Last year TUI Group posted another double-digit increase in its operating result, despite the major geopolitical challenges that persist. How did we do it?

Fritz Joussen:Our strategic structure as an integrated tourism group has proven to be tremendously robust – last year especially, for all the external shocks. As we own access to every component in the tourism value chain and have a presence in almost every destination around the world, we can respond flexibly to our customers’ changing travel wishes. For example, at the end of 2015 when a Kolavia plane crashed in Sharm-el-Sheik, within the space of 24 hours we had purchased additional bed capacity in Spain for 26 million euros, drawn up new flight timetables and geared our distribution channels to those destinations. That flexibility ben­efits us, because we profit commer­cially, but also our customers benefit in terms of the extremely diverse options we can offer them.

Even so, destinations like Turkey have witnessed a double-digit decline in visitor numbers.

The first decisive question for me is whether our industry as a whole is growing. And it is. People want to travel, to explore other cultures and countries, except that their preferences shift from one year to the next. TUI has a presence in more than 100 countries around the globe. That gives our business a broad base to build on. When we merged with TUI Travel at the end of 2014, we promised the capital market that in the three-year period up to financial year 2017/18 we would achieve an average growth in adjusted EBITA of at least 10 per cent a year. And we are sticking to that forecast.

In the last financial year, you defined six areas that you wanted to manage centrally from Group headquarters. What was behind that decision?

We want to tap into the global economies of scale that are available to us because of our size and international make-up, and which give us a competitive edge. With that in mind, we looked at the various activities we cover as a Group and identified six areas where we can draw on our strengths as a global player. Those are brand, IT, flights, investment in hotels and product sourcing, cruises, and destination services. But at the point where the competition is won or lost, being close to customers with their individual wish­es, local management in the markets operate with complete autonomy. I call that interplay “freedom within a framework”.

Implementing the single TUI brand on a global scale must be especially challenging. How much headway have you made?

The TUI brand is extremely strong in the international arena. We have made some great progress, especially thanks to the huge effort and commitment of the local markets, which have been exemplary in supporting migration to the TUI brand – above all with lots of ideas and activities for local employees. Apart from Germany, Austria, Switzerland and Poland, where we have always marketed our business under the name TUI, we now also operate under the global umbrella brand in the Netherlands, France, Belgium and Scandinavia. The last countries, the United Kingdom and Ireland, will be making the change in 2017. So from next year our customers all over Europe will have a consistent brand experience right along the value chain, from seeking advice in the travel agency, to enjoying the flight, to the services they receive on holiday. In the destinations, we have created a single international team, bringing together all the tour guides who used to work separately for each source market. The TUI brand is already extremely visible in the resorts. Our customers trust TUI, and our employees are proud to be part of this international TUI family.

Why is the development of your hotel and cruise portfolio managed centrally?

We want to achieve major growth in both business areas in the next few years. Given the investments that we will require to do that, we ought to agree together as a Group where we want to target our resources into new facilities, countries and ships. Because ultimately the occupancy of those hotels and ships – secured thanks to the distribution potential of our local markets – will decide how successful we are. That is why it also makes sense to market our four hotel brands Riu, Robinson, TUI Blue and TUI Magic Life and the three hotel formats Sensimar, Sensatori and Family Life within an international framework.

Will you be focusing on specific destinations as you expand your hotel operations?

The long-haul destinations are becoming hugely more important and the return on capital is especially good in countries with 365 days of sunshine. That’s why we will primarily build our own hotels in those regions. One focus for our investments is the Caribbean – an all-year destination which customers from both Europe and the United States always love to visit. With the Dreamliner, we now have an airplane that can fly there from the UK without refuelling on the way, and at relatively low cost. That lets us produce a Caribbean holiday for almost the same outlay as a holiday on the Canaries. Besides, demand in the Caribbean is rising every year by two-digit figures, but there isn’t the hotel capacity to match. So now we are building our own hotels there, and we estimate that every asset will generate a return of up to 20 per cent.

What are the motives for centralising flight operations?

In the past we behaved like five separate airlines, and we did not make rigorous use of the cost advantages that could have been had within an alliance. Now we are changing that. We are, for example, one of Boeing’s biggest customers, and that ought to be reflected in the terms when we purchase aircraft. In addition to that, we configure the planes in a way that makes it easier to exchange them between different countries in line with demand. We also have a one-stop shop for maintenance and ground handling. Flight planning and crew planning remain a local responsibility. All in all, we expect this greater centralisation to generate considerable savings.

Digitisation has radically transformed a number of industries. What steps is TUI Group taking to manage the changes in tourism proactively?

The key for us is to construct a central IT infrastructure. We need a standard customer platform and a central CRM system to have a picture of our customers. That is essential if we want to offer customers personalised services and products tailored to their needs. If we know, for example, that a guest has a preference for Room 624 in Robinson Club Cala Serena on Majorca, and it is still not occupied as the first week of October approaches, it would be fantastic if we could offer them that room at a special rate. Both sides stand to gain. That is the path we need to go down in future. It makes us more individual and personal from the customer’s point-of-view.

You are not just highly involved in Group strategy and areas of growth, but also with the whole issue of leadership. What makes a good manager in your view?

The demands placed on managers are very diverse and complex, especially when they are responsible for an international team or working within a matrix structure. But I think four things are crucial to good leadership. Managers should always have a vision and use it to derive a strategy. They should be able to inspire people and set a good example to trigger engagement among employees. Good managers should build a team with the right people in the right roles. And finally, they should be movers and shakers who define clear ob­jectives, remove obstacles from the path, and are prepared to make tough decisions.