HANNOVER, Germany—TUI Group’s joint CEO Peter Long said a focus for the company is to simplify its 20 million-plus customers’ entire travel journey by slowly migrating all of its many brands under the one TUI name and one integrated booking platform.
Long said during a conference call marking TUI’s first post-merger half-year earnings results that if TUI were formed today, it would have just one brand.
TUI Group’s owned hotel portfolio includes the Riu Hotels & Resorts, Iberotel Hotels & Resorts brands and others. Its additional businesses comprise airlines, cruises and tour operators (which includes the Thomson brand).
Standalone brand Thomson is perhaps one of the most well-known travel brands in the United Kingdom, and Long said it would be the last to fold into the mix. (Thomson effectively pioneered the package vacation for U.K. vacationers in the 1960s and 1970s to such destinations as Spain.)
“Our road map for growth will be to improve customer experiences and shareholder value,” Long said.
TUI is now the world’s largest leisure tourism group, following its December 2014 merger between U.K.-based TUI Travel and Germany-based majority owner TUI AG. At press time, the company had a market capitalization on the London Stock Exchange of £6.5 billion ($10.1 billion).
The company has predicted it will enjoy 10% profit growth over the next three years as it looks to shed non-core assets and increase its hotel portfolio.
Restructuring details
Approximately 60 hotels will be added by fiscal year 2019, to boost the 310 properties the company operates. According to presentation notes accompanying the earnings call, TUI owns 38% of its hotels. The other stock is managed (46%), leased (10%) or franchised (6%).
“The restructuring will create a flatter, more unified company that will focus on bringing tours and hotels and resorts together,” Long said. Non-core assets Long referred to include online-travel-agency LateRooms.com and its 15% stake in container shipping company Hapag-Lloyd. No asking prices were announced.
Ken Odeluga, a senior market analyst at City Index Limited, sees sense in TUI ditching parts of its empire.
“At best we can say (LateRooms.com) has been a distraction that required an inordinate amount of attention within a group for which it was quite clearly non-core; its below-satisfactory performance and lack of scale symptomatic of TUI’s unwillingness to invest further to make keeping hold of it worthwhile,” Odeluga wrote in an email to HNN.
“We will migrate firstly with the small brands and markets and learn from these experiences, and we will be very careful when it comes to the U.K. market,” Long said, who added that already existing was a strong link between the TUI name and the company’s “smile” logo that graces most of its offerings.
Hotel brand details
Friedrich Joussen, TUI’s other joint CEO, said during the news conference that the company’s core (hotel) brands post-restructuring will be Riu, Robinson, Magic Life and new hotel brand TUI Blue. The offering will be rounded off by the three hotel concepts Sensatori, Sensimar and Family Life. The hotel brands and hotel concepts differ in that the brands will be managed by TUI as hotel operator, while the hotel concepts may also be taken over by other hotel operators for their facilities.
TUI Blue will debut this summer with the rebranding of TUI’s 375-room Iberotel Sarigerme Park in Pisilis, Turkey. There is one more hotel in the pipeline and 27 more either in negotiation or repositioning. Riu has 103 properties, with four in the 2014/2015 pipeline; 60% of Riu’s bookings are of an all-inclusive nature.
By merging and simplifying operations, TUI predicts it will produce incremental underlying EBITA savings of €30 million ($33.8 million) within its hotel interests by the end of 2017, and with no capital expenditure requirements.
“There is no hurry, no urgency. In a controlled way, we will build on our successes and position TUI as one big power-brand,” Long said.