TUI Travel PLC Investor Day 27 January 2011 TUI Travel PLC Investor Day January 2011 Page 1 Blue Village, Hurghada, Egypt
Agenda Journey So Far & Strategic Overview Mainstream Strategy Differentiated Product Controlled / Online Distribution Operational Efficiency Q&A and Coffee Break Independent Strategy Online Accommodation Specialist & Activity Q&A Financial Roadmap Trading Update Conclusion Peter Long Johan Lundgren/Volker Bőttcher/Bart Brackx Johan Lundgren/Bart Brackx Will Waggott Joan Vilà/Chris Morris John Wimbleton Will Waggott Peter Long Peter Long Q&A TUI Travel PLC Investor Day January 2011 Page 2
Journey So Far & Strategic Overview Agenda Journey so far Our Market Mainstream Business Model Independent & Emerging Markets TUI Travel PLC Investor Day January 2011 Page 3
Journey So Far Rationale for merger Strong strategic fit between First Choice Holidays and TUI Tourism Created the world s leading leisure travel group with market leading Mainstream brands and the leading portfolio of specialist brands Removed excess capacity from the market Opportunity to extract substantial cost synergies Platform to leverage economies of scale Merger created a position of strength to deliver growth TUI Travel PLC Investor Day January 2011 Page 4
Journey So Far Who we are The world s leading leisure travel Group 30 million customers from 27 major source markets A Group with market leading brands A Group with significant profit growth 2007 EBITA 260m 2010 EBITA 447m We provide a full range of leisure travel needs Mainstream Independent & Specialist TUI Travel PLC Investor Day January 2011 Page 5
Journey So Far Our structure Mainstream Sector Accommodation & Destinations Sector Specialist & Activity Sector Emerging Markets Sector Classic TO business / market leading Destination services & online accommodation Portfolio of specialist & activity companies The world of TUI Revenue 11.6 bn TTV 1.9 bn Revenue 1.4 bn Revenue 0.1 bn EBITA 332m EBITA 73m EBITA 78m EBITA ( 7m) TUI Travel PLC Investor Day January 2011 Page 6
Journey So Far Progress In January 2008 we set out our medium term roadmap: 1) Synergy Delivery Delivered 2) Turnaround of underperforming businesses In progress 3) Redefining the Mainstream business model In progress 4) Grow organically and through acquisitions On-going 5) Emerging markets On-going Significant progress achieved, but the journey is not complete TUI Travel PLC Investor Day January 2011 Page 7
Journey So Far Key successes Integrated UK Mainstream and other overlapping businesses Exit from UK scheduled flying Exit from Germany scheduled flying Canada strategic venture Nouvelles Frontières performance improvement Emerging markets entry Significant progress to date TUI Travel PLC Investor Day January 2011 Page 8
Journey So Far Key challenges Cost inflation, particularly in the UK source market Timing of turnaround delivery Economic environment Volcanic ash Significant headwinds from fuel / exchange rates and economic environment TUI Travel PLC Investor Day January 2011 Page 9
Journey So Far Input cost movement Input Cost Movement TTPLC Group (2007-2010) 0.3 bn 0.7bn 0.2 bn 0.2 bn Fuel Rate Euro USD Cost Inflation Input cost increase of 700m from fuel & currency movements in the period TUI Travel PLC Investor Day January 2011 Page 10
Journey So Far Turnaround m Turnaround opportunity FY10 To go Canada 30 19 11 Corsair 24-24 Nouvelles Frontieres 23 6 17 Germany scheduled flying 20 20 - Germany ongoing business 19-19 Ireland 6 2 4 Poland 9 5 4 Netherlands 11 1 10 142 53 89 89m of turnaround opportunities to go TUI Travel PLC Investor Day January 2011 Page 11
Journey So Far Operating profit progression +23 +53 447 +195-84 260 FY07 EBITA Synergies Turnaround Acquisitions Net Trading FY10 EBITA Increased EBITA by 187m since the merger, despite over 700m of input cost inflation TUI Travel PLC Investor Day January 2011 Page 12
