A Case for Change – Digital Transformational Startegy for TUI


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TUI is strong brand. This “Case for Change” is not about saving the brand, it’s rather a strategy to outline future challenges & opportunities and to open a windows into emerging revenue potential – Youth and Students Travel markets.
Based on previous industry performance and global developments in travel and tourism, a conservative estimate predicts that the youth and student travel market will reach 300 million arrivals by 2020 and represent US$320 billion in market value. The travel industry has changed dramatically and market leaders need to transform to remain relevant, providing a new value to digital natives that independently organise their travel with spontaneity, flexibility and freedom.

By combing digital technologies and emerging markets, a brand such TUI would be able to create new market spaces and unlock great business opportunities.

Digital innovations help brands to reconsider their product development strategies and allow them to deliver a long-term great user experience. This piece of work is part of my Digital Media Management program at Hyper Island, Manchester, UK.

Please feel free to get in touch if you have any questions.

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A Case for Change – Digital Transformational Startegy for TUI

  1. 1. A Case for Change How Digital Transformational Change can help TUI to create its place in the Travel Market of the Future.
  2. 2. Tr a v e l E x p e r i e n c e Sun & Beach | Activity & Adventure | Luxury | Excursions & Transfers | Accommodation | Oceans & Rivers | Responsible travel B u s i n e s s S e c t o r Mainstream, Accommodation & Destinations and Specialist & Activity A Market Leader 1 TUI is a market leader, having grown through acquisition and owning brands such as Thomson Travel, Airtours and Laterooms.com. Their scale allows them to negotiate the most competitive deals for their customers. Ownership of booking engines, aircraft and resorts give TUI the edge in allowing for a completely customised holiday experience. [TIMELINE] TUI – Historically one of the world’s leading leisure travel companies 1968creationofTUI 1970AirtoursIntl& TransEuropa joinedTUI 1972Hotelbrands established 1990Renameofthe maintouroperatorinto "TUISchöneFerien" 1995CreationofTUI NederlandandTUI Austria 1995-1996Creationof TUINederland,Austria, SuisseandBelgium 1998Acquisitionofthe grouprenameto HapagTouristikUnion (HTU) 2000HTUwas renamedtoTUIGroup 2001TUIGroupisnow 100%subsidiaryof PreussagAG 2002Renameof PreussagAGtoTUI AG 2002Reorganisation fromamixedcompany totourismcompany. 2004WestLBsoldits share.Newshareholder onboard 2005Jointventure betweenworld’slargest travelgroup,TUIAG andLPTI. 2007TUITravelPLC wasformed 2009TUI’spresencein RussiaandCIS 2010Reorganisationof TUI’sbusinesssectors 2010Reorganisationof TUI’sbusinesssectors 1960’s 2010’s 2012Announced changestothe structureofthe MainstreamSectorto acceleratethemoveto modernmainstream andbeingonlinedriven.
