travel companies world xerfi 2013.pdf

Global Markets And Competition
Report code:
Analyst:
Publication date:
Market Analysis – 2012-2017 Trends –
Corporate Strategies
2XSTR01
Petra FRENT
June 2012

The 5 phases of Xerfi Global’s
Global Markets And Competitionreports
1
2
3
4
5
Identification of the playing field
At Xerfi Global, we believe that international classifications are not the only valid definition of a market. It is the
companies that make the sector and not vice-versa. During our first brainstorming session, we strive to give a
clear-cut definition of the scope of the report.
Identification of market leaders
During the second phase, Xerfi Global’s analysts identify the players who will be studied in the report. Our aim is
not only to classify by total sales, but also to detect tomorrow’s movers and shakers, especially those from
emerging markets.
Identification of the main market indicators
Using the best and most up to date international sources, Xerfi Global’s experts handpick the most relevant
indicators pertaining to both supply and demand.
Identification of corporate strategies
During a further brainstorming session, the Xerfi Global team aims to decipher the main corporate strategies and
key future trends.
Identification of the key conclusions
Thanks to a final brainstorming session, drawing on the knowledge of all the members of Xerfi Global, the main
conclusions are debated and ultimately summed up in no more than a dozen slides. Concision, precision and
accurate forecasts are our main aims.
This is a collective report written
under the supervision of:
Petra FRENT
Other contributors include:
Alessandro Schiliro
Alberto Balboni
Aurélien Duthoit
Frank Benedic
Diana Nagy
Sebastien Vera
Irina Baksheva
2
Travel Companies - World - June 2012

Table of Contents
3

4

Key trends 2012 - 2017
• The global travel market was approximately €720bn in 2011, with an ever-
increasing share (nearly 38%) booked through online channels. The global
migration of travel reservations from offline to online will continue to
progress in upcoming years;
• Recent developments in the sector point to travel disintermediation and an
increasing role of independent travelling which are re-shaping the industry
landscape. Air tickets and hotels are booked separately, as consumers build
their own packages;
• The above trend is favourable for low-cost airlines and online travel
agencies, however, putting asset-heavy (vertically integrated) players such as
Tui Travel or Thomas Cook under pressure;
• Both online and mainstream travel companies are seeking to further develop
their brand portfolios to cover a maximum of market segments, spending
massive resources to improve brand strength, global scale and supply-base;
• Product innovation, global expansion -especially in emerging markets, and
new channel penetration -more specifically the Internet and mobile devices,
will continue to be the prime drivers of growth in upcoming years.
Travel Companies - World - June 2012 5

The number of international tourists will surpass 1bn in 2012
International tourist arrivals, 2001 - 2012
unit: million
Source: World Tourism Organization (UNWTO)
• According to the UNWTO, international tourism will carry on growing in upcoming years, although at a
slower pace, reaching a historic one billion mark in 2012.
• Emerging economies will lead the way by number of tourist arrivals, growing 4 to 6% in Asia-Pacific and
Africa, compared to 2 to 4% in the Americas and Europe.
673
693 682
753
797
842
898
917
882
939
980
1,014.3
600
700
800
900
1,000
1,100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(F)
+4.4%
+6.5%
-3.8%
+4.0%

Global tourism expenditure to further rise in upcoming years
Global total tourism expenditure
unit: trillion euros, 2011 real prices
Source: WTTC Travel & Tourism Economic Impact 2012
• Global travel spending amounted to 2.89 trillion euros in 2011, rising for two years in a row after a
record low slow down in the wake of the global economic recession of 2008-2009.
• With higher living standards and wages, the contribution of tourism in emerging markets is anticipated
to be the main engine of travel industry growth in upcoming years.
2.81
2.89 2.88
2.72
2.81
2.89
2.98
3.11
3.24
3.38
2.0
2.5
3.0
3.5
2006 2007 2008 2009 2010 2011 2012(E) 2013(F) 2014(F) 2015(F)

Technological innovations will sustain online travel growth...
Online travel market growth drivers
Source: Xerfi Global
ONLINE
TRAVEL
GROWTH
DRIVERS
Rapid technological innovations
and developments
Growing access to internet
and mobile devices
(smartphones, tablets)
Favourable demographics:
new generations of young
customers with growing
incomes and greater online
habits
Growing demand (convenience)
and supply (higher margins,
wider customer reach) for online
travel
Multiplication of online travel
companies
Online industry consolidation
and strong competition

...and online bookings will remain the main growth driver
Growth prospects by main geographical travel markets
Market
Online travel
market size
2017 growth
prospects
Main growth drivers
EUROPE ++++ ↗↗
•Due to the relatively low proportion of
online travel sales in emerging markets,
they represent great opportunities for
online travel companies which are
expanding abroad;
•In advanced economies, technological
innovations are creating new travel
opportunities through mobile devices.
Online companies are creating new mobile
websites and mobile applications for each of
their brands.
•Overall, online travel companies have been
aggressively pursuing marketing campaigns
both online (search engine marketing, meta-
search, social media sites, etc) and offline,
as well as direct customer communication
on their websites or via e-mail.
NORTH AMERICA +++++
↗↗
ASIA ++ ↗↗↗
LATIN AMERICA + ↗↗↗

Online leaders match traditional operators’ size by gross sales
Leading travel companies analysed in this report
unit: billion euros
Source: Xerfi Global with companies’ annual reports; 2011 data; * 2010 data.
COMPANY COUNTRY
SALES
(GROSS
BOOKINGS )
PROFILE
TUI TRAVEL 15.56 Mainstream tour operator
THOMAS COOK 13.10 Mainstream tour operator
TRANSAT 2.62 Mainstream tour operator
KUONI 3.70 Mainstream tour operator
ALPITOUR 1.22 Mainstream tour operator
REWE TOURISTIK* 2.52 Mainstream tour operator
H.I.S. TRAVEL 3.42 Mainstream tour operator
EXPEDIA 2.52 (20.97) Online travel agency
PRICELINE 2.32 (10.30) Online travel agency
TRAVELOCITY (SABRE HOLDINGS) 2.16 (na) Online travel agency
ORBITZ 0.57 (8.6) Online travel agency
ODIGEO (OPODO,E-DREAMS, GO VOYAGES)* 0.59 (3.50) Online travel agency
CTRIP 0.39 (na) Online travel agency

Online travel groups will carry on growing at a much faster pace
Growth of travel sector leaders for 2007/2011
unit: annual percentage change
Source: Xerfi Global with companies’ annual reports
•In recent years, the pace of
online market increase has
considerably exceeded the
overall growth rate in the travel
sector.
•This is illustrated by the annual
expansion rate of leading
online travel agencies over the
past five years. Priceline, Ctrip
and Expedia have seen double
digit average annual growth in
revenues over 2007-2011.
•On the other hand, some of
the world’s largest tour
operators such as Tui Travel,
Thomas Cook or Transat have
experienced weak growth in
turnover over the same period.
1.0%
3.4%
4.5%
10.5%
33.0%
45.5%
0% 10% 20% 30% 40% 50%
Thomas
Cook
Tui
Travel
Transat
Expedia
Ctrip
Priceline

Online travel groups are also more profitable
Ranking of analysed companies by 5-year operating margins (2007/2011)
unit: % of operating profit over sales
0.8%
1.5%
1.7%
2.5%
2.5%
3.1%
13.9%
30.4%
32.1%
0% 5% 10% 15% 20% 25% 30% 35%
Transat
Kuoni
Tui Travel
HIS
Alpitour
Thomas Cook
Expedia
Ctrip
Priceline

Online travel groups have the broadest geographic span
• Top online groups such as
Expedia or Priceline
generate a significant
proportion of their sales in
international markets.
• Although they rely on the
European market to a
higher extent, mainstream
tour operators such as
Kuoni, Thomas Cook and
Tui Travel are increasingly
present in Asia and other
emerging markets.
• Several players have kept
a marked local and/or
regional dimension:
Transat in Canada/ North
America, HIS in Japan/
Asia, Alpitour in Italy/
Europe and Rewe in
Germany/ Europe.
Internationalisation degree of leading travel companies
13

Companies must adapt to new trends shaping the travel sector
Main trends in the global travel sector - overview
INCREASING
SHARE OF ONLINE
BOOKINGS
GROWTH IN
OUTBOUND
EMERGING
MARKET
INCREASING
SHARE OF
INDEPENDENT
TRAVEL
An increasing share of trips, tickets and hotel bookings are being made online.
Expansion of key players in destination management, a highly fragmented market,
with robust margins.
Growth of specialised and differentiated offerings.
Free Independent Tourists (FIT) are individuals of above average income who
prefer to travel alone or in small groups and source data from travel websites where
they also share their experience and pass on information to other travellers.
DISINTERMEDIATION
Consumers tend to buy travel components (air tickets or hotels) separately, directly
from travel suppliers. This trend is favourable for low-cost airlines and online travel
agencies, however, putting asset-heavy players under pressure.
Disintermediation trends have led all players to seek expansion in the fragmented,
more profitable hotel business.

…of high value-added
…with generally low profitability
To stay competitive, tour operators are redefining their offers
Evolving characteristics of travel product offerings
Source: Xerfi Global with company annual reports
Standardised packages
Fixed duration
(7 nights/14 nights)
Brochure and retail led
Call centre customer support
Product portfolios are shifting from
traditional commodities mainstream…
Differentiated, unique holidays
Flexible periods
Multi-media marketing (online)
Online self-service
… to personalised, flexible offerings

Separate brands to target a maximum of customer segments
Overview of selected competitors’ multi-segment positioning
ORBITZ
Tui TRAVEL EXPEDIA
PRICELINE
Last minute
purchases
Opaque channels
Retail
Package
Business travel
Luxury travel

17

1.1. Overview Key figures
~€720bn … the value of the total global travel market in 2011;
~38.3% …the share of online travel in the total global travel market;
10%
… the annual growth rate in online travel in Europe and the US,
each, for the past five years. These two markets combined
generate 75% of total online travel spending;
17%
… the annual growth rate in online travel in Asia Pacific for the
past five years.
Growth dynamics dominated by online travel
Source: Xerfi Global with Expedia, Tui Travel
18

