T UI GROUP S TR ATEGY

From an integrated holiday provider to an integrated

digital tourism ecosystem

AT T R A C T I V E T O U R I S M M A R K E T
TUI is a globally operating tourism company serving 21 m customers1
annually within its ecosystem. The tourism sector continues to be
attractive, showing constant and above GDP growth for nearly a
decade, providing an excellent basis for our businesses to grow.

The macro-fundamentals for our Hotel, Cruise and Destination Ex-

periences businesses remain particularly favourable: the global sales
volume for Hotels and Cruises is growing more than 4 % on a five
year outlook, for Destination Experiences growth is even at 7 %.
However, our Markets & Airlines intermediary business is facing
some cyclical and structural challenges.

T U I G R O U P ’ S S T R AT E G Y
TUI ’s integrated business model continues to be considered a suc-
cess factor and remains to be a core element of our strategy.
Access to 21 m customers1 in our core Markets & Airlines source F O U R S P E C I F I C S T R AT E G I C I N I T I AT I V E S
markets with strong market positions (market shares between Our Group strategy is driven by four specific strategic initiatives.
20 – 40 %) allows us to drive premium returns in our Holiday
­E xperiences businesses and provides a large basis for digitalised 1 . M A R K E T S & A I R L I N E S : P R O T E C T A N D W H E R E P O S S I B L E
product up-selling. Therefore, we are committed to growing our E X TEND STRONG POSITIONS
integrated model on both ends, investing in customers’ growth and While the performance of our Markets & Airline business in FY 2019
own product growth. While in recent years TUI was significantly was characterised by a number of specific external challenges such
investing into own product growth by redeploying non-core business as potential Brexit and grounding of the 737 Max aircraft, it contin-
disposal proceeds, we will re-focus future growth more towards ues to face cyclical and structural challenges in the form of over-­
digital customer acquisition and therefore continue to grow our capacities and cost pressure. Both elements may continue to drive
integrated business model on both ends. Our digital platforms will further market consolidation in particular in the Airline sector
enable us to accelerate customer growth and to create a digital following a broader tour operating market consolidation triggered
ecosystem allowing us to up- and cross-sell our tourism products by the insolvency of one of our key competitors. We will continue to
to an even larger TUI customer base. At the same time, we will be address the structural challenges we face by improving our cost
able to offer more individualised holidays to our customers. position and flexibility and by driving speed and innovation facili-
tated through centralised IT and processes as the core elements of
our Markets Transformation & Domaining initiative. This shall allow
us to further expand our product offering beyond traditional pack-
ages into attractive growth segments like accommodation only
and dynamic package offerings, while remaining com­peti­tive and
maintaining our leading positions in the traditional packaging mar-
ket, supported by managing our airline asset intensity.

1 Customers in the Markets & Airlines businesses

2 . H O T E L S & C R U I S E S : E X PA N S I O N AT S C A L E , D R I V I N G
­R E T U R N S B Y B E N E F I T T I N G F R O M V E R T I C A L I N T E G R AT I O N
With 411 hotels, TUI has built a sizable and highly profitable leisure
hotel business (with a ROIC of 14 %). We are benefiting from our
vertical integration, as we can leverage the distribution power in
our Markets and Airlines segment to drive customers into TUI
Hotels and Cruises. TUI will continue to invest in further portfolio
expansion and diversification leveraging its Joint Venture structures
besides own investments. However, our capital intensity will be
reduced compared to our investment spending in recent years. In
addition, we will accelerate the growth of our asset-light brand TUI
Blue by targeting almost 100 Hotels 2 by the end of FY 2020 versus
currently about 10 Hotels in particular through management and 3 . G D N - O TA P L AT F O R M : B U I L D I N G S C A L E B A S E D O N
franchise. Geographically, the Caribbean, South East Asia and Africa ­C O M P E T I T I V E P R I C I N G T O AT T R A C T C U S T O M E R S T O
remain our key investment focus areas. JOIN THE TUI ECOSYSTEM
TUI has launched a new online travel agency platform in six markets3
The fundamentals with strong demand and scarcity of supply remain complementary to its existing Markets & Airline businesses, current-
intact for our cruise businesses and provide the basis for further ly focusing in particular on the accommodation only market, meta-­
growth. We will continue to invest in our cruise businesses by search business and flight combined offerings based on Airline
expanding and upgrading capacities in particular through our joint partnerships. Unlike our traditional package markets, TUI is not
venture TUI Cruises. operating an own airline in these markets but sourcing aircraft seats
flexibly. Initially, we will run our GDN - OTA platform as a customer
acquisition engine by attracting customers with very competitive
product pricing and are prepared to accept no platform profitability
or moderate losses to build market share and to feed customers
into our TUI ecosystem. However, driving as many new customers
as possible into our own hotels and cross-selling our own prod-
ucts remains a key objective and should drive additional margins in
our Holiday Experiences businesses. Our CRM systems are set
to support such a digital up- and cross-selling and will focus on
customer retention within the TUI ecosystem. To date, we have
a run-­rate of 250 k GDN - OTA customers and are confident to
achieve our target of 1 m customers by 2022, now even much earlier
by rolling out our platform to further markets and meta-search
business opportunities globally. We see a strategic opportunity
for this platform to become the leading distribution system also for
independent third party hotels, in particular when combined with
our brands and sophisticated property management systems,
positioning TUI as a holistic digital hotel service provider.

