Source markets

Global tourism in the first part of 2008 continued to grow at a strong rate despite the economic uncertainty and turmoil in the financial markets.  Despite a recent deterioration in demand growth, tourism has resisted the downturn better than other sectors and, history suggests, leisure travel is more resilient to consumer pressures than other discretionary purchases in times of recession.  

TUI Travel has a unique combination of differentiated content and specialist product offerings, catering to a wide range of customers across 25 source markets which means we are not overly reliant on any one source market or customer segment.  Our business model contains a high degree of flexibility due to low bedstock commitments, third-party flying arrangements and the well balanced lease-expiry profile of our aircraft fleet and retail portfolio. As a result we can manage supply in line with changes in demand.

Mainstream market

The mainstream market has experienced a year of considerable change. Following the mergers of the major European tour operators, consolidation across Europe has led to a less fragmented marketplace and all major participants are focused on growing profits. Accordingly capacity is being managed within the market place to ensure supply matches demand.

TUI Travel businesses are either the number one or number two operator in each key mainstream market in terms of market share.  This scale enables us to achieve competitive cost advantage through efficient hotel buying, high aircraft utilisation, maximisation of load factors and low cost transfer services.  By leveraging this scale we can offer significant value for money to our customers, whilst our well-known brand portfolio provides quality assurance and financial protection.

Specialist markets

In contrast to the mainstream market, the specialist markets are highly fragmented, characterised by high growth and customer demographics and predominantly spread across Europe, the United States and Australasia.  These businesses typically operate a flexible cost model with an asset-right strategy, whilst attracting significant brand loyalty.

We have developed the market-leading portfolio of specialist brands and have an unrivalled portfolio of specialist products and experienced management teams. We have a track record of building leadership positions in these fragmented markets and delivering premium margins.  From the acquisition of Sunsail in 1999 we have created the world’s largest Marine charter business. From the acquisition of Exodus in 2002 we have become the leading Adventure operator in the UK. From the acquisition of Peregrine in 2005 we have the most extensive small ship polar cruising programme. More recently, from the acquisition of Australian Sports Tours in 2007 and Gullivers Sport Travel in April 2008 we have started to establish a market-leading position in the sport and event travel market in the UK and Australia. 

Destinations

As global travel and tourism continues to expand, certain destinations are set to grow faster than others.  For instance the first eight months of 2008 saw the Middle East (+17.3%), Central America (+9.4%), South America (+7.2%), South Asia (+7.5%) and North Africa (+6.9%) significantly outperform the total market, which was up 3.7% over the same period (Source: United Nations World Tourism Organisation).  Our Online Destination Services Sector already has a considerable presence in these emerging destinations and is consequently well placed to benefit from their continued expansion.

The online accommodation market, both business-to-business and business-to-consumer is intensely competitive.  Online Destination Services operates a portfolio of B2B brands - Hotelbeds and Bedsonline and B2C brands - LateRooms, Hotelopia and AsiaRooms. These brands sell bednights directly to the consumer or through industry partners (such as easyJethotels.net). The relatively low online penetration of the emerging markets creates an enormous opportunity to develop the online segments especially given our presence in these countries.