1.1. Overview Key characteristics
A sector driven by the online channel and emerging markets
Scope of the report
The current report investigates the dynamics of leading companies in the global
travel market, including both traditional mainstream tour operators and
increasingly stronger rivals, online travel agencies. Online and traditional leaders
alike cover all market segments, from budget-minded to high-end, luxury tourism.
Internet: the fastest growing channel
Main growth drivers in the travel market have been product innovation, expansion
in emerging markets and the Internet channel. Advanced economies led the way
in online sales in 2011, with Europe and the US accounting for circa 75% of global
online revenues and growing at around 10% annually over the past few years. The
Asia-Pacific region, however, saw a much higher growth rate for the same period,
+17%.
Growth geographies have been
emerging markets
In recent years, travel companies’ main focus has been centered around
establishing a significant presence in fast-growing travel markets. The most
noteworthy expansion potential is found in Brazil, China, India and other emerging
countries in which leaders have been tying joint ventures or acquiring local
players.
Independent travel is gaining
importance
Independent travel refers to self-made holidays which entail separate holiday
component purchasing: accommodation and air tickets are bought separately, not
as a package. With the takeoff of the Internet, independent travel continues to be
the fastest growing market in leisure travel. Hence, the online travel market has
become a key area of focus for mainstream travel companies. With a significant
share of future growth attributed to online channels, traditional tour operators
are focusing their efforts in expanding their Internet reach.
19

1.2. Market essentials What is the breakdown of the travel market?
Tour operators and online travel agencies have 20% of the global market
Breakdown of the global travel market by travel suppliers
units: billion euros
Source: Xerfi Global with Expedia, 2011 data.
AVIATION
43%
3bn passengers
DIRECT TRAVEL SUPPLIERS
80% - €576bn
HOTELS
36%
12.7mn rooms
GLOBAL TRAVEL MARKET
€720bn
CRUISE
1%
14.8mn travellers
INTERMEDIARIES
20% - €144BN
TO
TOUR
OPERATORS
OTA
ONLINE TRAVEL
AGENCIES

1.2. Market essentials What are the business models?
A two-way business: merchant and agency models
Main business models used by tour operators and online travel agencies
MERCHANT MODEL
Mainly hotel transactions
Collect cash from customer at time of booking,
pay suppliers at a later date
COMMISSIONABLE MODEL
Mainly air transactions
Customer pays supplier directly
MODEL
REVENUES
The difference between the amount the customer pays
for the product and the negotiated net rate plus
estimated taxes that the supplier charges for that
product
•Retail hotel transactions: at check-in
•Retail car transactions: at customer pick-up
•Retail air transactions: at time of booking
•No inventory risk; no credit risk with the customer
•Higher margins than the retail model
•Control over pricing
Subject to fraud
REVENUE
RECOGNITION
PROS
CONS
TOs collect a fixed commission from the supplier after
the customer uses the reservation
•No inventory risk;
•No credit risk with customer
•No latitude in determining pricing
•Lower margins than the merchant model

TOUR OPERATORS
TOs
ONLINE TRAVEL AGENCIES
OTAs
1.2. Market essentials What is the business?
An industry split between tour operators and online agencies
Main competitors in the travel market and their respective business models
Design inclusive travel tours, from
flight and hotel bookings to amenities
such as limousine transfers, restaurant
reservations, event tickets, etc.
Distribution
•Retail offices: companies own branch
outlets and third-party travel agencies
•Internet
•Call centres
Providing, on a stand-alone or
package basis, travel products and
services provided by airlines,
accommodation providers, car rental
companies, destination service
providers and other travel product
and service companies
Distribution
•Internet
•Selective retail offices (Expedia’s
luxury and corporate travel business)

1.2. Market essentials What is the activity chain?
Companies’ roles in travel distribution are overlapping
The activity chain of the travel industry
TRAVEL
SUPPLIERS
TRAVEL DESIGNERS TRAVEL RETAILERS
The roles of companies in the travel distribution chain will continue to overlap as direct travel suppliers
behave increasingly like online travel agents (OTAs) and OTAs emulate the business models of
mainstream tour operators - and vice versa
Hotel groups
Transport groups
(airlines, railway
companies, etc.)
Travel agencies:
specific branch outlets or third
party travel agencies
Online Travel Agencies
CLIENTS
TOs (packaged holidays)
•Specialised: cruise, fly-drive,
city break, accommodation
only etc.
•Generalist
Rental business
(Car and holiday
rental)

1.2. Market essentials Who are the main clients?
Main customers are individuals and businesses
Inbound world tourism by purpose of visit
unit: share in %
Source: Xerfi Global with UNWTO; VFR= visiting friends and relatives, latest available data.
Most of the world’s travel takes place for leisure, recreation and holidaying. Holiday trips account for 51% of travel,
while another 27% are visits to friends and relatives (VFR), and 15% is business travel. Most people traveling abroad
do so with their families.
Leisure, recreation
and holidays
51%
VFR, health,
religion, other
27%
Corporate
15%
Not specified
7%
END
CLIENTS
78%

1.2. Market essentials What are the main transportation means?
Air
53%
Road
39%
Water
5%
Rail
3%
Most travel is done by air and road
unit: share in %
Source: Xerfi Global with UNWTO; latest available data.
Inbound world tourism by mode of transport
Air transport is, by far, the most
preferred transport mode (53%).
While railway systems in several
European countries have seen
massive investments for long-distance
routes and high speed rail, train travel
only accounts for 3% of total travel.
Car travel is usually an independent
means of transport, and is second in
importance to air travel. Cruising has
become a significant source of
revenues in the travel industry (more
than doubling its market size since
the 1990s). The principal geographic
location of the main cruise lines are
the Caribbean, the Mediterranean
and the South China Sea/Pacific
Ocean.

COMPANY COUNTRY
SALES
(GROSS
BOOKINGS )
PROFILE REGIONS
TUI TRAVEL 15.56 Mainstream tour operator Global
THOMAS COOK 13.10 Mainstream tour operator Global
TRANSAT 2.62 Mainstream tour operator Europe, North America
KUONI 3.70 Mainstream tour operator Global
ALPITOUR 1.22 Mainstream tour operator Italy, Europe
REWE TOURISTIK* 2.52 Mainstream tour operator Germany, Europe
H.I.S. TRAVEL 3.42 Mainstream tour operator Asia
EXPEDIA 2.52 (20.97) Online travel agency Global
PRICELINE 2.32 (10.30) Online travel agency Global
TRAVELOCITY (SABRE HOLDINGS) 2.16 (na) Online travel agency Global
ORBITZ 0.57 (8.6) Online travel agency Global
ODIGEO (OPODO,E-DREAMS, GO VOYAGES)* 0.59 (3.50) Online travel agency Europe
CTRIP 0.39 (na) Online travel agency Asia
1.3. Market leaders Who are the main players?
By gross sales, online groups match traditional operators’ size
Leading travel companies analysed in this report
unit: billion euros
Source: Xerfi Global with companies’ annual reports; 2011 data; * 2010 data.

1.4. Geographical location Where are activities located?
Top markets: Europe for traditional travel, US for online travel
Main travel markets – breakdown by region
unit: billion euros; Key: the grey shaded portions represent online travel market
Source: Xerfi Global with Expedia, 2011 data.
163
EUROPE AND
EURASIA
US
ASIA-PACIFIC
45
LATIN
AMERICA
199
218
27
107 85
39
8
TOTAL
ONLINE

28

2.1. Market overview PESTEL analysis
A favourable environment for the sector in emerging markets
PESTEL analysis of the travel industry 2012-2017
+ - IMPACT
POLITICS
ECONOMY
SOCIETY
TECHNOLOGY
ENVIRONMENT
LEGISLATION
Political instability in the host
country
Terrorism, war, other
geopolitical factors
Increased volatility in exchange
rate and increasing oil prices
Economic uncertainty in the
eurozone
Reducedconsumer spending
in some European markets
Improvedtelecoms provide
alternatives to travelling
Discovering local sites instead
of long trips: lesser distances
covered
Taxation (airport taxes etc.)
Visa requirements
State support for tourism
Increasing tourism spending
in emerging countries
Higher share of consumer
spending devotedto tourism
in emerging countries
Demographic dynamics
Faster transports make
distances shorter
Growing Internet access
New forms of travel:
ecotourism, sustainable
tourism
Free circulation agreements
- +
- +
- +
- +
- +
- +
29

The economic context has significant impact on the leisure travel industry
Factors impacting the business cycle in the travel industry
All travel companies are exposed to business cycles and have to consider the impact of macroeconomic
developments on travel demand. Geopolitics and the economic context can highly influence global demand, while
rising transportation costs or lack of adequate infrastructure in one country can shift consumer preferences to
another destination. Increasing oil prices negatively impact the development of tourism, and particularly
international and long-haul tourism. Exchange rate changes make destinations more or less attractive for foreign
tourists. The travel sector is highly impacted by the political situation of a country (instability, war, terrorism) or
natural disasters.
Global economic
context
Dynamic
demography
Improving
transport
infrastructure
Transport costs
Geopolitical
context in the
host country
Exchange rates
DEMAND FOR
TRAVEL

Demand spurred by emerging market dynamics
Factors inducing growth in emerging markets
Several factors will be favourable
to the development of tourism in
emerging markets in the medium-
term horizon. Population increase,
higher incomes and the rising
percentage of educated people
will spur international travelling
habits.
Economic development in
emerging countries will be a major
factor boosting demand for the
travel industry in ensuing years. In
particular, demand will be driven
by economic development, usually
triggering the advent of a
wealthier middle-class with higher
standards of living.
By 2017, industry growth will be
increasingly driven by expenditure
from emerging markets in Asia,
Latin America and Middle East
where people are devoting an
increasing share of their incomes
to travels and holidays.
Online
travel
Business
travel
Luxury
travel
DEMOGRAPHIC
FACTORS
ECONOMIC
DEVELOPMENT
HIGHER LIVING
STANDARDS
31

Travel growth linked to infrastructure and technology advances
Transport technology and public
investments play a great role in
sustaining tourism...
Technological improvements in transports systems and infrastructure will
allow people to travel further and faster. The most efficient transport
infrastructures and networks are still located in the northern hemisphere
and contribute to sustaining inbound tourism. Nonetheless, increasing
demand for travel to emerging countries has boosted investments in the
transportation and tourism sectors in these regions. Public interventions
aimed at developing new infrastructure in these regions have had a positive
impact on tourism activities.
...whereas the developments of
telecommunications have a potential
negative effect
Technological progress has a potential negative effect on demand for travel
services from the business sector, since the development of low-cost
communications and improved Internet technology, such as
teleconferencing, has given companies alternatives to business trips.
Furthermore, the Internet has changed the business landscape in the
industry, with clients gaining increased access to information and being able
to book trips more easily, online, directly from travel suppliers or by using a
travel intermediary (OTAs).

