Tourism Demand for travel picked up again. Business improved significantly. Travel market continued to change.
| Service |
| Tourism | Logistics | Trading |
For the tourism division, 2004 was a year characterised by a considerable improvement in business in most European markets. With the recovery in economic activity, demand for travel picked up again. The travel market continued to change, with growth generated in particular by new forms of travel.
Following a good start to the new financial year, the upward trend continued in the second quarter so that a significant improvement in performance was already recorded in the first half of the year. This positive trend continued throughout the peak travel period of the 2004 summer season. The total number of customers travelling with tour operators of the TUI Group in 2004 rose by 0.9% to 18.4 million. The economic success of 2004 was also attributable to several other reasons: on the one hand, the relationship between available capacity and demand was more balanced, so that less residual capacity had to be sold at reduced prices. On the other hand, available capacity in the flight and hotel sector was better utilised due to directional channelling of demand. Last but not least, TUI started early on to adjust to the changes in the market, a move that paid off in that TUI already benefited from the cost containment and restructuring measures of the previous years in the economic upswing of 2004.
Tourism
| € million | 2004 | 2003 | Var. % |
|---|---|---|---|
| Turnover | 13,122.5 | 12,671.3 | + 3.6 |
| Earnings by divisions (EBTA) | 362.4 | 208.1 | + 74.1 |
| EBITDA1) | 673.3 | 531.6 | + 26.7 |
| Investments | 521.1 | 518.0 | + 0.6 |
| Headcount (31 Dec.) | 49,482 | 51,708 | - 4.3 |
1) Earnings before interest, taxes, depreciation and amortisation of goodwill
Turnover of the tourism division rose by 3.6% to € 13.1 billion. This was mainly attributable to the recovery of business in Germany and the UK, the large source markets, as well as the Nordic countries, with the Northern Europe sector recording the strongest relative growth.
At € 362 million, earnings of the tourism division climbed by 74.1% year-on-year. To a large extent this was due to the substantial improvement in earnings in the Central Europe sector. The Northern Europe sector, in contrast, reported a decline in earnings, which were also strained by the impact of the restructuring measures introduced. The Western Europe sector recorded a slight decrease in earnings. The destinations sector again contributed substantially to the earnings of the tourism division.
Central Europe
The Central Europe sector covers the distribution and tour operating business in Germany, Switzerland, Austria and the eastern European markets as well as airline Hapag-Lloyd Flug. This sector benefited particularly strongly from the recovery in tourism, although the positive trend varied in individual regions and market segments.
Tourism – Central Europe
| € million | 2004 | 2003 | Var. % |
|---|---|---|---|
| Turnover | 5,227.3 | 5,097.1 | + 2.6 |
| Earnings by division (EBTA) | 82.4 | - 16.5 | n. m. |
| EBITDA1) | 132.5 | 53.9 | + 145.8 |
| Investments | 22.8 | 95.7 | - 76.2 |
| Headcount (31 Dec) | 9,281 | 9,391 | - 1.2 |
1) Earnings before interest, taxes, depreciation and amortisation of goodwill
At € 5.2 billion, the turnover generated by the Central Europe sector was 2.6% up on the previous year. This increase mainly resulted from the improvements in the German market, which accounted for 87% of sector turnover. Here, the trend observed in the previous year continued: tour operators positioned in the budget-price market segments or engaging in direct or short-term sales of their products again grew disproportionately. The smaller markets showed varying business trends: while turnover increased in Switzerland, it was relatively stable in Austria.
Germany
Germany recorded a significant recovery in demand for tours. Holidaymakers continued to be very price-conscious and used early booker discounts on the one hand, but again paid increasing attention to quality on the other. Bookings of package tours grew slightly, while programmes bookable individually and flight-only or accommodation-only offerings recording stronger growth. In terms of destinations, Turkey and Egypt in particular were increasingly popular in 2004. Spain continued to be the main holiday destination for the German market, with customer numbers showing varying trends in the individual tourist regions in Spain.