  3. 3. A Brand with Values TUI is committed to its customers and creating values in their lives. This is what stands on the company website: “Making travel experiences special underpins everything we do and keeps our focus on providing the unrivalled choice, professionalism and confidence our customers and stakeholders can rely on, now and in the future.” Brand values that drive current brand behaviour and business strategy Teamwork Integrity Value Driven Responsible Leadership Customer Driven “We respect our customers and never forget that they choose to spend their leisure time with us. We share a duty to maintain their loyalty and trust. We anticipate customers' desires and everything we do is with them in mind. We believe there is no such thing as mass market but a huge market of individuals.” “We are committed to sustainable development and to making a positive impact on society. We know leadership has to be earned and we never take it for granted. We communicate openly and easily and help each other develop and grow. We celebrate local differences and actively seek to contribute to a better world.” “We share an infectious, entrepreneurial streak and a clear focus on the need for profitability. We look for opportunities that have a commercial advantage for us and add value to our customers' experience. We predict, translate and bring to market new leisure-time products based on their genuine appeal to customers.” “We are passionate about being the best and about winning with integrity. We seek the ideas and trends that change leisure-time markets for the better and move quickly to action them. We thrive on teamwork. We are not afraid of making brave decisions. We want to do something new every day and we love what we do.” 2
  4. 4. Financially OK. But? These values have ensured TUI a very good position in the market through previously mentioned acquisitions and owning brands worldwide. However, its products and services are mainly offered to families with kids, adults, couples, elders and businesses. What is missed is a future vision, considering future travellers and their needs, aspirations and understanding of their behaviours. In 2012, Group revenue declined by 2% from the prior year at £14,460m (2011: £14,687m). This result was driven by organic growth of 2% and a foreign currency translation impact of -4%. Organic revenue growth was driven by higher volumes and average selling prices in many source markets. In the brand outlook into 2012/2013 stands: “Our strategy of increasing our unique holiday (differentiated and exclusive product combined) offering, selling through direct distribution channels with a focus on online and driving continued operational efficiency throughout the business is paying dividends. Our strong business models, which have evolved through a deep understanding of the leisure travel market and the needs of our customers, lay the foundations for continued success and long-term sustainable growth. We have set out a road map for growth over the next five years and will deliver improved customer experiences and increased shareholder value.” Financially OK, but what about customers’ values? Is your strategy sustainable? Is not this just another product-driven mindset? 3
  5. 5. Future Challenges A Customer Insight Study done by AKQA has shown the following: Young, digitally enabled people are currently using Google to plan their holidays. The customer uses mobile as an integral part of their day to day life – and doesn’t expect this to change on holiday. They are used to booking as they go, and sharing their life through their social networks. This customer has a self-perception that the best experiences are spontaneous and unexpected. The idea of over planning leisure time (designated fun time) feels distant to them (hen parties, family events). They also understand that this go with the flow attitude often lets them down – they end up lost, spending a fortune on roaming charges, or end up paying through the nose as you’ve left things to the last minute. They would welcome a service that could add value to their holiday whilst enabling them to feel like they’ve curated the experience themselves. Young people are digitally confident enough to create their holiday independently. TUI’s mainstream offering (trusted selections, convenience and package holidays) is not at present valued by them and could be considered an old fashioned way to travel. That’s a challenge which should be turned into an opportunity. And the future is full of great opportunities! 4