2.1. Market overview Focus on government
With a huge economic impact, the sector is backed by states
Contribution of tourism and travel to a country’s economy
The travel industry’s contribution to economic growth is significant worldwide, with values varying according to
country. Overall, its direct contribution to world GDP amounted to circa €1,113bn in 2011 that is 2.8% of total,
according to the World Travel and Tourism Council. Total contribution to GDP (direct, indirect and induced spending)
was in the range of 9%. The travel industry (directly and indirectly) also provided around 9% of total worldwide
employment, according to the latest available data.
Induced Contribution
•Food and beverages
•Clothing
•Housing
•Household goods
•Recreation
Indirect Contribution
•Investment spending
•Government travel
spending
•Supply chain
purchases
Direct Contribution
•Accommodation
•Transportation
•Entertainment
•Attractions
•Hotels & catering
•Business services

2.1. Market overview Focus on government
8.5%
11.0%
9.1%
0%
2%
4%
6%
8%
10%
12%
Automobile Banking Tourism
Travel accounts for an important share of world GDP
unit: % share in world GDP
Source: WTTC, 2011 data.
The contribution of tourism to global GDP – selected industry comparison
The direct contribution of the
travel sector to global GDP in 2011
was approximately €1,113bn (2.8%
of GDP). This primarily reflects the
economic activity generated by
industries such as hotels, travel
agents, airlines and other
passenger transportation services,
but it also includes, for example,
the activities of the restaurant and
leisure industries directly
supported by tourists.
The total contribution of tourism
to GDP, including indirect and
induced effects, amounted to over
€4,000bn in 2011 (9.1% of world
GDP), which is nearly as important
as the banking sector’s input and
even more significant than the one
of the automotive industry.

-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2005 2006 2007 2008 2009 2010 2011 2012(E) 2013(F)
China Eurozone US
2.2. Demand Global economic context
A downbeat economic context in established travel markets
Consumer spending – selected markets Unemployment – selected markets
Source: Xerfi Global Country Trends Source: Xerfi Global Country Trends
Consumer spending has been on a downbeat trend in recent years in Europe and the US, while increasing at
significantly higher rates in China. Governments in emerging markets, especially in China, will continue to encourage
people to spend money, which is good new for the travel industry. Conversely, high unemployment in mature
economies is clouding perspectives for tourism, and the situation is not likely to ease up in upcoming years. The
Eurozone, the travel industry’s largest market in terms of travel expenditure, remains the most impacted.
unit: unemployment rate in %
unti: annual growth in %
0%
2%
4%
6%
8%
10%
12%
2005 2006 2007 2008 2009 2010 2011 2012(E) 2013(F)
China Eurozone US

2.2. Demand Market value
Western Europe
25.8%
Scandinavia
4.8%
Other Europe
24.4%
North America
11.2%
BRICs
8.7%
Japan
3.0%
RoW
22.1%
The world’s largest travel market is Europe
unit: % share in global travel expenditure (at destination)
Source: Xerfi Global with Thomas Cook annual reports, 2010 data.
BRICs= Brazil, Russia, India and China. RoW=rest of the world.
World travel market
The developed world accounts for
the largest proportion of global
travel expenditure. Europe is the
world’s largest travel market and
captured over 50% of the total
leisure travel market value
according to latest available data.
The biggest European travel
markets are Germany, France, UK,
Italy and Spain.
In upcoming years, the share of
developing economies is expected
to rise as they will increasingly
contribute to global travel
expenditure. On the other hand,
international tourism to emerging
markets is also gaining ground.
Global market
value:
€720bn

2.2. Demand International tourist arrivals
The number of international tourists will surpass 1bn in 2012
International tourist arrivals, 2001 - 2012
unit: million
Source: World Tourism Organization (UNWTO)
International tourist arrivals rose 4.4% in 2011 to reach 980 million, despite a generally unfavourable economic
environment, marked by stalled global economic recovery and political unrest in the Middle East and North Africa
and natural disasters in Japan. According to the UNWTO, international tourism will carry on growing in upcoming
years, although at a slower pace, reaching a historic one billion mark in 2012. Emerging economies will lead the way
by number of tourist arrivals, growing 4 to 6% in Asia-Pacific and Africa compared to 2 to 4% in the Americas and
Europe.
673
693 682
753
797
842
898
917
882
939
980
1,014.3
600
700
800
900
1,000
1,100
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012(F)
+4.4%
+6.5%
-3.8%
+4.0%

Asia-Pacific
22.0%
Americas
15.9%
Africa
5.1%
Middle East
5.6%
Europe
51.3%
456
344
522
458
0
100
200
300
400
500
600
Advanced economies Emerging economies
2005 2011
2.2. Demand Demand breakdown
Mature market inbound is losing ground to emerging markets
World inbound tourism: international tourist arrivals, 2011 International tourist arrivals by economic development
Source: World Tourism Organization (UNWTO) Source: World Tourism Organization (UNWTO)
By region, Europe still accounted for the largest number of tourist arrivals in 2011. Against the background of
unrelenting economic uncertainty, tourist arrivals to Europe rose to 503 million in 2011, with Central/Eastern Europe
and Southern Mediterranean destinations growing the most. Tourist arrivals in Asia-Pacific rose 6% to a total of 216
million, while South America, continued to be the world’s fastest growing region in terms of tourist arrivals growing
10% for a second year in a row. Overall, emerging economies have seen high growth rates in the number of
international traveller arrivals during 2005-2011.
unit: million
unit: % share in total number of tourists

2.2. Demand Top travel destinations
The world’s top travel destinations are found mostly in Europe
World’s top tourism destinations - countries World’s top tourism destinations - cities
Source: Xerfi Global with UNWTO, latest available data from 2010, purple bars
represent European countries.
Source: Xerfi Global with UNWTO, latest available data.
The world’s most visited countries are located mainly in Europe. The greatest number of visitors come from North
America, by far the largest source of incoming tourists to Europe, followed by Japan and Russia. Recently, European
inbound travel from China has seen the highest growth rates with an outstanding expenditure growth rate of 21% for
outbound travelling. Other major destinations for global travellers remain the US and increasingly China and other
emerging economies.
unit: million arrivals
21.5
23.6
24.2
25.5
28.0
43.2
50.9
52.2
54.9
74.2
0 20 40 60 80
Mexico
Malaysia
Germany
Turkey
UK
Italy
China
Spain
US
France
CITY COUNTRY
Paris France
London UK
Singapore Singapore
Hong Kong China
Antalya Turkey
Kuala Lumpur Malaysia
New York City US
Bangkok Thailand
Istanbul Turkey
Dubai United Arab Emirates

2.2. Demand Travel expenditure
2.81
2.89 2.88
2.72
2.81
2.89
2.98
3.11
3.24
3.38
2.0
2.5
3.0
3.5
2006 2007 2008 2009 2010 2011 2012(E) 2013(F) 2014(F) 2015(F)
Global tourism expenditure to further rise in upcoming years
unit: trillion euros, 2011 real prices
Source: WTTC Travel & Tourism Economic Impact 2012
Global total tourism expenditure
Global travel spending amounted
to 2.89 trillion euros in 2011, rising
for two years in a row after a
record-low slow down in the wake
of the global economic recession
of 2008-2009.
With higher living standards and
wages, the contribution of
travellers in emerging markets is
anticipated to be the main engine
of travel industry growth in
upcoming years. Tourists from
Asia, Latin America and the Middle
East are increasingly travelling
abroad, generating more revenues
for both online and traditional
travel companies.
Global tourism expenditure is
therefore expected to reach 3.11
billion euros in 2012 and to
continue rising at an annual pace
of around 4% up to 2015.

Domestic
70.5%
Foreign
29.5%
2.2. Demand Travel expenditure breakdown
Domestic travel is major, especially in the Americas and Asia
World tourism expenditure – domestic vs. visitor exports Share of domestic travel – regional overview
Source: WTTC Travel & Tourism Economic Impact 2012, 2011 data. Source: WTTC Travel & Tourism Economic Impact 2012, 2011 data.
Foreign travel expenditure designates spending within one country by international tourists (total inbound tourism
expenditure) while domestic expenditure refers to spending within the country by its own residents, for both
business and leisure trips. Domestic travel generated 70.5% of tourism spending in 2011 and is expected to grow at
higher rates than international tourist spending in upcoming years. The value of domestic travel greatly exceeds
foreign visitor spending in the US or China while European countries such as France, Italy and Spain are at the
opposite end, with international traveller spending accounting for the majority of tourism expenditure.
unit: % share in total travel spending
unit: % share in total travel spending at destination
Europe
and the
CIS
43.8%
Middle
East
Africa
50.2%
Asia
Pacific
77.5%
Latin
America
77.5%
North
America
81.3%

Europe still top travel market, but the highest growth is in Asia
Domestic travel versus foreign visitors’ travel expenditures – regional overview
key: purple surfaces represent total domestic travel expenditure while light green refer to foreign visitors’ travel expenditure in 2011
arrows oriented upwards represent annual growth rates for 2001/2011, if oriented downwards they designate a decrease
North America: the largest
region in terms of total
domestic travel
expenditure
Europe, (and the CIS): countries
such as France, Italy, the UK and
Spain are major destinations for
international tourists
942
0.5%
734
Latin America: the largest markets for domestic
spending are Brazil (ranked 5th globally) and
Argentina. They are also the region’s largest
destinations for international tourists, however,
with a minor role on a worldwide basis.
Asia Pacific: main countries
such as China, Japan, India
and Australia rank among the
largest global markets in
terms of domestic travel
spending
182
793
268
924
92
85
North Africa and the Middle East:
along with Europe and the CIS, it is
the only region where international
travellers’ expenditure exceeds
domestic travel spending
60
207
5.7%
0.5%
4.0%
2.1%
1.5%
1.3%
1.4%
3.3%
0.9%
3.2%

-6%
-2%
2%
6%
10%
14%
18%
0 20 40 60 80 100 120 140 160 180
2.2. Demand Expenditure by international tourists
In terms of foreign travel spending Europe is losing ground
Top markets in terms of foreign traveller expenditure
units: vertical axis: average (%) annual growth of travel expenditure during 2001-2011, horizontal axis: total spending by foreign visitors in nominal bn USD in 2011
Source: Xerfi Global. Primary source: UNWTO.
Netherlands
United Arab Emirates
Turkey
Thailand
UK
Germany
Italy France
Spain
US
China
Macau
Hong Kong
Growth of travel expenditure from
international tourists has been remarkable

-6%
-4%
-2%
0%
2%
4%
6%
8%
0 100 200 300 400 500 600 700
2.2. Demand Expenditure by domestic tourists
Stronger domestic travel spending in developing markets
Top markets in terms of domestic traveller expenditure
units: vertical axis: average (%) annual growth of the expenditure during the period 2001-2011, horizontal axis: total spending by domestic tourists in nominal bn USD in 2011
Brazil
China
Mexico
Russia
UK
Germany
India
France
Italy
Australia
Japan
US
Spain
Large domestic travel markets whose
travel spending by their own
inhabitants is tending to slow down