Journey So Far Summary Successfully delivered synergy target Underlying operating profit of 447m Overall turnaround opportunities are taking longer to execute, but clear roadmap in place Our journey is not complete - unfinished business remains TUI Travel PLC Investor Day January 2011 Page 13
Journey So Far & Strategic Overview Agenda Journey so far Our Market Mainstream Business Model Independent & Emerging Markets TUI Travel PLC Investor Day January 2011 Page 14
Our Market Geographical focus 26bn World leisure travel market: 740 bn TUI Travel Core Markets*: 343 bn 389 bn 317bn Our 3 largest markets Germany 102bn 343bn Travel Intermediaries 110 bn Direct Travel Suppliers 233 bn Travel Intermediaries 124 bn Direct Travel Suppliers 265 bn France UK 57bn 80bn 2009 2013 = TTPLC Core Markets* UK, Sweden, Germany, France, Belgium, Netherlands, Austria, Poland, Switzerland & Canada Source: Euromonitor & management = TTPLC Other Markets USA, Australia, Spain, Russia, India, China, New Zealand, Brazil analysis and estimates Our focus is on the 110bn travel intermediaries market as well as growing our international footprint TUI Travel PLC Investor Day January 2011 Page 15
Our Market Market segments Segments Our Market Presence Mainstream 31 bn Mainstream Tour Operators Market leading TO positions in all source markets Specialist Tour Operators Leading positions in Specialist & Activity market segments 1/3 110bn Independent 79 bn GDS OTAs Hotelbeds, Bedsonline, Hotelopia (Accommodation Wholesaler) Laterooms, Asiarooms (Accommodation OTA) Meta Travel Search Engines / Review sites Travel Portals TUIfly.com Travel Review Portal -Cheqqer 2/3 233bn Direct Travel Suppliers 233 bn Scheduled Airlines & LCC Hotel We have a substantial presence across the Mainstream and Independent segments TUI Travel PLC Investor Day January 2011 Page 16
Our Market Mainstream presence 2010 Market Shares UK Belgium Germany Canada Nordics France Netherlands Brands TUI Travel 47% 45% 29% 28% 27% 25% 20% Competitors 35% TC 42% TC 25% Rewe 17% TC 8% Alltours 32% Transat 15% Westjet 10% Air Canada Vacations 7% Sunquest (TC) 28% TC 19% Kuoni 13% TC 13% Club Med 11% Fram 14% TC 11% Sundio 13% OAD Market Concentration - Top 2-82% 87% 54% 60% 55% 38% 34% We have leading brands and positions in our core mainstream markets and have a 35% share of the European package holiday market TUI Travel PLC Investor Day January 2011 Page 17
Our Market Independent travel presence Specialist & Activity Mainstream Independent Accommodation Wholesaler Accommodation OTA Total Revenue/TTV 2010 1.3 bn 1.2 bn 1.0 bn 0.4 bn 3.9 bn EBIT 2010 78 m 36 m 24 m 15 m 153 m Volume 2010 1.6m pax 3.8m pax 11.6m bednights 5.2m bednights We also have a substantial presence in Independent Travel which represents 1/3 of our gross revenues & profits TUI Travel PLC Investor Day January 2011 Page 18
Journey So Far & Strategic Overview Agenda Journey so far Our Market Mainstream Business Model Independent & Emerging Markets TUI Travel PLC Investor Day January 2011 Page 19
Mainstream Business Model Two business models Traditional Mainstream Modern Mainstream Commodity Packages Differentiated, unique holidays 7 & 14 Night Durations Flexible Durations Brochure & Retail Led Online Multi-Media Product Marketing Call centre based customer support Online self-service We have redefined our Mainstream business model TUI Travel PLC Investor Day January 2011 Page 20
Mainstream Business Model We have redefined our Mainstream business model 1 Product Accelerate shift to differentiated/unique products & increase flexibility 2 3 Distribution Cost Efficiency Utilise controlled channels to sell our mainstream products with increasing focus on online channels New reservation systems allow improved customer experiences and lower costs Addressing legacy costs Sustainable Profitable Growth TUI Travel PLC Investor Day January 2011 Page 21
