Europe’s largest hol­i­day com­pany ready to take on Chi­nese travel mar­ket

The Pak Banker - - BUSINESS -

TUI AG, Europe's largest hol­i­day com­pany, said it's ready to take on the cul­tural chal­lenges of the Chi­nese travel mar­ket as it ex­pands be­yond its Mediter­ranean com­fort zone to spur sales.

Hanover, Ger­many-based TUI will add ho­tels in the Mal­dives, Mau­ri­tius and Sri Lanka to at­tract trav­el­ers from China, and is look­ing at mar­kets more lo­cal to the coun­try such as Viet­nam and Cam­bo­dia, Chief Ex­ec­u­tive Of­fi­cer Fritz Joussen said in an in­ter­view in Lon­don.

China, the world's No. 1 tourism mar­ket, is largely un­tapped by TUI, which has tra­di­tion­ally fo­cused on Mediter­ranean hol­i­days. Joussen, who is draw­ing up his strat­egy af­ter be­com­ing sole CEO on Feb. 9, said Chi­nese vis­i­tors to Europe are more in­ter­ested in cities, whereas Asian re­sorts have more beach-goer ap­peal.

"We need to think about where the growth is, desti­na­tion-wise, and also re­gard­ing new-source mar­kets," he said. "The eas­i­est way of cap­tur­ing the Chi­nese mar­ket is ho­tels in the Mal­dives. If you have wa­ter bun­ga­lows, you are top pick for Chi­nese hon­ey­moon­ers. They're sup­posed to sleep above wa­ter at least for one night."

Joussen, who be­came co-CEO with Peter Long two years ago be­fore as­sum­ing con­trol when the in­dus­try vet­eran stepped down this month, has al­ready turned around TUI's cruise busi­ness and merged the Ger­man hold­ing com­pany with it's U.K.-based tour­op­er­a­tor sub­sidiary TUI Travel to re­duce com­plex­ity. The chief said tar­get­ing Chi­nese clients has unique chal­lenges. Many can­not swim, and oth­ers don't want to get tanned for cul­tural rea­sons, so the stan­dard sun-and­beach-re­sort so pop­u­lar with north­ern Euro­peans is less at­trac­tive.

TUI is also keen to in­vest in lo­ca­tions with 365-day ap­peal, such as Cape Verde and the Caribbean, where it achieves a 20 per­cent cap­i­tal re­turn. Oth­er­wise, ho­tels can be empty for much of the year. The Western Hemi­sphere has been fa­vored in the past be­cause there's lit­tle com­pe­ti­tion from Gulf car­ri­ers that dom­i­nate Asia routes, let­ting TUI make money on flights as well as lodg­ing.

"West­bound is a no-brainer," Joussen said. "East­bound, we need to be a lit­tle more selec­tive." TUI plans to add about 60 ho­tels to its port­fo­lio of 330 within five years. The flex­i­bil­ity of its busi­ness model is be­ing tested as ter­ror at­tacks in Egypt and Turkey cre­ate a need to re­de­ploy ca­pac­ity to lo­ca­tions such as Spain. More cus­tomers may book pack­age tours, though, for fear of be­ing stuck abroad alone in an emer­gency if they travel in­de­pen­dently.

TUI is dis­pos­ing of on­line hotel­book­ing arm, which though a leader in its field has a mar­ket share of only about 6 per­cent in a frag­mented mar­ket, with the sale set to go ahead this year, Joussen said. The unit may be worth more than $1 bil­lion, ac­cord­ing to peo­ple fa­mil­iar with the process. In Europe, TUI will add four cruise ships by 2019, mak­ing it the in­dus­try No. 1 or No. 2 in the re­gion, he said, with each ves­sel likely to earn as much as 60 mil­lion euros ($67 mil­lion) a year af­ter tax.

TUI is also stream­lin­ing the op­er­a­tions of its 145-air­craft fleet to form what will es­sen­tially be a sin­gle air­line, though Joussen said that ac­cess to seats is more cru­cial than own­ing a car­rier. Ri­val Thomas Cook Group said in De­cem­ber it could ef­fec­tively exit air­line op­er­a­tions by team­ing with Deutsche Lufthansa AG as the Ger­man car­rier's dis­count arm Eurow­ings en­ters long-haul flights. For younger cus­tomers, Joussen plans to re­fresh the TUI brand to en­sure it doesn't age with its clients, and add more mo­bile ap­pli­ca­tions. "Po­ten­tially our big­gest chal­lenge is on­line com­pe­ti­tion," he said. "It is so many play­ers, with such short in­no­va­tion cy­cles. We need to be fast -- and para­noid that we are not fast enough."

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