Business
24.1%
Leisure
75.9%
North America is the largest market for business travel
World travel & tourism expenditure - business vs. leisure Share of business travel expenditure in selected regions
Source: WTTC Travel & Tourism Economic Impact 2012, 2011 data. Source: WTTC Travel & Tourism Economic Impact 2012, 2011 data.
Leisure travel spending (inbound and domestic) accounted for circa 76% of direct travel expenditure in 2011,
estimated at €2 trillion and is expected to grow by 3-4% annually in upcoming years. Business travel spending, which
generated approximately €600bn will grow at a lower pace, estimated at 2-3% in upcoming years. The USA is the
leading business travel spender, accounting for a forth of global business tourism expenditure in 2011. China is
progressively gaining ground and is currently the second largest spender in both the leisure and business segments,
encompassing 10% and 9% of the global market, respectively.
unit: % share in total
unit: % share in total travel spending
Latin
America
16.4%
Europe
21.9%
Middle
East
Africa
22.0%
Asia
Pacific
25.3%
North
America
27.3%

Business travel has been growing faster in emerging markets
Business travel versus leisure travel expenditures – regional overview
key: purple surfaces represent total leisure travel expenditure while yellow refer to business travel expenditure within one region in 2011
arrows oriented upwards represent annual growth rates for 2001/2011, if oriented downwards they designate a decrease
North America: the US is
the largest single business
travel market
Europe, (including Russia):
business expenditure in the
region’s Western markets has
been trending downward
507
1802
Latin America: Brazil and
Argentina are the largest regional
markets in terms of both
business and leisure travel
expenditure
Asia Pacific: China and Japan
enjoy, by far, the highest
business travel expenditure
272
723
282
831
39
140
North Africa and the Middle East:
business spending is the greatest in
the United Arab Emirates and Saudi
Arabia
46
172
3.0%
0.2%
2.0%
4.6%
2.7%
3.6%
1.0%
1.2%
1.6%
3.1%

-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
0 50 100 150 200 250 300
2.2. Demand Expenditure by domestic tourists
India and China have seen the highest growth in business travel
Top markets by business travel expenditure
units: vertical axis: average (%) annual growth of the expenditure during the period 2001-2011, horizontal axis: total spending by foreign visitors in nominal bn USD in 2011
China
UK
Germany
India
France
Italy
Spain
Japan
US
Malaysia
With the global preeminence of China and
India as the world’s fastest developing
markets, business travel expenditure has
significantly grown in these countries
Business travel in Western European markets and Japan has
been stagnating or seen little growth over the past decade

2.3. Supply Tourist sites
11
11
12
13
14
14
15
18
18
17
20
28
28
31
33
35
40
42
45
0 10 20 30 40 50
Peru
Poland
Czech Republic
Portugal
Sweden
Japan
Canada
Brazil
Australia
Greece
Russia
India
UK
Mexico
Germany
France
China
Spain
Italy
European countries have the most attractive tourist spots
unit: number of natural and cultural sites
Source: Xerfi Global with UNWTO, latest available data, purple bars designate non European countries.
Unesco world heritage sites by country
Europe is the most abundant
continent in tourist attractions,
especially with regard to cultural
and historic sites. Using the
number of Unesco world
heritage sites to measure the
capacity to attract tourists, it is
clear that the Old Continent
makes up the largest part of the
list.
However, emerging economies
are faring well in this ranking and
they will profit from fast growth
in both domestic and foreign
travel spending. TOs or OTAs will
have to expand their emerging
market presence in order to rip
their potential growth benefits.
Nevertheless, Europe is likely to
remain the first destination for
international tourism over the
years to come.

2.3. Supply Airport supply
Airport infrastructure is still concentrated in mature regions
unit: million passengers
Source: Xerfi Global with Airport Council International, UNWTO, latest available data from 2010.
Main airports by passenger traffic
AIRPORT PASSENGERS
Atlanta 89.3
Beijing 73.8
Chicago 66.6
London 65.8
Tokyo 64.1
Los Angeles 58.9
Paris 58.1
Dallas/Fort Worth 56.9
Frankfurt 53.0
Transport infrastructure and networks are much more developed in
industrialised regions, such as Europe, North America and Japan, than
in emerging countries. This gives industrialised countries considerable
advantage in attracting international tourists.

2.3. Supply Hotel supply
Independent hotels still be most of the world’s hotel supply
Source: Xerfi Global with UNWTO, 2010 data.
The world hotel market consists of roughly 128,000 hotels with total revenues of €220 billion per year. It has an
estimated room capacity of 18 millions rooms. On this market, branded companies compete with independently
owned hotels. The latter still represent 55% of global room capacity, with differences between regions. The hotel
market is geographically concentrated since more of 80% of world total rooms are located in the top 20 countries.
Among them, the US is the largest national market, representing 25% of global hotel capacity, followed by China,
Spain, and Italy. The global hotel industry is dominated by American groups. 8 out of the 10 world leaders in terms of
number of rooms are from the United States.
Independent hotel rooms as a percentage of total market
unit: % of world total
Europe:
60%
USA:
30%
Asia
Pacific:
70%

REGION SUB-REGION
2011 INTERNATIONAL
ARRIVALS (mn)
GROWTH
2000-2011 PERSPECTIVES 2017
EUROPE
Northern Europe 61.4 3.5%
Western Europe 158.1 1.2%
Eastern Europe 101.0 3.8%
Southern Europe 181.8 3.2%
ASIA PACIFIC
North East Asia 115.9 7.1%
Rest of Asia 89.5 7.8%
Pacific 11.7 2.0%
AMERICAS
North America 101.0 1.0%
Latin America 55.0 4.1%
AFRICA
North Africa 16.9 5.2%
Sub-Saharan Africa 33.1 7.5%
MIDDLE-EAST - 54.8 8.6%
2.4. Market trends Demand trends
Outbound tourism in emerging markets is increasingly important
International arrivals by geographic region
Source: Xerfi Global with UNWTO

52

3.1. Competitive forces Driving forces of the industry
Growing rivalry due to online players and shifting client needs
Competitive forces of the travel industry
New entrants
+
Substitutes
+
Suppliers
++
Customers
++++
How to read this chart:
The darker the shading, the
stronger the force
Rivalry +++
53

3.1. Competitive forces Rivalry
Rivalry: online travel companies are
gaining ground
A decade ago, the Internet has provided an entry-port into the travel sector, and
since, online travel agencies (OTAs) have been increasingly taking market shares
from traditional tour operators. Although ever more threatened by the constant
expansion of OTAs, mainstream travel companies such as Tui and Thomas Cook, are
a significant challenge to OTAs, particularly given their brand strength and high level
of vertical integration.
However, in recent years, mainstream travel (pre-packaged holidays) have been
increasingly replaced by ‘do-it-yourself’ holidays whereby customers can purchase
travel components separately, thus either buying directly from suppliers (airline
offices or websites) or passing by an OTA that offers dynamic packaging options: the
client can book his trip separately or choose from a number of combinations
comprising hotel and airline, hotel and car rental, all of the above etc. The Internet
has changed the industry landscape, and traditional mainstream travel companies
(tour operators) are facing increasingly stiffer competition from OTAs, on all
business fronts. However, as far as premium and corporate travel businesses are
concerned, OTAs play a minor role, with Expedia being the exception.
Vertical integration remains a
competitive advantage
Industry players such as Thomas Cook or Tui have control over both demand and
supply structures due to high vertical integration. The high volumes they provide
make them the inevitable partners for suppliers. Economies of scale are essential to
industry profitability and often entail investment into either suppliers through
backward integration (accommodation, transport) and/or forward integration
(travel agents). Thus, travel companies can achieve considerable buying power and
control over their suppliers, as well as the control of distribution of their products in
terms of quality, availability, access and price. Vertical integration is also sought by
online travel groups, which have been striving to tie deals with direct travel
providers.
Online agencies are gaining ground at the cost of tour operators

Mainstream tour
operators
8.9%
Independent
22.7%
Financial
services
1.5%
Direct travel
suppliers
66.9%
3.1. Competitive forces Focus on rivalry
Travel companies’ suppliers are also their main competitors
Overview of the travel market structure – example of the Western European markets
unit: % share in overall gross bookings
Source: Xerfi Global with Thomas Cook annual reports. Markets: France, UK, Germany, Belgium, the Netherlands. Direct sales to customers only (without bypassing a third-
party outlet).
• Schedules Airlines
• LCC (low cost carriers)
• Hotels
Thomas Cook, Tui,
Kuoni, Rewe Travel,
Transat, Alpitour, etc.
• Specialist tour operators: ClubMed
• GDS (Global distribution systems)
• OTA (Online travel agents):
Travelocity, Expedia, Priceline, etc.
• Meta Travel Search Engines/ review
sites: Tripadvisor etc.
• Scheduled
Airlines
• LCCs (low
cost carriers)
• Hotels
• Car rental
companies
TRAVEL INTERMEDIARIES
Insurance companies
as well as travel
companies

3.1. Competitive forces Focus on rivalry
Rivalry is intensifying with online sector consolidation
The merger of eDreams, Go Voyages and Opodo
Source: Xerfi Global with annual reports
In May 2011, eDreams and GO Voyages merged with Opodo. As a result, a major pan-European travel group was
born. The three divisions operate as separate brands in their respective markets. However, the entity’s Achilles Heel,
mostly focused on airline ticketing, is its weak presence in the fragmented hotel market. In the middle-to-long run,
airline companies’ development will begin to plateau while hotels will see strong growth. The fragmentation of the
hotel sector in Europe and emerging markets leaves plenty of room for growth in the online hotel booking, and an
OTA without a ‘healthy’ hotel presence will be unequipped for future growth.
New
entrants
Substitutes
Suppliers Customers
Rivalry
Air-centric OTA
No robust hotel practice, limiting long-term growth perspectives

0.39
1.14
2.47
2.64
2.68
3.13
3.36
4.16
11.30
16.93
0 2 4 6 8 10 12 14 16 18
Ctrip
Alpitour
Expedia
Transat
Opodo*
Priceline
HIS
Kuoni
Thomas Cook
Tui Travel
3.2. Structure of competition Ranking by sales
Integrated traditional travel companies are leading by net sales
Ranking of analysed travel companies by net sales
unit: billion euros
Source: Xerfi Global with companies’ annual reports, *2010 data.
57

11.30
15.56
16.93
20.97
0 5 10 15 20 25
Thomas Cook
Priceline
Tui Travel
Expedia
3.2. Structure of competition Ranking by sales
Online groups are a match for traditional ones by sales volume
Ranking of analysed travel companies by gross revenues
unit: billion euros
Source: Xerfi Global with companies’ annual reports, 2011 data.
58

