Operating in North America, Europe and a number of emerging markets including Russia, this Sector is comprised of over 40 specialist travel companies. The specialist businesses focus on either specific destinations, premium travel experiences or particular customer demographic segments often with differentiated and exclusive product. Specialist travel experiences include escorted tours to the Galapagos, around the world private jet expeditions, student spring-break trips to Acapulco and tailor-made trips to Australia. Brands include TCS and Starquest Expeditions, private jet tour operators, Sovereign and Hayes & Jarvis, luxury brands and Turchese and Mostravel, destination specialists.

The Specialist & Emerging Markets Sector reported underlying operating profits of £26.1m (2007: £29.9m). In the UK, the business was adversely affected by distribution issues and significant disruption to the business caused by a change of location and systems, while demand in the leisure segment of student travel in the US was weaker.

Europe

The Europe division reported underlying operating profits of £13.9m (2007: £18.7m), a decrease of £4.8m. A number of businesses within the division are undergoing a restructuring programme to address the business model as a result of adverse performance in 2008. For example, there was some loss of volume in the Thomson businesses during the migration of the call centres and reservation systems that adversely affected the distribution platform. However, significant progress has been made in the integration project, delivering £0.5m of synergy benefits in 2008 with further benefits to come in 2009. In particular, the former Thomson businesses will benefit from increased control over distribution that resulted from migration of these businesses to the reservations system used by the former First Choice.

US

The US division reported underlying operating profits of £12.2m in 2008, an improvement of £1.0m (2007: £11.2m). This was due to strong growth in the expeditions businesses, in particular TCS Expeditions and Starquest Expeditions which operate in the luxury private jet segment. TCS increased customer volumes by 29% and doubled revenues in 2008, with demand particularly strong for its Winter programme, which was fully sold before the start of the season. Starquest was acquired in September 2007 and contributed £2.2m to the profitability of the division in 2008.

However, the leisure segment of the Student Travel group of businesses suffered from a softening in demand for higher priced international trips due to the weakening of the US economy. In addition, volumes decreased due to a change in customer buying habits, with more students self-packaging and arranging group trips through social networks. Total leisure volumes decreased by 15% in 2008 compared to the prior year. To address this change, actions have been taken to simplify the sales structure and rationalise the product portfolio. These actions will enable the businesses to improve sales efficiency and focus on the core differentiated spring-break offering. Europe Express, which specialises in packaging holidays for US customers to Europe, also experienced a reduction in volumes of 10% as US consumer demand fell due to the strengthening of the Euro against the Dollar and the weak US economy.

Emerging Markets

In Russia, we continue to evaluate our participation strategy for this high-growth market and announced in April our intention to form a joint venture relationship with S Group to develop TUI Travel’s Russian leisure tourism presence.