  6. 6. Three factors why TUI should consider a radical shift in its business strategy: (1) By 2020 there will be almost 300 million international youth trips per year, according to UNWTO forecasts, (2) Travel is considered as the biggest single opportunity to grow in the next 5 years – guess who is our Target Audience in 5 years? And (3) The purpose of travelling for youths is changing The Future is Bright Turn the challenge into opportunity by listening actively to your young customers and understanding what are their essential needs and values when travelling? Freedom and flexibility are the new desires and you should follow future predictions and use digital technologies to drive your business into that bright future. Here are some relevant data to follow: 1 10 100 2002 2004 2006 2008 2010 2020 148150170180198 300 MillionInternationalArrivals In 2020, travelling youths will represent US$320 billion in market value: 1 10 100 Tourism Aircarft Other Social Mobile Acquisitions Tech MarketShare% Tourism is the biggest single opportunity for business over the next 5 years: 1 10 100 Languages Volunteering Work Places/Cultures Family/Friends Relax/Fun Study PurposeofTravel% Flexibility to explore new places is key motivation for youths to travel: 5
  7. 7. Adjust Your Value Chain Based on this, you’re just another tour operator, with a product driven value chain, ignoring future opportunities – i.e. not creating customer experiences, nor values! Site Operator, Cultural Group Hotel, Restaurant Transport Company Travel Agent Transport Company Organise event, experience Advising tourist on product contract Transport from the destination Transport to the destination Providing accommodation, food, etc. Future opportunities are huge and you have the power to be leading contributor into this future. What if we can take that further and co-create the future of the industry. It might sound bit cliche to say you should DISRUPT the industry, as disrupters are everywhere and new business ideas keep on launching almost everyday. One of the biggest challenges for your business is to gain a certain level of self/brad-awareness. To identify your harmful beliefs and to be able to admit that a Change is needed. Current Value Chain is a great example of an old-fashion and product-driven business mindset. 6
  8. 8. Change Your Mindset The current Value Chain + = Myopic strategy leading to a long-term and systemic disappearance from the market. TUI is a market leader and knows best what travellers need. Our strategy of increasing our unique offering is paying dividends. We will keep growing based on our strong business models is built on deep understanding of the leisure travel market and the needs of our customers. We can provide the best the best experience for the best prices. Disruptors as Booking.com, AirBnB and Expedia.com are competitors and we won’t cooperate with them. We sell holiday concepts that you can only buy from our brands. We are focused on increasing the amount of unique and differentiated products that you can only buy from our brands. We are experts in technology and online businesses. 7 Someofyour Harmfulbeliefs
  9. 9. Case for Change Combining previously mentioned factors – your current value chain and held harmful beliefs, that can lead to a lack of constructive self–awareness and unmeant arrogance. That’s a Case for Change – A time for an update! Hence, how can a 360 travel service (from booking, to the plane, to a hotel room) offer young travellers something they value? How can you add value to their holiday experience? How can you change ... From We sell ready-made holiday packages Product focused To We facilitate an eye-opening and flexible holiday experience Customer focused 8 The answer is: GIVE THEM WHAT THEY VALUE THE MOST – FREEDOM! Redesign your strategy to be more customer-driven. Stop selling holidays and start creating values by facilitating their flexible holiday experience.
  10. 10. First: Identify Customers’ Needs To get this change right, you need to understand your customers’ user journey and be able to identify their main needs and achieve their new Desired Outcome: Enjoying an eye-opening and flexible holiday experience. This is a short version of a Customer Activity Cycle, demonstrating main activities young travellers do in order to achieve the desired outcome, while enjoying the desired outcome and after that to keep it going. Ideally, you might want to step into this cycle as soon as possible ad stay there as long as you can. The goal is to put value in and take waste out. Waste is any meaningless activity that can complicate travellers’ path to achieve the Desired Outcome. Get rid of it! Enjoying an eye-opening and flexible holiday experience Search for tip Plan your trip Book a ticket and room Pay Go to the airport Pack your luggage Get insurance Check-in Get to your hotel Check-in at your destination Boarding Explore your destination Get in touch with locals / reps Get car/scooter to travel Search for new adventures Get back to your hotel Go to airport, fly back Share experience Share experience Evaluate your trip Provide feedback to your travel agency Think about new experience next time, engage online PRE DURING POST 9