3.2. Structure of competition Aggregate sales
41.66
42.37 42.63
43.30
48.20
30
35
40
45
50
2007 2008 2009 2010 2011
Leaders’ revenues have been on the upswing
unit: billion euros
Aggregate net sales of analysed travel groups
Leading travel companies’
aggregated sales increased 11.3% in
2011 compared to the previous year
to reach €48.20bn. This was mainly
due to substantial year-on-year
revenue increases of Priceline
(+32.1%), Ctrip (21.4%), Expedia
(13.9%). Additionally, HIS, Tui and
Thomas Cook saw growth in the
range of 10%, each.
Increasing travel activity in
emerging countries has offset
sluggish expenditure in mature
markets in which the slow economic
recovery has impacted consumer
spending. Travel is also becoming
more affordable due to the
expansion of the low-budget
segment and this partly contributed
to higher sales.
Increasing revenues are also related
to further consolidation in the travel
sector, both online and mainstream.
Most companies have acquired
entities abroad, particularly to gain
access to customers in emerging
markets which present the greatest
opportunities in the middle-long
term.
59

0.8%
1.5%
1.7%
2.5%
2.5%
3.1%
13.9%
30.4%
32.1%
0% 5% 10% 15% 20% 25% 30% 35%
Transat
Kuoni
Tui Travel
HIS
Alpitour
Thomas Cook
Expedia
Ctrip
Priceline
3.2. Structure of competition Ranking by operating margins
Online travel companies are clearly more profitable
Ranking of analysed companies by 5-year operating margins
unit: % of operating profit over sales
Source: Xerfi Global with companies’ annual reports, 2011 data.
60

3.2. Structure of competition Aggregate operating margins
Leaders’ margins have been trending upward in recent years
unit: aggregate operating profits over aggregate sales
Aggregate margins of analysed travel groups
Leaders’ aggregate operating
margins have carried on improving
for the past three years, against the
background of higher sales volume
coupled with extensive
restructuring and cost-cutting
measures that were implemented,
in particular by traditional travel
companies. Tui Travel and Thomas
Cook have, for instance, announced
further layoffs in 2012.
The 2008 negative result can be
mainly attributed to a significant
operating loss recorded by Expedia
due to the impairment of long-term
assets of approximately €2 billion.
Online travel agencies have seen
much higher margins than their
‘brick and mortar’ rivals, due to
their low fixed-cost business
models. Over the next five years,
traditional travel agencies are
expected to see slow growth as
online travel companies will
continue to capture further market
share.
61
3.1%
-2.5%
3.5%
4.3%
5.1%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
2007 2008 2009 2010 2011

3.2. Structure of competition Revenue and profit growth
Priceline and Ctrip have outperformed their competitors
unit: average annual growth in %
Sales and profit growth of analysed travel players
-40%
0%
40%
80%
-10% 20%
2011-2007 sales growth
2011-2007 profitability growth
Online travel groups Priceline and
Ctrip, as well as the world’s leading
tour operator, Tui Travel, have
recorded the best performances over
the past five years. Tui Travel has seen
a remarkable improvement in its
operational efficiency, nonetheless,
the pace of sales growth was slow
compared to its online peers.
On the other hand, two of the
sector’s largest groups, Thomas Cook
and Expedia, as well as smaller players,
Transat and Kuoni have been
performing poorly in terms of
profitability, in spite of higher net
revenues
62
Tui Travel
Ctrip
HIS
Priceline
Expedia
Transat
Kuoni
Thomas
Cook
Alpitour

3.3. Corporate strategies Main trends
Companies must adapt to new trends shaping the travel sector
Main trends in the global travel sector - overview
INCREASING SHARE
OF ONLINE
BOOKINGS
GROWTH IN
OUTBOUND
EMERGING MARKET
INCREASING SHARE
OF INDEPENDENT
TRAVEL
An increasing share of trips, tickets and hotel bookings are being made online.
Expansion of key players in destination management, a highly fragmented market,
with robust margins.
Growth of specialised and differentiated offerings.
Free Independent Tourists (FIT) are individuals of above average income who
prefer to travel alone or in small groups and source data from travel websites where
they also share their experience and pass on information to other travellers.
DISINTERMEDIATION
Consumers tend to buy travel components (air tickets or hotels) separately,
directly from travel suppliers. This trend is favourable for low-cost airlines and online
travel agencies, however, putting asset-heavy (vertically integrated) players under
pressure.

3.3. Corporate strategies Increasing competitive advantages
Leading travel groups have several competitive advantages
Main competitive advantages for competing in the travel sector
PRODUCT
KNOWLEDGE
COMPETITIVE
ADVANTAGE
ECONOMIES
OF SCALE
DIFFERENTIATION
MULTI
CHANNEL
•Destination knowledge
•Customer support at destinations
•Control of delivery
quality
•Customer support at
destinations
.
•Branding and differentiation
according to customer base
•Exclusivities
•Reducing of inventories
•Competitive pricing
64
CUSTOMER
RELATIONSHIP
•Multi-channel approach
•Increased online
capabilities
CAPACITY
ACCESS
•Airline and room capacity
access is essential,
especially during peak times

3.3. Corporate strategies Main growth strategies
Growth tools: marketing, enhanced portfolio and distribution
Main strategies of travel companies
Marketing
Brand building
65
Differentiation
Positioning
Travel package
design
Mixed models
Vertical integration
of travel suppliers
Partnerships with
travel suppliers
Distribution
Distribution
partnerships
Advertising
Multi-channel
approach
Complementary
strategies
Joint ventures
International
expansion
Mergers and
acquisitions

3.3. Corporate strategies Marketing: positioning
Most players have a mixed positioning
Main competitors of analysed players in main travel segments
INDIVIDUAL CORPORATE
PRICE
66
LOW COST
The traditional battle field of
mainstream tour operators, with
increase presence from online travel
companies, namely Expedia’s Egencia
Focus of online travel agencies
Mainstream tour operators are increasingly present
on this segment by using opaque channels and
dedicated brands: Tui Travel’s ‘Discount travel’
brand
Increasing presence of certain online travel
companies: Expedia’s luxury cruise business, its
‘Classic Vacations’ brand
Focus of online travel agencies

3.3. Corporate strategies Marketing: positioning
Separate brands to target a maximum of customer segments
Overview of selected competitors’ multi-segment positioning
ORBITZ
TUI TRAVEL EXPEDIA
PRICELINE
Last minute
purchases
Opaque channels
Retail
Package
Business travel
Luxury travel

3.3. Corporate strategies Travel package design
‘One-size-fits-all’ is not an answer for the Chinese market
Market segmentation of Chinese travellers
Source: BCG, ‘Travel and Tourism in China and Beyond’, market share data for leisure travel in 2010.
Chinese tourists are a main target of travel companies, as they are expected to drive the highest growth in travel expenditure
in the medium-to-long term. Travel groups are accelerating their offensive on the Chinese market, seeking to build diversify
offerings to satisfy distinct tastes and travel habits of Chinese customers. For instance, Ctrip, which encompasses about a third
of Internet hotel and airline bookings in China, has extended its value-added services to offer wide-ranging travel information,
from essentials about the customer’s destination, to recommended itineraries and descriptions of the experiences of other
travellers. It also makes available several payment systems via the Internet, mobile, credit-card, third-party or cash-on-delivery
options, in additional to customer centre assistance.
MAIN
ATTITUDES
INEXPERIENCED
TOURISTS
EXPERIENCED
BUDGET-MINDED
TOURISTS
EXPERIENCED WEALTHY
TOURISTS
ACTIVITIES
PLANNING
Sightseeing
Explore cities outside known
regions
Relaxation
Must-see historical sites and
museums
Sightseeing, shopping and
entertainment
Shopping
Entertainment
Luxury
Travel agencies for packaged
tours
Websites for information on
destination
Online search and booking
Independent travellers
Premium tour packages
PRESENT / 2020
MARKET SHARE
56% 23% 21%

3.3. Corporate strategies Marketing: differentiation
Traditional tour operators are redefining their product offerings
Main characteristics of travel product offerings
Standardised packages
Fixed duration
(7 nights/14 nights)
Brochure and retail led
Call centre customer support
Product portfolios are shifting from
traditional commodities mainstream…
Differentiated, unique holidays
Flexible periods
Multi-media marketing (online)
Online self-service
… to personalised, flexible offerings

Lounge
access
3.3. Corporate strategies Marketing: differentiation
Companies can differentiate by specific travel preferences
Key: 1 = highest priority
Source: BCG, ‘Travel and Tourism in China and Beyond’
Ranking of selected air-travel services
There are immense opportunities
to be captured in emerging
markets, and in China in particular.
It holds the second largest share in
global travel expenditure, in both
leisure and corporate markets.
Furthermore, it is expected to
carry on recording the fastest
growth rate among all travel
markets. However, specific cultural
and social backgrounds entail
different travel habits for Chinese
tourists. This is illustrated by their
priorities when choosing to
purchase an airline fare.
Travel companies should capitalise
on growing demand from
emerging market travellers and
tailor value-added services to
respond to new types of travel
demand.
Possibility
to change
flight times
Baggage
delivery to
the hotel
Higher
weight
allowance
1
2
4
2
7
13
10
16

Advertising
25%
Advertising
57%
3.3. Corporate strategies Marketing: advertising
Marketing expenses, the highest share in operating costs
Share of marketing budget for top* traditional travel groups Share of marketing budget for top* online travel groups
Source: Xerfi Global with company annual reports; *Alpitour, Thomas Cook, Tui Source: Xerfi Global with company annual reports; *Expedia, Priceline, Ctrip
The long-term success and profitability of travel companies depends on their ability to maintain and increase the overall
number of travelers. In this sense, customer brand-awareness is crucial. In order to promote various brands and businesses,
and most importantly position brands in relation to one another (product differentiation), tour operators and online travel
agencies alike use huge advertising budgets. Traditional mainstream operators’ advertising budgets represent approximately
25% of their total operating expenses. However, online groups Expedia, Ctrip and Priceline allocate over half of all operating
expenses to advertising. The relatively higher marketing efforts are also due to the fact that they have just begun expanding in
the sector and their need to develop brand awareness.
unit: % share in cost of sales
unit: % share in cost of sales

Online groups’ sales driven by the accommodation business
Revenue breakdown by type for selected leading travel companies
unit: percentage share of 2011 revenues by revenue source
Company HOTEL AIR LINE CAR RENTAL CRUISE PACKAGE
Tui
Thomas Cook
Kuoni
Ctrip -
Priceline -
Expedia
Traditional mainstream operators are still selling
packaged holidays mainly
Online travel groups have a strong presence in the hotel business

