Connecting up such a diverse, offline industry like tours and activities is not going to be easy, but the reward for a company like TUI is massive.
TUI Group will open up its tours and activities platforms to third-party providers after it completes the purchase of Hotelbeds’ destination management unit.
The move will make Hanover-Germany-based TUI an even bigger player in the fast-growing sector as it already develops and arranges around 4.5 million excursions per year.
“We will open the platforms for third party excursions and activities so if you, for example run a Segway tour provider and you want to connect to our customers and sell your excursions you will be able on a fully digital basis connect to our platform and you will be available when the customers come in [to] the destination,” CEO Fritz Joussen said on a media conference call after the company’s second-quarter results.
Earlier this year TUI decided to move Destination Experiences (formerly Destination Services) into a separate reporting unit to emphasize its importance.
When the deal with Hotelbeds goes through, the division will be will be present with branches and staff in 48 countries, employing more than 9,000 people and generating sales of $832 million (€700 milllion).
Race for the Prize
The tours and activities market is something of a hot commodity at the moment with established companies rushing to take a bigger role.
Booking Holdings and TripAdvisor both recently made acquisitions in the space (albeit for technology providers), while the latter spent $200 million on booking platform Viator in 2014.
“I think potentially they see what we see, it’s attractive. So if competitors do similar things then you… it’s potentially reassuring,” Joussen said.
“The market is huge, and the market is extremely scattered and I think other companies are seeing similar trends and [have] potentially come to similar conclusions”
TUI’s thinking is slightly different in that it is building a business for TUI customers of which there are more than 20 million. Unlike, the big online travel agencies, TUI owns and operates aircraft, hotels and cruise ships, packaging them up and selling vacations across the world. In that sense, tours and activities are just another pieces of the puzzle. Offering more of them would mean customers wouldn’t have to go elsewhere.
“Think about it, customers’ book a vacation in, let’s say, Egypt. Four or five months later they go to Egypt [and] in these five months only we know these customers will go to Egypt, so we can start offering activities in destination,” Joussen said.
He added: “If you have a couple of Segways how do you get a customer today? You go to the blackboard of a hotel and say: ‘I offer Segway tours’, but this is not very solid and I think we can do a little bit better.”
At the moment most of the customers TUI gets for its tours and activities business are its own but anyone can book on the platform. A spokesperson told Skift that going after non-TUI customers was a part of the company’s growth strategy.
For European package holiday specialists, the winter trading months are traditionally loss making. Companies like TUI Group and its rival Thomas Cook don’t make their money until the summer months when tourists actually go away on their trips.
Even so, the results for the first-half of the financial year are a good indicator of what kind of year a company will have.
In the six months ending with March, revenue increased 7.2 percent to $8.1 billion (€6.8 billion) with the net loss dropping 18.5 percent to $238 million (€200 million).
“We continue to deliver growth, all trends remain intact, and our very good trading performance for summer 2018 fully matches our expectations,” Joussen said.
TUI’s program for the upcoming season is 59 percent sold across its three European source markets (northern, central and western) with bookings up 5 percent.
TUI is gradually moving away from a trading to a yielding model where it owns more of the vacation experience.
“As TUI continues to diversify into differentiated content (cruise, own-label hotels) the results of this invest-led growth are beginning to come through,” said Richard Clarke, a senior analyst at Bernstein, in a note to investors.
This article was updated to include details of growth from non-TUI customers.
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Tags: earnings, europe, tours and activities, tui group
Photo credit: A camel in front of a pyramid in Cairo. TUI Group is planning to boost its tours and activities division. Chriss Knorr / TUI Group