Tui unveiled a group restructure, a global rebrand and growth in long haul alongside changes at the top of its UK business last week. Ian Taylor reports
Tui Group’s half-year results announcement last week was no routine affair. It saw the departure of deputy chief executive Johan Lundgren and confirmation of a global rebrand.
The leadership of Peter Long, the Tui name and the focus on ‘unique holidays’ and controlled distribution continue, but the merger of Tui Travel and German-based Tui AG in December has brought change.
Long, now joint chief executive with former Tui AG head Fritz Joussen, told analysts: “Tui Group is not Tui Travel in reincarnation. We’re doing something slightly different. We’re not moving away from our core strengths but we’re not wedded to anything.”
The changes at the top in the UK will be immediate, those in the market more medium term. Lundgren will leave at the end of May, with Tui UK and Ireland managing director Dave Burling joining the executive board and taking control of a Northern Region comprising the UK, Nordic, Canadian and Russian markets, plus product and purchasing and aviation. Current mainstream distribution and online director Nick Longman replaces Burling as head of Tui UK.
Lundgren, who had been in pole position to succeed Long, no doubt felt the structure left no place for him. However, Long insisted: “Johan played an important role in developing the structure.”
The bigger change involves the brand. The group confirmed it will make Tui a global “power brand”. However, the timescale remains vague.
Joussen at one point suggested the process could take “five to 10 years”.
He said: “Our belief is a global brand scales better than many [brands].” But it will be “a careful process” involving two phases of “brand migration”, the first in the Netherlands, France and Belgium. The UK will fall at the end of phase two.
Joussen said: “We must be very careful not to destroy local brand equity. We will start with a Tui.com site in the UK long before we start the rebrand of Thomson. We don’t do the full-fledged rebranding now.”
He added: “I don’t think it is a big risk. The Tui smile is known in all our main markets. It is a bit like when you have an old house and you decide to renovate it a little. It is the right thing to do. But you over-estimate the risks and underestimate the benefits. Rebranding is a chance to reach new customers.”
Long said: “Building the [Tui] power brand is important. There is no doubt in our minds that in the medium to long term it will put us in a hugely stronger position.”
He insisted: “We’re going to do this in a measured and controlled way. We’ll start in Continental Europe and learn from that, and the UK will be last.” Asked why, Long said: “The size of the UK business – I don’t want to put our business at risk.”
Aside from the brand, the big change will be in Germany where the group is determined to move closer to the UK distribution model and drive bookings direct and online.
Joussen said: “In Germany, we have to do a lot of change. It is the market with the least direct distribution, the least online distribution.” Long agreed: “The number-one priority in Germany is to reduce dependence on third-party travel agents.”
Less than half Tui’s German sales are direct, with 57% through third-party agents compared with 10% in the UK and just 13% online against 54% in the UK.
Where the UK will see change is in capacity, particularly in long haul. A statement to analysts pledged: “The group will grow faster than the market in the next few years.”
Tui aims to increase long-haul passengers by 50% to more than 1.5 million in five years. Long said: “We have scale, access to over 20 million customers and the largest fleet of Boeing 787s in Europe.
“We have the aircraft, the hotels and the infrastructure. We can go into a destination and own it. We’re in a unique position in that we control the end-to-end customer experience.”
He talked of “conquering destinations”, adding: “We’re not constrained by lack of bed availability. We can get a new hotel built and our tour operators fill it. Others can’t replicate that. There are big opportunities east and west.”