MERCHANT MODEL
TOUR OPERATORS
ONLINE TRAVEL
AGENCIES
AGENT MODEL
Companies seek to diversify their business models…
Merchant and agency business of mainstream and independent travel companies
Source: Xerfi Global with companies’ annual reports; NB: the difference between the merchant and agent business models are explained on page 20.
TUI
TRAVEL
PRICELINE
EXPEDIA

… while providing differentiated travel products
Major examples of travel product differentiation
Source: Xerfi Global with companies’ corporate information
SPECIALIST TOURS
Organizing sport tours
English language
schools
Golf tours
Internet travel
information
Mobile software
MAJOR INITIATIVES
Acquired Travel Sense, a Copenhagen-based travel
agency that specializes in organizing sport tours
Acquired Manchester Academy tours, Hampstead School
of English, EAC Language Schools, etc.
Acquired Krone Golf Tours, a Copenhagen-based provider
of golf tour services
TripAdvisor acquired ‘Where I've Been’ a US provider of
Internet travel information and Kuxun, a Chinese online
travel research engine.
Acquired Mobiata, a developer of mobile travel
applications software and EveryTrail (via TripAdvisor) a
provider of mobile application services

39,000
85,000
145,000
170,000
520,000
0 200,000 400,000 600,000
Ctrip
Orbitz
Expedia
Priceline
Tripadvisor
3.3. Corporate strategies Travel package design: hotels
Companies are expanding in the fragmented hotel market
Hotel portfolio of online companies Recent partnerships with hotel chains
Source: Xerfi Global with companies’ annual reports Source: Xerfi Global with companies’ annual reports
Travel companies provide accommodation under two main business models. Under the agency model, they pass on
reservations booked by travelers to the hotel supplier. Under the merchant of record model, they have more leeway to
establish prices charged to travellers as they negotiate pricing with suppliers, hence higher margins. Travel companies are
seeking to establish long-term relationships with hotel supply partners. Since there is sparse accommodation supply being
added in mature markets, companies are focusing on opportunities in international markets where increasing room supply is
being added as hotel owners and operators try to take advantage of opportunities in high-growth travel markets such as China
and India, among others.
unit: number of hotels affiliated
Ctrip: invested over €80mn to acquire a 16%
stake in Home Inns & Hotels and a 9% stake in
China Lodging Group, two leading budget hotel
chains in China.
By the end of 2011, Expedia’s has added 12%
more hotels compared to previous year to its line
of contractual agreement with accommodation
suppliers, leading to a portfolio of 145,000
hotels.
Tui’s hotel room wholesaler, Hotelbeds, has been
adding new capacity in Asia and the Americas, in
particular in Colombia, Korea, India, Brazil and
Argentina.

3.3. Corporate strategies Travel package design: supply diversification
European online groups should focus on the hotel market
Share of air revenues – online travel agencies (OTAs) European online companies’ market presence
Source: Xerfi Global with companies’ annual reports Source: Xerfi Global
Due to the high profitability and a largely fragmented supply base, accommodation sales represent the biggest growth
opportunity for travel companies. Leading online travel agencies’ (OTAs) sales, namely Expedia and Priceline, both based in the
US, are mainly generated from hotel bookings. However, European OTAs (Opodo, GoVoyages, etc.) revenues come mainly from
airline tickets. This is partly natural as the hotel market is much more fragmented in Europe which makes it more difficult to
channel the entire offer. However, European OTAs should focus more on opportunities in high-growth international markets
where increasing room supply is being added as hotel owners are seeking to take advantage of high-growth levels in countries
such as China and India, where inbound tourism is on the rise.
Weak hotel revenues
which generate higher
profits
Limited, regional
geographic span of
operations
Heavy reliance on airline
tickets, with low margins
unit: % share in total revenues
80%
50%
European OTA US OTA

3.3. Corporate strategies Travel package design: partnerships
Leaders are partnering to offer unique travel packages
Recent partnerships of leading travel companies
As travel packages are pretty much standardised commodities and differentiation is increasingly depending
on pricing, travel companies are focusing on delivering unique and differentiated travel experiences. To this
end, they are tying partnerships with suppliers and seek to provide exclusive travel offerings.
Groupon is partnering with Expedia to create a new discount travel service that will allow
customers to trip components at discount prices.
Kuoni is partnering with Nuffield Health to offer well-being holiday packages. Kuoni and
Nuffield Health are to test and create a first of its kind holiday offer meant to maximise body
healthcare benefits.
Thomas Cook and Sentido Hotels & Resorts are launching a new hotel concept that appeals to
the senses. It combines a signature fragrance and specially composed music, with dream
destinations, and premium quality standards and service, in order to offer a relaxing
atmosphere in exotic beach surroundings.
Tui has partnered with Sunwing which owns Vacation Express, a company that markets
packages to destinations and resorts in the Caribbean, Mexico and Central America.

3.3. Corporate strategies Travel package design: vertical integration
Travel groups have adopted a mixed vertical integration scheme
Vertical integration in the traditional travel sector
Tour operators generally operate on
low margins and high volumes.
Hence, a vertically integrated
business model used to be
considered a prerequisite for
successful operations. However,
swings in consumer demand can
lead to over-capacity with
devastating effects. In recent years,
mainstream travel companies have
partly given up owning/leasing
aircraft in order to be able to
respond to sudden changes in
demand and also to become more
flexible. They are adopting an asset
light approach, tying contractual
agreements with third-party
suppliers. For instance Tui Travel
operates Thomson Airways and
Jetair, while Kuoni has its own
airline, Novair. However, they also
rely on contracts with airline
companies to provide seats for their
packages. Third-party deals are
preferable in markets where a
group has either a small volume of
customers or a lower market share.
OWNERSHIP
THIRD PARTY
RETAIL STORES
HOTELS
AIRLINES
TOUR OPERATING

3.3. Corporate strategies Travel package design: vertical integration
Vertical integration of travel retail shops differs across regions
Tour operator market concentration, Western Europe vs. the United States
Source: Xerfi Global with the UK competition commission
The travel agent should the role of a travel broker, offering end-client the possibility to choose from a wide-array of
travel packages, provided by several travel agencies, thus, to be independent of the tour operator. However, this
does not hold true in reality. In the US, the majority of travel agents are independent without any ties to tour
operators or airlines. By contrast, in Western Europe most travel agents are tied to tour operating companies. This
tying of agents removes the role of the travel agent as a broker and replaces it with the role of sales outlet, giving
market power to tour operators.
Role of broker,
presumed
independent of
tour operators
Role of sales
outlet
MAINSTREAM EUROPEAN
TRAVEL COMPANIES
Independent agents
1/3
Tied agents
2/3
MAINSTREAM US TRAVEL
COMPANIES
Independent
agents
2/3
Tied agents
1/3

3.3. Corporate strategies New channel penetration: internet
Internet is king in travel bookings in mature markets
Online travel bookings by industry sector
Source: WTTC, 2010 data.
Internet penetration has reached 30% (2 billion people) in 2011. Thanks to the growth in Internet access rates
worldwide, the last decade has seen an unprecedented boost in online travel bookings. Globally, roughly half of all
leisure trips and a good proportion of business trips are booked online with 61% of all airlines and 17% of hotel
room bookings made via the Internet. Although they have taken the necessary steps to adapt to new market
developments, traditional tour operators still fall behind in terms of sales made online. Therefore, they must place a
greater emphasis on expanding their Internet presence in order to remain in the game.
Hotels: 17%
Airlines: 61%
Overall online bookings: 37%
COUNTRY
POPULATION
ONLINE (%)
MOBILE
PENETRATION
(%)
% OF TRAVEL
BOOKED
ONLINE
China 32 58 18
India 4 36 25
Brazil 38 92 20
USA 74 91 40
UK 74 129 47
WORLD

3.3. Corporate strategies New channel penetration: internet
The Internet has been reshaping travel booking behaviours
The evolving online travel planning process
Compile a must-
see, must-do list
Finalise trip
reservation
Compare travel
offerings
Decide on a
destination
Gather information from different
websites to decide on a destination.
A final comparison to
see if the deal to be
booked on a travel
agency site can be
purchased for a lower
price directly on airline
and hotel sites.
Visit travel research sites
or blogs to make an
itinerary and the must-
see places or must-do
things at destination.
Cross-checking several sites
for discounts or attractive
deals and read
accommodation reviews.

3.3. Corporate strategies New channel penetration: mobile
Mobile innovations are creating new travel opportunities
Main movers in mobile travel applications
Travel booking online has grown at a much faster pace than overall travel over the past decade. Countries such as
the USA, UK or the Scandinavian region tend to have the highest rates of internet travel reservations. Moreover, the
latest technological developments have been centred around mobile devices such as smartphones and tablets.
Mobile bookings represent additional growth opportunities and online travel companies have launched an offensive.
Use of mobile phones for collecting travel information has been growing significantly in recent years.
Expedia acquired Mobiata, specialised in designing mobile travel applications. Via
this deal, it launched several travel applications, including FlightTrack, FlightTrack Pro
and FlightBoard, in order to expand its reach in the mobile Internet channel.
Among its mot recent mobile apps are Expedia Hotels for the iPhone and the iPad.
Priceline launched ‘Tonight-Only Deals’, a mobile phone specific application for hotel
bookings which targets last-minute travellers. They can book hotels at a largely
discounted price for stays the same night.
Furthermore, ‘agoda.com’, the arm of Priceline in the Asian market, has launched
Android and iPhone applications which grant immediate access to its 160,000 hotel-
base worldwide, instant confirmation on bookings and the ability to search hotels by
current location. Agoda’s database includes over 21,000 hotels and resorts in Asia.

