We heard you’ve been thinking about this. Would you be interested in looking at it?” Joussen said: “I had no idea


about tourism [but] I looked at the material [on Tui]. “Tour operators were created


more or less in the 1950s and 1960s when northern Europeans wanted to go to southern Europe and it was a big unknown for vacationers. In Spain you still had a dictatorship. The intermediary role was pivotal. “[But] in 2012, you had the


euro, the same legislation, the internet. Why do you need an intermediary?”


How to compete


Joussen came up with an answer. He said: “If you cannot compete on cost and choice you need to compete on differentiation. And when you look at our industry, the hotel is a main pillar of differentiation.” He added: “Vertical integration


is driving differentiation. Look at my old industry. Apple has 15% to 20% market share [of mobile]. Google with Android has 80%. But Apple earns a lot of money by vertical integration and Google does not earn much with Android, because it is not vertically integrated.” Joussen concluded of Tui: “We


have the vertical integration and we have the hotels, there must be an opportunity. That is what I said to the board, [and] they said ‘Why don’t you become CEO?’.” In taking the role as head of Tui he also became chairman of Tui Travel, then 50%-owned by the German group. He said: “I discovered Tui was two different companies and not all vertically integrated. “When you are an independent


company, even when you own 50%, you need arm’s-length relationships because you need to be fair to all shareholders. “The other thing I discovered


was that this trading company [Tui Travel] had risk capacity – aircraft – [and] as soon as you have planes, your thinking is targeted around load factor. When you own planes, you had better fill them. “In my world you either invest


where differentiation happens or where essential facilities are. Commodities are outsourced. Are planes differentiating? No. People don’t care as long as they are punctual, reasonably priced and safe. Maybe people don’t even know which plane they are on. People go on budget flights to five-star hotels.” He added: “If you don’t realise


higher prices then you are not differentiated, [and] you cannot realise higher prices on planes when they aren’t bundled [in package holidays] – maybe on Dreamliners, there is always an exception.”


The biggest risk


Joussen said: “I just was asking questions.” But he came to a straightforward conclusion: “Vertical integration will only happen if we take over the full company [Tui Travel]. “It took two years. In the beginning it was a little difficult. Tui Travel, an enormously successful trading company, had told the market [it was] asset-light and ‘You don’t need hotels’. We wanted them to turn around and say ‘We need hotels and cruises.’ But in December 2014 we made it.” A key factor was that Tui Travel boss Peter Long agreed. Joussen said: “Peter also


I said to the board ‘We have market access and we have content like hotels. Vertical integration will create great opportunities.’ They said ‘Why don’t you become the CEO?’


saw that the internet is a very dangerous animal in a trading environment. We came to the conclusion we should be vertically integrated and think about our business from a content plus market-access perspective. “The beauty of that perspective


is that you decrease the gearing [borrowing] of the business [and] increase the cash generation. You are more content-centric, which is also beneficial because from a brand perspective it is the main driver of differentiation.” He added: “The biggest risk of


having an asset is that you cannot fill it. But when [as the combined Tui businesses] you have seven million customers in your own assets and 20 million in your tour operating businesses, there is enough [customers entering the] ‘funnel’ to limit the risk.”


Global platforms


Having engineered the merger, the challenge now is to complete the process of vertical integration. “We think about the components that scale, the global platforms,” said Joussen. “One is brand. One is aviation platforms – buying, configuration, maintenance, ground handling, not crewing [and] not route planning because that is an integral part of tour operating. Also IT, investment in hotels, investment in cruises, hotel purchasing – these can be scaled globally. “But competing locally within


markets is the responsibility of local teams in the UK or Germany. That is how we work. “I see us now at a great starting


point. We had the best commercial year last year and the first quarter of this [financial] year [October to December] was not bad. But it’s a starting point. Our industry will change. We should not lose our trading mindset, but we will be more marketing-led and it will not only be brand marketing, but also customer demand-led. “It will not happen tomorrow.


The yield system of Tui UK is very sophisticated, but there is much to come.”


WITH FRITZ


On the Tunisia beach massacre “This was one of the saddest experiences. You can understand why you have travel warnings and why people don’t want to go.”


On Sharm el-Sheikh “When the [Russian] plane came down we said ‘Do we think the market will come back in the near future?’ We decided to buy €26 million additional capacity in Spain and to redirect our flights. Overnight our purchasing team bought the capacity. This is the beauty of an integrated model.”


On selling direct “In every market we have different commercial propositions. The common theme is the more direct we go, the more profitable we are. The better our yield system, the more profitable we are.”


On customer loyalty “We’ve done a good job If a client wants to book the Robinson Club in Majorca and if it’s full they ask for other Robinson options instead of asking for another hotel in Majorca.”


On competitors “I look at easyJet, Ryanair, Norwegian. I’m more obsessed with yield-based companies than trading companies. They have a more sustainable model. And, of course, I’m obsessed with internet companies. You have to be.”


On future acquisitions “We’ve done an enormous merger. We need to sort out the synergies. There are times for doing deals. Now is a time for operational performance and management.”


25 February 2016 travelweekly.co.uk 15


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