2 Partially through repositioning existing hotels

3 Spain, Portugal, India, Brazil, China, Malaysia
4 . D E S T I N AT I O N E X P E R I E N C E S P L AT F O R M : B U I L D I N G SUMMARY & CONCLUSION
S C A L E I N T H E ‘ T H I N G S T O D O ’ - M A R K E T A N D AT T R A C T I N G TUI has built a profitable business, its integrated business model has
CUSTOMER S TO JOIN THE TUI ECOSYSTEM proven to be successful. To grow our integrated model on both
The tours and activities market encompasses a sales volume of ends TUI will re-focus on accelerated customer growth in addition
around € 150 bn and is growing approx. 7% 4. In this market, TUI has to further investments into Holiday Experiences. Initially, such cus-
built a growing platform business with around 150 k products. Our tomer growth may come at lower margins but will drive customer
business model is based on a two-­sided open platform, accessible acquisition acceleration into the TUI ecosystem. Once acquired,
for direct booking, distribution partners and 3rd party curated TUI will up- and cross-sell its own products with the support of our
product suppliers along-­side serving our own customers and sophisticated and digital CRM systems, driving margins in our Holi­
connecting our own destination experiences products. While we day Experiences on top of the demand from our existing traditional
see strong profitable growth rates5, investing in an accelerated Markets and Airline business, which will become more competitive
customer acquisition may initially come at the expense of margins. as a result of our Transformation & Domaining initiative.
As with our GDN - OTA initiative, our CRM systems will be applied to
4 2018 – 2023
up- and cross-sell our products to customers once acquired. We see 5 Based on underlying EBITA
product depth as the main constraint to accelerate our platform
growth and are therefore committed to investing in additional
product offerings both, organically and inorganically in line with
our vision to offer ‘1 m things to do’ to our customers.
Our environment Our employees

For TUI Group, economic, environmental and social sustainability For the TUI Group well-qualified and engaged employees are a key
is a cornerstone of our strategy for continually enhancing the value factor in the long-term success. To meet the technological, cultural
of our Company. This is the way we want to create the conditions for and organisational challenges of digital transformation effectively,
longterm economic success and assume responsibility for sustain- we aim to empower our employees to keep abreast of the times.
able development in the tourism sector. At the same time, we have to recruit new ‘change-makers’. We want
to be an attractive employer whose employees are passionate
The goals we set ourselves in our ‘Better Holidays, Better World‘ about the company and to offer them development opportunities
sustainability strategy include ‘Step lightly’, where we aim to reduce that meet their personal needs. ‘The best company to work for’ is
the environmental impact of our business operations and to fix therefore the key goal of our Group-wide HR strategy. In 2019, our
goals for improvements in all Group areas. Engagement Index6 of 76 matched the previous year’s level. Our
goal is to exceed a People Engagement score of 80 by 2020 in order
Greenhouse gas emissions and the impact of these emissions on to feature among the Top 25 global companies in this area.
climate change pose one of the major global challenges for the
6 The Engagement Index comprises the individual commitment and the team
tourism sector. In FY 2019, TUI Group’s total emissions decreased
c­ ommitment of our employees and describes the loyalty with the company.
year-on-year in absolute terms, primarily due to the sale of the The questions on commitment relate to the satisfaction of the individual
airline Corsair. Relative carbon emissions across our airlines slightly with the working conditions, a possible recommendation of the employer, pride,
increased by 0.9 % in the FY 2019 to 65.2 g / rpk (previous year motivation, belief in future orientation and willingness to exceed requirements
and expectations.
64.6 g / rpk, excluding Corsair). The main reasons for the increase
are the overall reduction in load factors and the grounding of
Boeing 737 Max. TUI continues to operate one of Europe’s most
carbon-­efficient airline fleet and continually seeks to deliver further
improvements.

The grounding of the Boeing 737 Max and the late deliveries have
significantly impacted progress against our initial aviation carbon
target to cut our carbon itensity of our operations by 10 % by 2020
(baseline year 2014: 67.56 CO 2 / rpk). Compared to our baseline
year 2014, we have improved airline carbon efficiency by 3.6 %.

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