3.3. Corporate strategies International expansion
Online travel agencies have grown both at home and abroad
International growth performances for selected online versus traditional travel companies
Key: points proportional to percentage share in companies’ sales (●: 0-10%, ●●: 10-20%, ●●●: 20-40%, ●●●●: +40%)
Arrows proportional to 2011/2009 revenue growth rate (↗: 0-5%, ↗↗:5-15%, ↗↗↗: 15-25%, ↗↗↗↗: +25%, ↘: revenue decline)
Source: Xerfi Global with companies’ latest annual reports
When looking at recent revenue growth rates of online and mainstream travel groups, one trend stands out: the largest online
travel companies have clearly outpaced traditional sector leaders. Expedia’s and Priceline’s performances have been
remarkable both across and outside their home market, the US. Moreover, the share of international sales in their revenues is
quite noteworthy. On the other hand, mainstream travel leaders like Kuoni and Tui groups, whose sales rely heavily on the
European market, have recorded little or no growth in their usual markets. However, Kuoni greatly expanded its revenues
abroad, due mainly to its positioning as a premium travel provider in emerging markets where high-end tourism has taken off.
Home market/region Overseas market
Company Size Growth Size Growth
Expedia ●●●●●● ●●●●
Priceline ●● ●●●●●●●●
Kuoni ●●●●●●● ●●●
Tui Travel ●●●●●●●● ●●

3.3. Corporate strategies International expansion
Travel groups are expanding in high growth markets
Examples of geographic expansion projects by leading travel companies
Source: Xerfi Global with company data and business press
Kuoni acquired Gulf Dunes, a Dubai-based
provider of event services. Concurrently,
Kuoni purchased Reem Tours & Travel.
Kuoni acquired a full interest stake, in Et-
China.com, a Guangzhou-based travel
company.
2011: Tui Travel acquired CVC Brasil
Operadora e Agencia, a Sao Paulo-based
provider of tour services from Carlyle
Group. It also purchased Lima Tours SA, a
Peru-based travel agency.
2011: Thomas Cook acquired a minority
stake in VAO Inturist from AFK Sistem
(Russia).
Egencia acquired Travelforce Ltd, a
Sydney-travel management company.
Expedia acquired eLong, China’s
second largest online travel agency.
TripAdvisor acquired Kuxun.cn, a
China-based provider of online travel
research services.

3.3. Corporate strategies Mergers and acquisitions
M&A add new geographies and segments and enhance scale
An overview of main merger and acquisition drivers in the travel sector
Opportunities for operational
improvement
Growth in
outbound
emerging
markets
Extend
product
portfolio
Combine complementary capabilities,
market positions and partnerships
Leverage IT investments and drive process
innovation (online)
Increased number of destinations
Enhance
distribution
channels
Expand into new businesses/ distribution
channels
85
Company
Number of M&A deals
2005-2010 2011
Expedia 2 5
Kuoni 23 2
Thomas Cook 10 4

86

4.1. The case of Kuoni Its main acquisitions over 2007-2011
Kuoni has added the most new companies…
Main acquisitions of Kuoni during 2007 -2011
2007
2008
2010
2011
Kuoni has stated their main focus is to further develop
the tour operating business in Asia
2012
•Kuoni has carried on
building a portfolio of
differentiated travel
companies, focusing on
unique holidays and
with a high-end
positioning;
•To respond to recent
travel trends it also
acquired GTA, an online
travel specialist, aiming
to become a leader in
online travel.

4.1. The case of Kuoni Its differentiated brand portfolio
…with a distinct brand portfolio, by geography and by market
Kuoni’s main category of brands by geography and market positioning
Upper
segment
Middle
segment
Direct sales
Specialists

Third party
agents
44%
Own shops
24%
Call center
13%
Internet
19%
4.1. The case of Kuoni Its premium brand portfolio
…and a focus on premium, differentiated travel offerings
Kuoni’s most profitable businesses Kuoni’s distribution channels
Source: Xerfi Global with company annual reports Source: Xerfi Global with company annual reports
The ‘one size fits all’ approach does not apply to Kuoni, which centers its business strategy in providing differentiated travel
experiences, namely by focusing on destination management and outbound emerging markets. The company specialises in the
design and implementation of events and tours for both travel agencies, businesses, cruise companies and individuals in over
80 locations worldwide. Kuoni is one of the largest providers of destination management services both in Europe, its main
market, and also in SE Asia, South Africa, the United Arab Emirates and Australia. In order to control the quality of its offerings,
Kuoni relies mostly on its own distribution channels, comprising online, call centres and proprietary retail shops which
accounted for 56% of 2011 revenues.
unit: % share in total revenues
DESTINATION MANAGEMENT
-specialised/differentiated products-
46.0% of revenues
EMERGING MARKET SPECIALISTS
24.6% of revenues

4.2. The case of Expedia Its business portfolio
Expedia, an extensive travel portfolio, online and offline…
Expedia’s portfolio of businesses
Source: Xerfi Global with Expedia annual reports
Expedia is the world’s largest online travel agency and is equally present, albeit at a minor degree, in traditional mainstream
travel. By gross revenues, Expedia results exceed those of top global tour operators, Thomas Cook and Tui Travel. Expedia ’s
portfolio is by far the most wide-ranging among online travel groups. Expedia’s operations span from leisure to business travel,
from low-cost to luxury. For premium and corporate tourism, it also sells its packages through third-party retailers. It recently
acquired Northern Europe’s largest corporate travel management company, VIA, in a move to expand its geographic reach.
Furthermore, its travel research site, TripAdvisor, the ‘crown jewel’ of the company and the world’s largest in the segment, has
been spun-off to be listed separately on the Nasdaq stock exchange in 2011.
HOTELS AIR CAR RENTAL CORPORATE
PREMIUM:
cruise,
destination
services, etc.
Travel review
and research:
TripAdvisor

4.2. The case of Expedia Its investments in Asia
…with a growing international presence, focused on Asia
Overview of Expedia’s main operations in Asia
Source: Xerfi Global with Expedia annual reports
Expedia is ‘big’ both at home market and abroad. In 2011, circa 39% of its global gross bookings and 42% of revenues were
international, compared to 22%, each, in 2005. Expedia aims to generate over half of its revenues overseas in upcoming years
and expansion in the Asian region is key to achieving this goal. Hence, it has acquired a majority share in eLong, China’s second
largest online travel company. Moreover, in July 2011, it entered a 50/50 joint venture with AirAsia a low cost carrier serving
the Asia-Pacific region, whereby the Expedia sites were to be the only websites – other than AirAsia – to distribute AirAsia
products. Along with Priceline, its US peer, Expedia was one of the fastest growing companies in the overall travel sector,
expanding at circa 41% annually, on average, between 2006 and 2011.
Owns 64% of
China’s 2nd largest
OTA
ACQUISITION
With Asia’s largest
low-cost airline
PARTNERSHIP
14 sites in 13 Asian
countries, 5 launched
since 2009
Powers Jalan, a
leading Asian
travel site
ORGANIC GROWTH

Higher ad
revenue,
generates cash
flow that
triggers
investment
Investments
allow to
broaden the
supplier
channels
Leading to
improved
travel
experience
More
travellers,
higher
traveller
retention
User
generated
contents
4.3. The case of online travel groups Increase advertising revenues
Advertising plays an important role in OTAs’ business strategies
The rationale behind advertising strategies of online travel agencies
Online travel agencies gather an
important share of revenues from
advertising

4.4. The case of Tui and Thomas Cook Their domination of the mainstream travel market
Tui Travel and Thomas Cook: overwhelming domination in Europe
Mainstream tour operators’ market concentration (top 2 or top 3) in selected European markets
unit: % of total mainstream market
Source: Xerfi Global with Tui Travel annual reports; TC= Thomas Cook.
BELGIUM UK SCANDINAVIA
Tui: 47%
TC: 35%
Tui: 47%
TC: 42%
Tui: 27%
TC: 28%
GERMANY FRANCE NETHERLANDS
Tui: 29%
Rewe: 25%
TC: 17%
Tui: 20%
TC: 14%
Tui: 25%
TC: 13%

4.5. The case of Shanghai Spring Tour Its niche positioning
Targeting a niche segment: tourists from smaller cities
Shanghai Spring Tour’s portfolio of businesses
Source: Xerfi Global with BCG
Originally a low-cost airline, Shanghai Spring Tour expanded into the tour operator business. It targets budget
tourists living outside major cities in China’s western region, providing customised services such as free
transportation to big airports nearby, mainly the Shanghai airport. It combines attractive trip prices with direct
flights from lower-tier cities and improved access to airports, thanks to its vertical integration. The move into smaller
cities has attracted a significant number of first-time tourists and opened new growth opportunities. Shanghai Spring
Tour has thus capitalised on a major travel demand of Chinese travellers.
…limited access to airports Discount trip and travel packages
Shanghai Spring Tour targets
middle-class travellers from smaller
cities, with...
…fewer flight options, entailing commuting to
big-city airports.
…fewer travel agencies, limited offerings
…higher refusal rate when applying for visas,
especially when booking their own trips
Free shuttles to nearby major airports
Connecting flights from small cities
Assistance for first-time travelers
Shanghai Spring Tour’s tailored
offerings include:

95

5.1. Tui Travel Presentation
Fiscal year ended September 30th, 2011
Headquarters Crawley, UK
2011 key figures
Net sales 16.93 billion euros
Cost of sales 15.39 billion euros
Operating profit 0.29 billion euros
Net income 0.10 billion euros
Capital expenditure 0.37 billion euros
Workforce 53,247 employees
•Tui Travel plc was established in 2007 by the merger of the Tourism &
Travel division of Tui AG and First Choice Holidays plc. The company
provides specialist travel services, including adventure travels, language
travels, responsible holidays for groups and independent travellers. Tui
also offers high-end travel products.
•The company’s expansion strategy includes targeting travel markets in
Brazil, Russia and India which are considered the driver of the future
growth in the tourist sector.
•Tui operates 250 tourist brands in 180 locations worldwide and has
over 30 million customers. Tui Travel plc is listed on the London Stock
Exchange.
2011 net sales by region
UK 30.3% of net sales
Germany 28.9% of net sales
France 9.5% of net sales
Other Europe 26.4% of net sales
Rest of World 4.8% of net sales
Tui Travel plc
2011 net sales: 16.93 billion euros
Mainstream
86.2% of net sales
Specialist,
Emerging markets
9.3% of net sales
Accommodation
& Destinations
4.4% of net sales
96

5.1. Tui Travel Description of business
SEGMENT % OF SALES
OPERATING
MARGIN
DESCRIPTION
MIANSTREAM 86.2% 2.5%
Mainstream operations in Northern
Europe (UK, Ireland, Sweden,
Denmark, Norway and Finland),
Central Europe (Germany,
Switzerland, Poland and Austria) and
Western Europe (The Netherlands,
Belgium, France, Spain and Italy).
SPECIALIST, EMERGING
MARKETS
9.3% 3.8%
Specialist sector includes adventure,
education, language, marine, North
American specialist, sport activities
and Specialist Holidays group;
Emerging markets segment includes
Tui Russia & CIS.
ACCOMMODATION &
DESTINATIONS
4.4% 9.6%
Accommodation wholesaler,
destination services, online
accommodation travel services and
cruise handling.
97