A total of 2.15 million guests travelled with specialist tour operators in Germany, a 8.1% drop year-on-year. The decline primarily related to premium tours. In the premium segment, Airtours International benefited from the realignment of its business and stabilised its business volume in the course of the year. Wolters, the tour operator offering holiday homes and adventure tours, reproduced the previous year's booking levels. Last-minute provider L'tur benefited from the reduction in tour operators' short-term marketing volumes and growth in internet-based distribution. Berge & Meer continued to grow in the direct selling segment, recording particularly strong growth in long-haul tours in 2004.
TUI Leisure Travel, grouping together travel agency activities, recorded a stabilisation of business following a difficult 2003. Approx. 47% of travel agency turnover was accounted for by Group tour operators. Travel agencies remained the cornerstone of distribution, although web bookings continued to grow for the high-volume tour operators. Web bookings already accounted for around 25% of turnover for specialist tour operators L'tur and Berge & Meer. In 2004, the TUI Leisure Travel organisation covered 1,482 travel agencies, 479 of which were Group-owned, with the remainder being franchise partners or agencies under distribution cooperation schemes.
The German charter market grew again in 2004, with stronger growth on long-haul routes compared with medium-haul routes. Demand rose steadily in the course of the year; in addition, the proportion of short-term bookings declined year-on-year. Besides the positive environment, Hapag-Lloyd Flug benefited from the selective channelling of TUI tour operator passengers to Group-owned air capacity. As a result, this passenger segment was up to approx. 70%, the share of third parties increased, while the airfare-only business declined slightly. Overall, the number of passengers grew by 6% to 7.1 million. Hapag-Lloyd Flug operated the same fleet as in 2003: the 29 Boeing 737-800s and five Airbus A 310s had an average age of around 7 years. They flew from 21 departure airports to 39 destinations in nine countries. A total of 19.1 billion seat-kilometres were offered, 7% up year-on-year. The seat load factor improved by 2 percentage points to 88%.
Switzerland
The Swiss travel market only benefited to a limited extent from the improvement in the overall economic situation. The market continued to be characterised by price competition and capacity overhangs in flight operations. Against this background,
TUI Suisse tour operators held their own well. The total number of customers rose by 18.1% to 0.22 million. Bookings showed varying trends in the individual market segments. Thus
Imholz recorded growth in the club holidays segment in particular, while reporting a drop in bookings of city trips. The newly launched brand
FlexTravel, offering a modular system for booking tours, successfully established itself in the market.
Vögele recorded another increase in its direct selling activities, consolidating its leading position in this sector.
In the flight sector, TUI Suisse mainly cooperated with three Swiss charter airlines on all routes. In addition it also used other airlines – occasionally from the destinations – from time to time.
Austria
The economic framework and thus the situation on the travel market did not change significantly in Austria. Against this backdrop,
TUI Austria's tour operators recorded a satisfactory year in 2004. The total number of customers booking their holidays with these tour operators was 0.73 million, almost the same number as in 2003. The TUI brand, market leader in the upper price segment, managed to increase its customer numbers.
Gulet, Austria's strongest tour operator brand and specialist tour operator for the eastern Mediterranean, also managed to grow. In the low-price segment, 1-2-Fly expanded its market position with brisk growth in customer numbers. In contrast, the
Magic Life club brand and
Terra, tour operator for overland tours, recorded more moderate business than in 2003, with a drop in customer numbers year-on-year.
In the flight sector, the tour operators essentially covered their capacity requirements by means of agreements on committed capacity concluded with four airlines. Charter flights accounted for 95% of all flight operations, with the remainder being scheduled flights.
Eastern European markets
In
Poland, activities were combined into one entity, TUI Poland, in 2004. Demand on the Polish market remained volatile; it was positively impacted in the course of the year by the elimination of specific taxes on travel. In this environment, TUI Poland sold more tours than in 2003 and managed to maintain its market position.
In
Hungary, business continued to develop well in 2004. With its TUI, Gulet and Magic Life brands, managed from Austria, TUI Ungarn gained a leading market position and generated an increase in the number of tours sold compared with the previous year. As far as its neighbouring countries are concerned, both
TUI Slowenien and
TUI Slowakei saw a promising start to their first financial year.
