How do I improve the hotel business

Doubling of the result by 2008

The European travel group TUI wants to increase its profitability significantly by 2008. CEO Michael Frenzel announced at the general meeting in Hanover that he intends to increase earnings before taxes and goodwill amortization in the core tourism business to around EUR 700 million by 2008. This would correspond to a doubling of the value compared to the previous year.



In 2004, TUI's return on sales of 2.8 percent was well below the target of 5 percent, although the travel group's tourism business increased its earnings by 74 percent to EUR 362 million. For future prospects, Frenzel is toying with the record result of 2001. At that time, TUI was able to achieve a result of 530 million euros and a return on sales of 4.2 percent in the tourism division. The reason for the optimism is, among other things, the incoming bookings in the last few weeks, which, according to Frenzel, are higher than they have been in three years. The booked sales for the summer season at the end of April are almost 11 percent above the corresponding figure for the previous year.



By reducing costs and increasing efficiency, the group is now aiming for further earnings effects of around EUR 150 million, according to Frenzel. Corresponding programs have already been launched in Germany and Great Britain. The focus is not on further personnel savings, but on a restructuring of the work organization, an optimization of sales costs and savings in the maintenance of the Group's own aircraft. Frenzel wants to achieve an annual earnings effect of up to 50 million euros by helping TUI to restore low-income parts of the company to success. Frenzel anticipates additional earnings potential of up to 35 million euros from the investments in the hotel business. The group plans to open a total of 34 hotels with 19,000 beds in 2005 and 2006. The TUI boss also said there was plenty of potential in the rapidly growing internet business. Here, too, he expects earnings potential of up to 35 million euros annually. In addition, Hapag-Lloyd Express has broken even in the flight business. Frenzel assumes that the British Thomsonfly will also succeed in the coming year. The elimination of the up-front costs improves the result by around 30 million euros, according to Frenzel.



However, the fulfillment of the optimistic target presupposes that the positive development of the market environment continues and the market continues to grow moderately. Frenzel looks to the future with confidence: he expects global tourism growth of up to five percent annually by 2010.