More branded hotels and cruise ships

TUI has unveiled plans to streamline its hotel brands, add more club hotels and expand its cruise ship fleet in a new medium-term growth phase after reducing half-year losses and completing its consolidation strategy.

Europe’s largest tourism group plans to introduce a new ‘TUI Hotels’ brand to incorporate smaller, non-core brands, to nearly double the number of Robinson clubs and gradually add more cruise ships in order to offer customers more exclusive, differentiated products and also improve profit margins.

CEO Fritz Joussen said: “Group-owned hotels, clubs and cruise lines are maximum drivers of differentiation as perceived by our customers and make us stand out.” He aims to “move away from a brand jungle towards a clear brand architecture showing a sharper TUI profile and gaining stronger customer recognition via the tourism value chain”. Over the next 3-5 years, the new ‘OneTUI’ growth phase would focus on preserving and expanding market share in the Mainstream Business and on further focusing on contents and product differentiation, the company explained.

In the hotels business, a new “brand architecture” will be presented for the diverse brands in the second half of the year. The company apparently plans to introduce “TUI Hotels” as an umbrella brand covering some 50 hotels from smaller businesses such as Iberotel, Grupotel and Grecotel. But RIU and Robinson, the two core hotel brands that generate the bulk of hotel revenues, will remain separate.

In addition, TUI wants to expand the number of Robinson clubs from the present 24 to 40 in the next few years. The clubs, which have so far focused on German-speaking guests, will be internationalised and opened up, for example, to other source markets. TUI said this concept had already been successfully implemented at the Robinson Club in the Maldives, which is very popular among Asian guests.

The brand’s expansion follows its improved financial performance with its return on invested capital (ROIC) expected to rise to more than 9% this year from 6%, heading towards the 11% target for hotel brands. RIU hotels, for example, already achieve ROIC of 12%. “Robinson is successfully implementing its profitability growth roadmap. We are thus creating the basis for the future expansion and internationalisation of our premium clubs,” said Joussen.

In the first half of the 2013/14 year, TUI Hotels & Resorts increased operating profits by 53% to €74 million despite an 8% drop to turnover of €201 million.

TUI Cruises, which will take delivery of its third vessel in June this year and fourth in 2015, is also lined up for growth towards a fleet of 6-8 ships in future. “Further fleet growth is conceivable to achieve the planned internationalisation of TUI Cruises within the TUI Group, in particular through a potential entry into the source market UK,” TUI said.

TUI expects the cruises business, which also includes premium brand Hapag-Lloyd Cruises, to achieve a financial turnaround this year. In the first half-year losses were reduced by 94% to just €3 million while revenues increased 24% to €149 million.

In the tour operating business, which accounts for 90% of turnover, TUI Travel reduced reported losses by 7.5% to €387 million in the half-year, although underlying profits worsened slightly by 3.5% to €382 million. Revenues were 4.5% lower at €6.2 billion.

In Germany, half-year revenues dropped 5% to €1.7 billion due to fewer Egypt bookings and poor Alpine snow conditions but the seasonal loss was reduced by 21% to €61 million. TUI Travel CEO Peter Long welcomed the improved margin in Germany. For summer 2014, bookings and revenues are stable but this represents a decline from the single-digit growth reported earlier in the year.

Overall, TUI AG reduced its seasonal half-year loss by 29% to €339 million while turnover was down by 4.1% at €6.6 billion.