Northern Europe
The Northern Europe sector comprises the distribution and tour operating business in the UK, Ireland and the Nordic countries as well as Britannia Airways UK and Britannia Airways Nordic airlines. All markets of this sector continued to be characterised by intense competition, primarily due to the persistent growth of low-cost airlines. This was particularly strongly felt in Ireland. In the UK, demand for tours to Spanish destinations was additionally impacted by the strong euro. The Nordic countries recorded a recovery of the travel market, supported by an overall positive economic trend.
Tourism – Northern Europe
| € million | 2004 | 2003 | Var. % |
|---|---|---|---|
| Turnover | 4,635.4 | 4,301.1 | + 7.8 |
| Earnings by division (EBTA) | 65.2 | 79.0 | - 17.5 |
| EBITDA 1) | 166.9 | 185.8 | - 10.2 |
| Investments | 110.2 | 118.3 | - 6.9 |
| Headcount (31 Dec.) | 17,176 | 18,033 | - 4.8 |
1) Earnings before interest, taxes, depreciation and amortisation of goodwill
At € 4.6 billion, the turnover generated by the Northern Europe sector was up 7.8% year-on-year. Growth was strongest on the British market which, at 79%, also accounted for the largest proportion of turnover in this sector. Here, growth was recorded in particular by the mainstream tour operators. The strongest relative growth in turnover was reported by the Nordic countries, which saw their tour operators' position strengthened by the restructuring processes. Ireland recorded a slight increase in turnover on the previous year despite the decline in volumes.
UK
Market volume in the UK grew again in the 2003/2004 winter season, and this trend continued in the 2004 summer season. This benefited TUI UK's tour operators, both in the mainstream segment and in the special programmes, although competition remained intense due to the low-cost airlines and travel products offered through new distribution channels. Spain continued to be the destination with the highest number of bookings but suffered a decline in booking numbers due to the unfavourable exchange rate ratio. As a result, growth was recorded for some low-cost destinations in the eastern Mediterranean and long-haul tours.
A total of 0.73 million customers travelled with the tour operators of the Specialist Holidays Group, a 5.2% increase on the previous year. While growth was recorded for the winter season, the summer season was characterised by restrained demand, with villas a market segment particularly strongly affected by fierce competition.
TUI UK's agency distribution covered 833 travel agencies. At 65% of tours sold, the products offered by Group-owned tour operators continued to account for a high proportion of overall business. Overall, bookings continued to shift away from travel agencies to new forms of distribution such as web bookings, call centres and travel TV, which jointly accounted for around 25% of the total volume.
A comprehensive realignment of business was initiated towards the end of the year, focusing on a concentration of tour operation and a realignment of distribution which is aiming at a significant reduction of production cost.
Britannia Airways UK operated a fleet of 33 aircraft in the 2004 summer season, including 20 Boeing 757s and 13 Boeing 767s. The average age of the aircraft fleet was eleven years. The airline flew from 22 British airports to a total of 149 destinations. The total number of passengers carried was 8.1 million, a 2% increase year-on-year. 96% of passengers were customers of Group-owned tour operators. At 22.6 billion seat-kilometres, capacity on offer rose by 9% on the previous year. The seat load factor reached 90% and thus rose slightly year-on-year.
Ireland
The Irish market was characterised by intense competition, primarily based on prices. This was due to both the growth of low-cost airlines on traditional package tour routes and the persistent trend towards late booking. Against this background, a total of 0.35 million customers travelled with TUI Ireland's tour operators, a 6.9% drop year-on-year. Declines were recorded in particular for bookings of Spanish destinations, while long-haul destinations were well booked, a trend supported by the favourable US dollar exchange rate. Besides the decline in volume, earnings were also impacted by the pressure on margins.
Nordic countries
Following several difficult years, the Nordic countries resumed an upward trend. Demand rose perceptibly, in particular in Sweden, the Nordic market with the highest volume. TUI Nordic benefited both from an early launch of sales of its programmes and the expansion of offerings in the low-cost destinations in the eastern Mediterranean. The number of customers travelling with TUI Nordic's tour operators grew by 1.1% to 1.25 million. Due to capacity planning in line with market requirements and targeted sales channelling measures, the short-term marketing of capacity was largely avoided, resulting in an increase in average prices.