  11. 11. Second: Eliminate Waste Waste is the value gap you can easily fulfil by solving customers’ problems. Most of the waste happens in the DURING stage, where the need for flexibility is obvious. Having a flexible holiday is a non-linear process leading to richer experience. current market disruptors are trying to cover one or more of the these gaps, identified during the Customer Activity Cycle – I have clustered them into groups of problems to solve. You have the opportunity to create a unique, integrated and personalised solutions, combing your global network and assets, making you customers’ first choice. Enjoying an eye-opening and flexible holiday experience Search for tip Plan your trip Book a ticket and room Pay Go to the airport Pack your luggage Get insurance Check-in Get to your hotel Check-in at your destination Boarding Explore your destination Get in touch with locals / reps Get car/scooter to travel Search for new adventures Get back to your hotel Go to airport, fly back Share experience Share experience Evaluate your trip Provide feedback to your travel agency Think about new experience next time, engage online Enjoying an eye-opening and flexible holiday experience LOOKING FOR INSPIRATIONS FINDING THEBEST OFFER ONE-FITS- THEM-ALL PACKAGES PACKAGE CAN BE PURCHASED ONL WITH TUI PARTNERS PRE DURING POST NO POSSIBILITY TO CHANGE / UPDATE MY HOTEL HARD TO FIND AUTHENTIC LOCAL EXPERIENCE NOINTERNET CONNECTION NO POSSIBILITY TOCHANGE MY LOCATION IMMOBILITY IRUN OUT OF M ONEY BUDGETEVALUATION IS A PAIN INTHE ... O M G !M Y RO AM ING BILL AM I LOYAL TO THE BRAND? 10
  12. 12. Third: Create New ... Value Proposition REDUCE ELIMINATE RAISE CREATE ELIMINATE Which of the factors that the industry takes for granted should be eliminated? REDUCE Which factors should be reduced well below the industry’s standard? RAISE Which factors should be raised well above the industry’s standard? CREATE Which factors should be created that the industry has never offered? 11
  13. 13. ... Innovative Values 12 CREATE / RAISE • A New Platform – Providing travellers with flexible & immediate tools to change, update or upgrade their holidays. It allows them to change locations, hotels and helps them to find the best offer – while being at their destination (i.e. upgrade to a better room, find another hotel, move to different city) and also helps to find the best/cheapest way to get from A to B, C, etc. Young travellers will use this platform to plan, book and pay their holiday, without the need to waste time by searching and asking for tips. A smartphone App is part of Platform to ensure immediate access to TUI’s recent offers – before, during and after their holiday! • A Subscription Payment Model – They will not pay for a ready-made package, they’ll rather “subscribe” with a given budget to be used during their holiday days. Once they arrive to the destination, they decide how much they spend, where to stay and what to do – flexibly & immediately. Keeping the budget is one of the identified “pains” that young travellers face during and after their holidays. • A Crowd-funding Platform – Young travellers can crowd-fund their experience by sharing their aspirations with their families, friends and peers. This Platform gives travellers an authentic freedom and allows them to create their own unique experience. And TUI is here to facilitate that user experience. • Crowdsourced Peer-To-Peer Customer Services Platform – Turn your travellers to become your Local Reps. Reward them when share their experiences. • Collaborate with Internet Providers – Ensure that all your destinations have access to the Internet. We live in the age of the Internet of Things, everything and everyone is connected. If that will be technically impossible, provide your travellers with FREE SIM- CARDS with UNLIMITED DATA. Why data? To make sure they can make the best out of your new platform! • Collaborate with Local Businesses – Allow them to become part of the new platform where they can provide travellers with relevant information about what’s happening at which destination. • Invest part of your revenue back to Support Local Projects – Build better and richer holiday experiences. You win, travellers win and locals win (jobs). • Raise the number of “Purpose-driven” holidays – Youths travel for different reasons, make sure you find what motivates them and meet their aspirations (education, languages, cultures, etc.) • Sales points – Collaborate with various Online/Offline partners to increase sales. ELIMINATE / REDUCE • Carbon Emissions – Keep your Carbon Emissions Strategy to reduce the environmental impacts produced by aviation, water and ground transport, major premises and hotel properties. • Green Energy – Energy saving initiatives can dramatically save money by cutting costs in building, airlines and operations.
  14. 14. Four: Pimp Up Your Revenues 13 A flexible holiday experience will add value to young travellers’ lives while driving your profit up! The new platform provides youths with a flexible way to manage their holidays, leading to returning customers which would increase the number of bookings and sales. By allowing travellers to update or upgrade their bookings on–the–spot, you can easily generate money that they probably would not spend when pre– booking. You will also invite local businesses to promote their offerings through your new Platform / App, adding another revenue stream from local recommendations. Through Brand Loyalty Updates / Upgrades And Local Businesses
