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Travelmole guest comment: watching the big two
Thursday, 18 Apr, 2011
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With a recovery in the travel industry underway, Thomas Cook Group plc and TUI Travel plc are looking to solidify their leading positions in western European travel retail.
One strategy has been to continue acquisitions to build market share as well as increase buying clout, reduce costs and access new markets, new marketing and technology resources. It also can help control supply better to allow for price increases.
The other strategy has been to grow online sales to take advantage of the shift to online bookings. Travel and tourism analyst Michelle Grant investigates.
Thomas Cook goes on a buying spree
In 2010 the company was involved in several acquisitions – obtaining 100% of Think W3 (trading as Essential Travel), acquiring 51% of Thomas Cook Services (Cyprus) and 50.1% in the Russian company Intourist, as well obtaining full control of Oger Tours in Germany. In the UK, Thomas Cook announced a merger with The Co-operative Group, which is currently subject to regulatory approval.
The most significant of these moves is the merger with The Co-operative Group, which combines the high street travel, foreign exchange and cruise businesses. This consolidation creates a large high street network of more than 1,200 shops in the UK.
The UK is the third largest market for leisure travel retail sales in the world according to Euromonitor International. TUI will therefore be forced to assess its current market strategies, new product development and consider future alliances in an increasingly competitive environment.
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The battle for Russia…
With a large outbound market clamoring for beach destinations as well as hosting the Winter Olympics in 2014 and the World Cup in 2018, Russia has attracted the attention of the European travel group giants. Thomas Cook’s November 2010 deal with Intourist was followed by TUI’s January 2011 acquisition of the Svoy Travel Group.
Thomas Cook’s controlling stake in Intourist (with an option to purchase the full company in the next five years) gives the company a leading edge over TUI in Russia, which had entered the market in 2009 with the acquisitions of Mostravel and VKO Group. However, both are expected to benefit from the US$4 billion absolute growth in leisure travel retail sales over 2010-2015 predicted by Euromonitor International. Furthermore, the market is highly fragmented, which leaves opportunities to knock out or acquire other small players.
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…and the internet
In 2010, Thomas Cook set its sights on breaking into the top three of online travel agencies in Europe, using thomascook.com and branded tour operator websites in the UK, Germany, France, Netherlands and Belgium.
Its OTA organisation ended 2010 with £1 billion in gross bookings, up 22% from 2009. It aims to reach £3.5 billion in gross bookings in the near term and improve its hotel stock, especially for city breaks. It also is making a push behind its dynamic packaging system, TravelGenie, which accounted for 20% of independent sales.
For TUI, improvements to the Thomson and First Choice websites helped improve online sales thanks to the “MyThomson” microsite that helps travellers manage their bookings. Laterooms.com in the UK also saw a 31% increase in room nights during the company’s fiscal year (September 2010) and plans on expanding the model to Continental Europe and Australia.
These moves by both companies are necessary as more consumers book online. Euromonitor International predicts that the percent share of leisure travel retail sales made online will increase from 21% in 2010 to 27% in 2015 for Western Europe.
Dynamic packaging sales are expected to account for 15% of online sales in 2015. However, the big two will face strong competition from incumbents such as Expedia.com, Lastminute.com and Booking.com and newcomers such as easyJet Holidays.
Dinah
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