Western Europe
The Western Europe sector covers distribution and tour operation in France, the Netherlands and Belgium as well as Corsair airline and TUI Airlines Belgium. Markets in the three countries showed uneven trends. Restrained private consumption in France also impacted the travel market, which only gradually started to recover. In the Netherlands, market volume declined due to the persistent weakness of economic activity. The Belgian travel market continued to report a positive trend, with market volume rising year-on-year in virtually all segments.
Tourism – Western Europe
| € million | 2004 | 2003 | Var. % |
|---|---|---|---|
| Turnover | 2,505.2 | 2,479.6 | + 1.0 |
| Earnings by division (EBTA) | 40.9 | 42.2 | - 3.1 |
| EBITDA1) | 83.1 | 83.4 | - 0.4 |
| Investments | 183.9 | 75.1 | + 144.9 |
| Headcount (31 Dec.) | 6,617 | 6,521 | + 1.5 |
1) Earnings before interest, taxes, depreciation and amortisation of goodwill
Turnover in the Western Europe sector grew by 1.0% to € 2.5 billion.
In France, the largest market in this sector, it dropped slightly. This was mainly attributable to the passengers' price sensitivity, impacting in particular turnover in the tour operator business. In the Netherlands, turnover increased slightly despite a decline in volume, as long-haul tours with their higher prices increased as a proportion of total business. In Belgium, the increase in business volume was also reflected by a corresponding increase in turnover.
France
The French travel market reported weak demand at the beginning and at the end of the year. As a result, market volume declined. Holidaymakers were increasingly price-conscious; this trend was reinforced by the increase in offerings through new forms of distribution. Thanks to its low-price offerings, a high proportion of modular tours and its strong position in the airfare-only business,
Nouvelles Frontières managed to hold its own well. The new TUI brand, positioned in the quality segment, developed well and achieved a respectable market position. 1.64 million customers booked their tour with one of the Group's tour operators, up 0.9% year-on-year. Their favourite destinations were overseas and in North Africa.
In the flight sector, Corsair was mainly affected by the temporarily fierce price competition in the airfare-only segment on routes to the French overseas departments, accounting for around one quarter of volume. In the 2004 summer season, Corsair operated ten aircraft, departing from eight airports in France to 102 destinations. The fleet comprised six Boeing 747s, two Boeing 737s and two Airbus A 330s. It carried a total of 2.1 million passengers, 2% down year-on-year. Capacity on offer totalled 14.7 billion seat-kilometres with a seat load factor of 83%.
Netherlands
The Dutch travel market contracted considerably. Moreover, the structure of demand changed: it declined for short- and medium-haul destinations but rose for long-haul tours. Direct sales and web bookings continued to grow. The business trend recorded by
TUI Nederland was characterised by the changes in the market environment. The two classical tour operators
Arke and
Holland International lost customers as the growth in long-haul tours and city trips did not compensate for the declines in other segments. In the direct sales segment,
Kras continued the positive trend of 2003 and increased both its business volume and market share. At 1.18 million, the number of customers travelling with TUI Nederland declined by 2.2%. This trend mainly affected destinations in Spain and tours to neighbouring countries. In contrast, growth was recorded for destinations in Turkey and the Caribbean.
In the flight sector, TUI Nederland's tour operators cooperated with four charter airlines carrying just under 80% of their passengers, with the remaining passengers using scheduled flights.
Belgium
The Belgian travel market reported growth in demand, both in the winter and summer season.
TUI Belgium took advantage of the favourable market environment and expanded its market position. However, growth rates differed in the individual market segments.
Jetair, TUI Belgium's main brand, only achieved moderate growth in package charter tours. Growth was stronger in overland tours, with city trips being particularly popular.
Jetonly, the brand launched in the previous year focusing on the airfare-only business, reported strong growth. The direct selling operations of
Sunjets Direct, which also grew most strongly in this market segment, were successfully established. At a total of 1.26 million customers, TUI Belgium's tour operators recorded 4.5% growth. Spain continued to be the most popular holiday destination, while tours to Egypt and the Caribbean recorded significant growth.
