The newly merged TUI/First Choice expects the proportion of its trips sold online to increase from 20% to at least 30% and perhaps as much as half over the next few years. The company also predicts that the business models of web-based travel companies and traditional travel firms will converge.
Europe’s big tour companies have all struggled as travellers have turned to internet-based competitors, or have been lured into cobbling their own holidays together, starting with a cheap flight from a low-cost airline. TUI, the market leader, has come under more pressure than its peers have. The company’s share price has fluctuated wildly because of speculation that it would be taken over itself and concern about its big debts and pension liabilities. Towards the end of last year its bosses concluded that radical action was needed. In mid-December they announced a painful restructuring programme involving 3,600 job cuts in Britain and Germany and some €110m of cost cuts in the back office.
TUI hopes that First Choice’s expertise in adventure trips and other holidays with “special effects” will make the new TUI Travel more profitable. He also wants to make more of the firm’s online offerings. Britons in particular have taken with gusto to scouring the internet for cheap deals on flights, hotels, hire cars and even package holidays, dispensing with intermediaries. Mr Frenzel expects the proportion of TUI’s trips sold online to increase from 20% to at least 30% and perhaps as much as half over the next few years. He also predicts that the business models of web-based travel companies and traditional travel firms will converge. Traditional firms will try to reap savings by selling more online, and web-based companies will try to improve margins by making block bookings of hotel rooms and reselling them.