  15. 15. A Flexible Holiday Experience Adventure Education Hostels Community Culture Web Acess Budget Hotels Cards Visas Work Abroad A true travellers’ experience can be achieved only through flexibility and freedom, tapping into different markets, making sure that you can cover travellers’ activities pre, during and post enjoying their holidays! To achieve that goal, a new Value Chain needs to be implemented Organise event experience Accommodation, food, etc. Advising tourist on product contract Transport to the destination Transport from the destination 14
  16. 16. Summery TUI is strong brand and financially doing well. This “Case for Change” is not about saving your dying brand, it’s rather to outline future challenges & opportunities and to open a small window into a huge emerging market / revenue potential. Based on previous industry performance and global developments in travel and tourism, a conservative estimate predicts that the youth and student travel market will reach 300 million arrivals by 2020 and represent US$320 billion in market value. The travel industry has changed dramatically and market leaders need to transform to remain relevant, providing a new value to digital natives that independently organise their travel with spontaneity, flexibility and freedom. Price policy is key for your success! Aim for an on-going value creation, delivered at lower price. Optimise your operations and multiply your sales points. Diverse in destinations and source markets is being observed the trend. BRIC and emerging countries are the markets that look interesting for development and expansion and will define the industry, gaining increasingly more global market share. Don’t wait for the future. The best way to predict the future is to create it. Unlock new market space to leverage your strong assets and market position to disrupt the industry and ensure your create and invent the future of the industry. Your mergers and acquisitions are to grow market share, not to lead to a changed market place. Your earnings are without top- line growth and competition keeps coming increasingly from outside industry. And these are reasons why should you bother! Young travellers do not want to listen, they want to be heard. Deliver a sustainable personalised experience and you’ll succeed. Be Good. Be fair. Be decent. Make things that last. 15
  17. 17. References IMAGES Intro slide: http://www.listofimages.com/sunset-departure-aircraft-commercial-departure- jet-red-sky-sunset.html Slide 01: http://www.listofimages.com/sunset-departure-aircraft-commercial-departure-jet- red-sky-sunset.html Slide 02: http://www.wallsfeed.com/wallpapers/2013/01/Aircraft-Plane-Wing- Sunset-720x1280.jpg Slide 03: http://www.wallpapersas.com/wallpaper/sailing-ship.html Slide 04: http://www.leaflanguages.org/folium-the-ultimate-guide-to-traveling-when-youre- broke-via-lifehacker/ Slide 05: http://www.wallpaperbe.com/wallpaper/australia-ocean-beach-pool-evening- sunset-red-sky-clouds.html Slide 06: http://wallpapersus.com/sunset-beach-beautiful-clouds-nature-reflection-sky- summer-sunset-waves/ Slide 07: http://wallpaperskd.com/wallpaper/turtle-island-in-yilan-taiwan/ Slide 08: http://www.wallpapersas.com/wallpapers/2013/02/Clubbing-720x1280.jpg Slide 09: http://wallpaperstock.net/freedom-and- happiness_wallpapers_35452_1280x720_1.html Slide 10: http://windows-8-wallpapers.com/wallpapers/bamboo-forest-canopy-windows-8- wallpaper-1280x720.jpg Slide 11: http://www.wallpaperbe.com/wallpaper/usa-california-san-francisco-golden-gate- bridge-sunset-blue-ocean.html Slide 12: http://www.wallpaperbe.com/wallpaper/thailand-paradise-scenery-seawater- sunrise-bridge-house-sunlight.html Slide 13: http://www.wallpaperbe.com/wallpaper/sunset-in-taipei.html Slide 14: http://www.upphotos.net/france-paris-evening-sunset-people-sky-square-eiffel- tower-30667.html Slide 15: http://www.wallsfeed.com/airplane-clouds-flying-sunset/ References slide: http://www.layerbag.com/wp-content/uploads/2013/04/forest_1280.jpg RESOURCES Slide 01: http://www.tuitravelplc.com/brand-experience/featured-brands http://en.wikipedia.org/wiki/TUI_AG#History Slide 02: http://www.tuitravelplc.com/about-us/vision-values Slide 03 – Data Source: http://ara2012.tuitravelplc.com/sites/default/files/attachments/Business%20and%20financial %20review.pdf Slide 05 – World Youth Student & Educational Travel Confederation/IAS, 2011: http://dtxtq4w60xqpw.cloudfront.net/sites/all/files/pdf/the_power_of_youth_travel.pdf Slide 06 – The Power of Youth Travel by WYSE: http://issuu.com/ldaly/docs/wysetc-unwto-report-english_the_power_of_youth/1?e=0 Slide 11 – Blue Ocean Strategy: W. Chan Kim, 2005. Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant. 1 Edition. Harvard Business Review Press. Slide 15 – Data Source: http://ara2012.tuitravelplc.com/sites/default/files/attachments/Business%20and%20financial %20review.pdf