TUI Airlines Belgium was launched in April 2004 and operated nine aircraft in the 2004 summer season: eight Boeing 737s and one Boeing 767. It carried 1.0 million passengers, almost all of whom were customers travelling with TUI Belgium's tour operators. Capacity on offer was 2.5 billion seat-kilometres, with a seat load factor of 91%.
Destinations
The destinations sector covers TUI's incoming agencies and the Group's hotel companies grouped within TUI Hotels & Resorts. Both sectors benefited from the recovery of demand in the source markets although the individual holiday regions recorded varying business trends.
Consolidated turnover generated by the destinations sector totalled € 0.5 billion and thus was below the previous year's level. The incoming agencies generated less turnover, in particular due to a decrease in Spain. In the hotel sector nearly all consolidated hotel companies achieved an increase in turnover, but this could not offset the decline resulting from the divestment of the Anfi Group as per 30 June 2004.
Earnings generated by the destinations sector grew strongly. At € 144 million, they climbed by 37.9% year-on-year. Strong growth in earnings was recorded by the incoming agencies, which almost doubled their profit contribution. Hotel companies contributed the largest proportion of earnings generated by the sector. Boosted by an increase in the number of overnight stays and an improvement in occupancy rates, their performance also rose significantly on the previous year.
Tourism – Destinations
| € million | 2004 | 2003 | Var. % |
|---|---|---|---|
| Turnover | 508.2 | 547.5 | - 7.2 |
| Earnings by division (EBTA) | 144.1 | 104.5 | + 37.9 |
| EBITDA 1) | 209.4 | 168.5 | + 24.3 |
| Investments | 163.3 | 186.3 | - 12.3 |
| Headcount (31 Dec.) | 11,726 | 12,896 | - 9.1 |
1) Earnings before interest, taxes, depreciation and amortisation of goodwill
Incoming agencies
TUI's consolidated and associated incoming agencies catered for a total of 10.54 million holidaymakers in 24 countries. Their services comprised transfers and excursions as well as the handling of cruise ships and group and incentive programmes. The business trend varied from one holiday region and time of the season to another. Most agencies in the countries of the eastern Mediterranean benefited from the recovery of tourism in these regions. In contrast, agencies in the western Mediterranean were adversely affected by the resulting changes in tourism flows but nevertheless managed to improve their performance. The sector was further expanded by means of shareholdings in agencies in Italy, Malta, Mauritius and Sri Lanka.
In the eastern Mediterranean, the local agencies benefited to varying extents from the return of holidaymakers to this region. Greece saw a steady development of business: at 1.34 million, the number of holidaymakers serviced by TUI Hellas thus increased only slightly on the previous year. Turkey experienced a brisk recovery of tourism, benefiting the Tantur agency in the expansion of its business. At 0.78 million, it recorded an increase of around one third in the number of holidaymakers catered for. Aeolos, the incoming agency in Cyprus recorded a steady business trend with 0.33 million customers. TUI Bulgaria continued to develop well. At 0.26 million, the number of holidaymakers catered for rose by just under 15% on the previous year.
Egypt, which was severely affected by the aftermath of the conflict in Iraq last year, recorded a tourism boom. This also benefited the Travco agency, which almost doubled the number of holidaymakers catered for. Tunisie Voyages, operating in Tunisia and Djerba, also benefited from the recovery of travel to Islamic countries. At 0.47 million, the number of holidaymakers serviced by the agency was 30% up on the previous year. Holiday Services in Morocco also reported a clear recovery of business: it catered for a total of 0.13 million holidaymakers, an increase of 27%.
The agencies in the remaining destinations also performed well. Their services were used by a total of 1.36 million holidaymakers, with the Mexican agency reporting particularly strong growth.
Hotel companies
The Group's hotel portfolio is grouped within TUI Hotels & Resorts. It comprises hotel companies in which the Group holds a majority stake, joint ventures with local partners, companies in which shareholdings are held and hotels operated under a management agreement. At the end of 2004, the portfolio consisted of a total of 275 hotels with a capacity of over 154,000 beds. 45% of this capacity was owned by the Group, 13% was leased and 42% was controlled under management or franchise agreements.
