TUI Travel Enters U.S. Package Market With Multi-Channel Focus
The acquisition last month of Atlanta-based Vacation Express marks European travel giant TUI Travel’s initial foray into the U.S. package market.
TUI owns 49% of Canadian wholesaler Sunwing Vacations, which acquired Vacation Express, a company that markets packages to destinations and resorts in the Caribbean, Mexico and Central America. TUI Travel entered into a strategic partnership with Sunwing in January 2010.
A strategic partnership
Acquiring Sunwing made sense for TUI, “because the companies share similarities in destinations served and supplier partners,” TUI spokesperson Lesley Allan, told Travel Market Report.
TUI Travel chief executive Peter Long cited the strategic partnership with Sunwing Vacations as a highlight in 2011, a record year for the firm. (TUI Travel reported a record underlying profit in 2011 of £471 million ($725 million), up 18%, despite the challenging geopolitical and economic environment.)
Going forward, TUI Travel will focus on capturing more sales of its leisure travel products through its 3,500 storefront travel agencies, online travel agencies and the online direct sales channels of its wholesalers, Long said in a video commentary posted on TUI Travel’s website.
“We remain focused on our strategy of increasing the proportion of sales of differentiated and exclusive product, and on increasing controlled distribution, with a focus on online to enhance our customer access and reduce distribution costs,” he said.
By going to market with “differentiated and exclusive product,” TUI Travel’s tour brands, which include Thomson and First Choice in the U.K., will give consumers a compelling reason to buy these products, said Long.
Travel Market Report asked spokesperson Lesley Allan about TUI’s strategy of capturing more sales across its vertically integrated segments and its implications for traditional travel agents.
What does TUI Travel mean by controlled distribution?
Allan: Controlled distribution are the sales channels that we directly own and where the relationship with the customer is ours – i.e., our own travel agencies, call centers and online Web sites
When we talk about increasing our controlled distribution, we are talking about increasing controlled distribution for the products sold by our tour operators.
Does that strategy mean driving more customers to online bookings and away from high street travel agencies?
Allan: We use all the sales channels and believe that it is important to offer our customers the channels they most want to book with. We have approximately 3,500 travel agencies across the group.
Some countries have a higher proportion of sales online than others. For example our Nordic (Sweden, Denmark, Norway and Finland) tour operator sales are 61% online, while in Germany they are 19%.
Does the focus on online mean that TUI Travel is downgrading high street agencies?
Aren’t high street agents important to TUI's strategy of increasing sales of independent travel, as well as of products in the specialist and activity segment?
Allan: Our own agents and our relationships with key supportive third-party agents are important across the group.