5.1. Tui Travel Corporate strategy
Expansion in emerging countries
In 2011, travelling and tourism sector accounted for around 9% of global GDP and
are considered among the fastest growing activities. Demand in emerging
countries is expected to be the main driver of the sector’s growth in the future. Tui
Travel is planning to expand activities in Brazil, Russia, India and China. The
company is already present in Russia and Ukraine, and through three recent
acquisitions with its venture capital partner S-Group Capital Management, it plans
to expand further its operations in the CIS countries. In Brazil, China and India sales
are to be increased through the accommodation wholesaler Hotelbeds, whose
sales rose by 12.2% in 2011. In China, the company completed the first step of its
expansion strategy following the outbound operating licence granted to Tui by the
Chinese National Tourism Authority. It creates a good growth opportunity.
Developing two separate mainstream
business models
There was a division reorganisation in 2011 and today the activity of Tui Travel is
divided into three main sectors, the most important of which is mainstream. Two
business strategies have been put in place within the segment: the traditional and
the modern mainstream. The first one focuses on offering commodities packages,
while the latter is based on a differentiation product strategy. Tui Travel focuses
on offering exclusive products on all source markets which would be difficult to
replicate by other travel companies. In line with its mid-term strategy, the
company launched its Thomson Couples holiday concept offering accommodation
in 16 child-free hotels in the UK.
Further enhancing the product range
and clientele reach of the independent
travel unit
The travel industry anticipates a substantial growth in demand for independent
travels by 2014. In order to gain an additional share of this market, the company
plans to expand its product offer by increasing the range of accommodation and
the possibility to book through online distribution channels. This strategy aims to
increase the part of direct booking and decrease distribution costs. In terms of
specialist and activity services, the company will offer a larger choice of
experiential holidays.
98

5.1. Tui Travel Recent events
May 2011
Tui Travel announces that it intends to acquire the 6 ML companies, managing its
13 Magic Life Clubs in Turkey, Tunisia, Greece, Egypt and Spain from its parent
group Tui AG. The deal aims to ensure the supply of high-end hotel club services.
The transaction is worth around €6bn.
The Canadian division of Tui Travel records a profit following the partnership with
Sunwing. Unrest in Egypt and Tunisia leads to a decrease in sales by €33 million.
June 2011
Tui Travel’s subsidiary Intercruise Shoreside & Port services completes its
investment in TMS Gateway. The latter will allow Tui to offer port and ground
handling services to cruise ships in major ports in the US and the Canadian West
Coast.
July 2011
Tui Travel plc announces the acquisition of the English Language Centre Ltd in York
for €1million as a part of its language business portfolio. Tui Education will be
therefore able to offer larger choice of education travels in the UK.
November 2011
Tui’s accommodation wholesaler, Hotelbeds announces that it expects a 25%
increase in sales for the year following expansion in Asia and the Americas, in
particular in Colombia, Korea, India, Brazil and Argentina. Its sales for 2010
amounted €0.98bn.
December 2011
Sandra Leonhard, the newly appointed director of digital strategy and
transformation for Tui Travel announces that the company will develop its IT
system jointly with Thomson, First Choice owner and Tui Hotel & Resorts. The step
is in line with the company’s strategy to increase online sales and explore e-
commerce opportunities.
April 2012
In order to enhance its aircraft maintenance efficiency, Tui Travel purchases
Boeing’s Maintenance Performance Box for its entire Boeing fleet for a period of 5
years. The deal includes system, library, authoring and task module operations and
will improve the reliability of the company’s airline subsidiaries.
99

14.80
16.06 15.98
15.57
16.93
13
14
15
16
17
18
2007 2008 2009 2010 2011
-6%
-2%
2%
6%
10%
14%
2007 2008 2009 2010 2011
5.1. Tui Travel Key data
Tui Travel’s net sales Tui Travel’s net sales performance
Source: Xerfi Global with Tui Travel Source: Xerfi Global with Tui Travel
Despite the challenging market conditions in Europe, Tui Travel’s turnover rose by 8.7% reaching €16.93bn in 2011. 7% of the
increase was driven by organic growth, 2% by foreign currency variation and 1% by acquisitions. The Arab Spring in the first
half of FY2011 affected the results of the French division, and recorded a decrease of €33 million. The North African region
accounts for 40% of Tui’s bookings in France. There was a positive trading performance of the Dutch and Irish divisions.
Performance in Canada was improved through the joint venture with Sunwing.
unit: annual % change
unit: billion euros
100

Tui Travel’s sales by segment Tui Travel’s performance by segment
Effective October 1st, 2010, Tui Travel reorganised its activities into three main segments, with Mainstream being the core
activity with sales of €14.59bn in 2011(86.2% of net sales). Tui’s positive sales performance the same year was driven by the
increase in Accommodation and Destination sales. The latter rose to €0.75bn (+12.2%over 2010) given the expansion of the
company’s accommodation wholesaler Hotelbeds in South America and Asia. Mainstream sales were up by 9.3% as a result of a
good division performance in the UK and the Nordic region.
unit: % share of 2011 net sales
Mainstream
86.2%
Specialist,E
merging
markets &
Activity
9.3%
Accommoda
tion &
Destinations
4.4%
9.3%
1.9%
12.2%
-0.7%
-17.7%
5.3%
Mainstream
Specialist,Emerging markets &
Activity
Accommodation & Destinations
2010 2011
101

UK
30.3%
Germany
28.9%
France
9.5%
Other
Europe
26.4%
Rest of
World
4.8%
7.7%
14.0%
6.3%
10.2%
-13.5%
-0.7%
-0.7%
-1.8%
-8.0%
4.6%
UK
Germany
France
Other Europe
Rest of World
2010 2011
Tui Travel’s net sales by region Tui Travel’s performance by region
Tui Travel’s main market is Europe with over 95% of net sales. Sales in Germany rose by 14% in 2011, amounting €4.9bn. The
demand in the summer improved compared to the prior year, given the possibility for customers to switch destinations from
Egypt to the Balearics, Turkey or Greece. Sales in other European regions were up by 10.2% as a result of the sustained positive
performance of the Nordic region. Summer sales in the UK and Ireland delivered strong revenues at €5.13bn in 2011 offsetting
the negative impact of the Arab revolutions in the beginning of the year.
unit: % share of 2011 sales
102

0.06
-0.21
0.04 0.05
0.29
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
2007 2008 2009 2010 2011
-6%
-4%
-2%
0%
2%
4%
6%
8%
2007 2008 2009 2010 2011
Tui Travel’s operating profit Tui Travel’s operating margin
Operating profit has been increasing since 2008 and amounted €0.29bn in 2011. The rise of 479% the same year is due to the
strong performance of the European division and the non recurrence of the volcanic ash disruption in Iceland at the of 2010. in
2011, the operating margin rose to 1.7% of net sales. The increase in financial performance was partially offset by the political
unrest in Arab countries, which continued to impact the French travel sector in the second half of 2011. The efficient cost
management and cost synergies contributed with €0.03bn to Tui Travel’s operating profit.
unit: % of operating profit over net sales
unit: billion euros
103

0.09
0.24
0.27 0.27
0.37
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
0.0
0.1
0.2
0.3
0.4
0.5
2007 2008 2009 2010 2011
Tui Travel’s capital expenditure and capex ratio Tui Travel’s cost of sales
In 2011, total capital expenditure net of disposals rose to €0.37bn (+34.5% over 2010) and represented 2.2% of net sales for
the year. Maintenance expenditure of the mainstream segment increased by 43%. The Western European division recorded a
rise in capital increase to €0.09bn (+ 71% on 2010).
Cost of sales rose by 8.2% in 2011 (€15.39bn), at a pace slower than the one of sales. The company has undertaken a cost
management strategy through cost synergies with other companies and increase in cost efficiency.
units: billion euros; annual % change
units: billion euros; % of capital expenditure over sales
13.60
14.88
14.64
14.22
15.39
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
2007 2008 2009 2010 2011
104

5.1. Tui Travel Statistical tables
Tui's net sales and operating profit
units: billion euros; annual % change; % of operating profit over sales
Year Sales Annual % change Operating profit Operating margin
2007 14.80 0.06 0.4%
2008 16.06 8.5% -0.21 -1.3%
2009 15.98 -0.5% 0.04 0.3%
2010 15.57 -2.5% 0.05 0.3%
2011 16.93 8.7% 0.29 1.7%
Source: Xerfi Global with Tui Travel
Tui's sales by segment
Segment Sales 2011
2011/2010
change
Sales 2010
2010/2009
change
Sales 2009
Mainstream 14.59 9.3% 13.35 -0.7% 13.45
Specialist,
Emerging markets
& Activity
1.58 1.9% 1.55 -17.7% 1.89
Accommodation &
Destinations
0.75 12.2% 0.67 5.3% 0.64
105

5.1. Tui Travel Statistical tables
Tui's sales by region
Region Sales 2011
2011/2010
change
Sales 2010
2010/2009
change
Sales 2009
UK 5.13 7.7% 4.76 -0.7% 4.80
Germany 4.90 14% 4.29 -0.7% 4.32
France 1.61 6.3% 1.51 -1.8% 1.54
Other Europe 4.47 10.2% 4.06 -8% 4.41
Rest of World 0.81 -13.5% 0.94 4.6% 0.90
Tui's cost of sales
Year Cost of sales Annual % change
2007 13.60
2008 14.88 9.4%
2009 14.64 -1.6%
2010 14.22 -2.8%
2011 15.39 8.2%
106

5.2. Thomas Cook Presentation
Fiscal year ended September 30th, 2011
Headquarters Peterborough, UK
2011 key figures
Net sales 11.30 billion euros
Cost of sales 8.89 billion euros
Operating profit 0.35 billion euros
Net income -0.60 billion euros
Advertising expenses 0.21 billion euros
Workforce 31,097 employees
• Thomas Cook’s first excursion dates back to 1841. Thomas Cook
Group plc, as it is known today was established in 2007 by the merger of
Thomas Cook AG and MyTravel Group plc. The company is among the
leading tour operators in North American and European markets. It
manages seven main tourist brands: Thomas Cook, Sunset, Neckermann,
Condor Airlines, Ving, Direct Holidays and My Sunquest.
• The mid-term corporate strategy includes offering a wider choice of
individual and better tailored travels, such as adventure or cultural
travels. It will also offer better flexibility and a wider accommodation
choice to its clients. Thomas Cook has business operations in 22
countries and serves over 23 million customers worldwide.
• The company is listed on the London Stock Exchange.
2011 net sales by region
UK 33.2% of net sales
Central Europe 23.9% of net sales
West & East Europe 19.4% of net sales
Northern Europe 11.7% of net sales
North America 3.6% of net sales
Thomas Cook Group plc
2011 net sales: 11.30 billion euros
UK
33.2% of net
sales
Central
Europe
23.9% of net
sales
West & East
Europe
19.4% of
net sales
Northern
Europe
11.7% of
net sales
North
America
3.6% of net
sales
Airlines
Germany
8.2% of net
sales
107

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