In the summer of 2004, Robinson, market leader in the premium segment for club holidays, operated 24 club complexes in nine countries, one down on the previous year. Their occupancy rate was slightly above the previous year's level. The clubs in Turkey recorded substantial improvements and thus a significant increase as customers returned to the eastern Mediterranean region. The Spanish clubs reported slight declines this year following particularly strong demand last year. The remaining clubs reported a steady business trend, with occupancy rates matching the previous year's good levels.
Magic Life, the all-inclusive club brand, reduced its offering by two to 19 club complexes, most of which were located in the eastern Mediterranean. Due to strong demand for tours to this region, the clubs in Egypt and Tunisia in particular reported good booking levels and a resultant considerable increase in their occupancy rates.
Dorfhotel operated two complexes in Austria and one in Germany in the summer of 2004. Its occupancy rate matched the previous year's level.
RIU, the second largest Spanish hotel chain, looked back upon a successful year in 2004. It expanded its hotel portfolio to a total of 112 hotels, an increase of eight on the previous year. Business in the long-haul destinations Mexico, Caribbean and the US developed particularly well. The group's 25 hotels in this region – including the newly opened RIU Negril in Jamaica – reported above-average booking levels. Hotels in Majorca and the Canary Islands also recorded improvements in occupancy rates. Hotels in Tunisia benefited from the return of customers who had avoided Islamic countries last year, and thus also increased their occupancy rates. In contrast, bookings decreased in hotels in mainland Spain and Ibiza. Overall, RIU hotels reported an increase in occupancy rates.
Grupotel, the second Spanish hotel company of the Group, had 35 hotels available in the summer of 2004, the same number as in 2003. Twentythree of these hotels were located in Majorca, eight in Menorca and four in Ibiza. Occupancy rates remained stable overall, with improvements in Majorca but a slight decline in Ibiza.
Grecotel, the leading hotel company in Greece, opened one of Europe's largest hotel complexes, the Grecotel Olympia Riviera Resort in the Kyllini region, in the summer of 2004. It thus expanded its capacity by three to a total of 19 hotels, six of which were located in mainland Greece and 13 on Greek islands. Overall occupancy rates declined slightly, since several hotels started the season later than in 2003 because of unfavourable weather conditions.
Iberotel operated a total of 18 hotels in the summer of 2004, an increase of four on the previous year. Fifteen of the hotels were located in Egypt and three in Turkey. The Egyptian complexes benefited from the boom in demand and considerably increased their occupancy rates. Turkey recorded satisfactory occupancy rates.
The Nordotel, Atlantica and Gran Resort hotel chains, which mainly marketed their facilities in the UK and Scandinavia, operated a total of 15 complexes around the Mediterranean in the summer of 2004. Seven hotels were located in Spain, one in Turkey, two in Cyprus and five in Greece. The Greek and Cypriot hotels achieved satisfactory occupancy rates, while hotels in Spain and Turkey reported extraordinarily good occupancy rates.
Other tourism
The Other tourism sector comprises the Group's business travel sector and IT service providers. It generated turnover of € 0.2 billion. Earnings rose to € 30 million. Besides good earnings of the IT companies, the earnings trend also benefited from the business travel sector which reflected, among other things, the first successful results of the cost containment measures.
Tourism – Other tourism
| € million | 2004 | 2003 | Var. % |
|---|---|---|---|
| Turnover | 246.4 | 246.0 | + 0.2 |
| Earnings by division (EBTA) | 29.8 | - 1.1 | n. m. |
| EBITDA 1) | 81.4 | 40.0 | + 103.5 |
| Investments | 40.9 | 42.6 | - 4.0 |
| Headcount (31 Dec.) | 4,682 | 4,867 | - 3.8 |
1) Earnings before interest, taxes, depreciation and amortisation of goodwill
TUI Business Travel, which operates under the TQ3 Travel Solutions brand, continued to record a difficult business trend. Development in Germany was characterised by the marked seasonal character of its business and the elimination of commissions from the sale of air tickets. The position of TQ3 in international business was considerably strengthened by its partnership with Navigant International.