Tourism Move TUI On a Restructuring Trip

Fritz Joussen aims to decentralize TUI, the world's largest tourism company, five months after acquiring Britain's Tui Travel. The supervisory board is expected to approve his plans on Friday.
Restructuring a travel behemoth - a real head scratcher for Fritz Joussen.

Over the past few months, Mr. Joussen has met with more than 5,000 employees, attended numerous management meetings and works meetings, and spoke with hoteliers in vacation areas around Europe.

The 52-year-old TUI chief executive will announce a complete corporate restructuring when he meets with analysts in London on Wednesday, Handelsblatt has learned from sources familiar with the plans. "Joussen also wants to reorganize responsibilities in the executive board," one of the sources said.

The move is triggered by TUI's need not only to integrate its British subsidiary, but also to kick-start its stagnating sales.

The plan, as described by the sources, calls for Hanover-based TUI to no longer run its tourism business centrally but instead to transfer more responsibility to its local subsidiaries, which will have more control over their own profit and loss statements.

Tourism markets affected under the plan include Britain, Scandinavia and Canada. Also impacted are Germany, Austria, Switzerland and Poland whose travel operations are handled mainly by exclusive agencies.

We don't just deal in travel, but we also own the hotels, cruise ships and aircraft. Fritz Joussen, TUI Travel, CEO

TUI Germany will be run separately, in response to relatively demanding customers in Germany and the need to strengthen sales operations. Unlike most other countries, Germany has few exclusive travel agencies. As a result, TUI's catalogs typically share a shelf with promotional materials from rival travel companies, including Thomas Cook, Dertour and Alltours. The company also plays only a secondary role on the Internet in Germany.

Dividing the group into regions would constitute a major change at TUI. Until now, Johan Lundgren has run the package tour business, known internally as "Mainstream." The arrangement, which stems from the days before the Tui Travel, makes the package tour business look like a company within a company.

Mr. Joussen explained the reorganization plans and need for decentralization in an internal email recently sent to the company's 77,000 employees.  "Responsibility for results must also lie with local management because they are the ones most familiar with the needs and expectations of customers in the field." Mr. Joussen, the former head of Vodafone Germany, wrote in the email in which he called the program "Freedom within a framework."

The business has been divided in two since the acquisition of company predecessor Thomson in 2007. Hannover-based TUI AG managed the Riu and Robinson Club hotels and the Hapag-Lloyd and TUI Cruises ships, while the British subsidiary, acquired last year, has served as a tour operator and agency seller.

That structure will soon disappear. "I want a completely integrated group," Mr. Joussen told Handelsblatt in an earlier interview. He wants to see hotels and cruise ships, aircraft, and sales through travel agencies and the Internet under one roof. "No one can do this the way we do," he said at the time. "That's because we don't just deal in travel, but we also own the hotels, cruise ships and aircraft."

Before the merger, Tui Travel's sole objective was to sell as many vacation trips as possible. Whether hotels or cruise ships owned by its principle shareholder, TUI , were used was of minor importance to the British.

Mr. Joussen recently criticized the large number of brands in a separate email to employees, in which he described what customers experience in Ireland. "There, the customer books a Falcon product, boards an aircraft operated by our Canadian partner Sunwing, is welcomed by a TUI travel guide at his vacation destination, and then could very well spend his vacation in a Sensatori concept hotel by Thomson," he wrote, complaining that  "this is not what a consistent brand experience looks like."

Since taking over the helm of TUI in late 2012, Mr. Joussen has seen the company's share price more than triple to €17.20.

Christoph Schlautmann reports on the travel and retail sectors for Handelslbatt. To contact the author: [email protected]