1 Shift to Flexible, Differentiated Products Differentiated product Year on Year Booking Volumes Summer 2011 UK Nordics Germany 46% 8% 26% 12% 15% 21% Total Differentiated products Differentiated content continues outperform commodity products TUI Travel PLC Investor Day January 2011 Page 22
1 Shift to Flexible, Differentiated Products UK product mix UK Differentiated Products (Passenger Volumes of Total Programme) UK Non 7/14 night Durations (Passenger volumes for Total Programme) 1.9 m 1.4 m 0.8 m 0.4 m S2008 S2011F S2008 S2011F Clear demand growth in specific market segments TUI Travel PLC Investor Day January 2011 Page 23
% respondents 2 Shift to Online Market booking trends Total Market -Online Travel Penetration 2006-2011 Holiday Booking Channel - UK Mainstream Online/Offline Mix - Growth 50 35 bn Nordics UK France Germany Spain 45 40 35 30 25 20 15 10 5 21% 16% 13% 39% 34% 25% 26% 36% 43% 31 bn Offline 25 bn Online 6 bn +8% +24% Offline 27 bn Online 8 bn Source: PWC 0 Source: Mintel Personal visit to travel agent Entirely by telephone On the Internet 2005 2007 2009 2009 2013 Source: Euromonitor Based on TUI Travel core markets: UK, Sweden, Germany, France, Belgium, Netherlands, Austria, Poland, Switzerland & Canada Online travel is a large & growing part of the market TUI Travel PLC Investor Day January 2011 Page 24
2 Shift to Online Channel Our online booking mix 2010 online booking mix by source market - Percentage of Total Pax Numbers 2007 Nordic 57% +11pp UK 38% +9pp Belgium 33% +17pp Netherlands 30% +6pp France 18% +6pp Germany 17% +10pp Online represents a significant channel in most source markets & is growing substantially TUI Travel PLC Investor Day January 2011 Page 25
2 Shift to Online Channel Online market share European Online Mainstream Holiday Market (2010) European Online Travel TTV (2010) 3.8 bn* 3.1 bn Rest of Market 2.5 bn 38% 6.1 bn TUI Travel 2.5 bn 43% 2.1 bn Thomas Cook 1.1 bn 19% TUI Travel Expedia TCG Source: PhoCusWright & Company Information We have a leading share of online package sales TUI Travel PLC Investor Day January 2011 Page 26 * TTV for Accommodation Wholesaler, Accommodation OTA & Mainstream Packages Online
3 Cost Efficiencies Cost reduction actions New reservation systems Delivers lower cost production model Drives automation of processes and reduces back office resource requirements Improves customer experience Addressing legacy costs Delivering efficiency gains in group airlines Cost efficiencies deliver margin improvements TUI Travel PLC Investor Day January 2011 Page 27
Journey So Far & Strategic Overview Agenda Journey so far Our Market Mainstream Business Model Independent & Emerging Markets TUI Travel PLC Investor Day January 2011 Page 28
Independent & Emerging Markets Agenda 1 Independent travel exhibits superior growth, particularly through online channels 2 Specialist businesses exhibit strong margins and growth 3 Emerging markets provide large and growing addressable market opportunities TUI Travel PLC Investor Day January 2011 Page 29
Independent & Emerging Markets Agenda 1 Independent travel exhibits superior growth, particularly through online channels 2 Specialist businesses exhibit strong margins and growth 3 Emerging markets provide large and growing addressable market opportunities TUI Travel PLC Investor Day January 2011 Page 30
1 Independent Travel Market Market growth Independent Market Growth (TUI Travel Core Markets) 89 bn 75 bn 79 bn Other 45 bn Other 37 bn Other 40 bn Accommodation Only 13 bn Accommodation Only 13 bn Accommodation Only 15 bn Flight Only 25 bn Flight Only 26 bn Flight Only 29 2005 Source: Euromonitor 2009 2013 Independent travel market continues to grow strongly TUI Travel PLC Investor Day January 2011 Page 31
1 Independent Travel Market Online growth Independent Online/Offline Mix Growth (TUI Travel Core Markets) 89 bn 75 bn 79 bn Offline 63 bn - 5 bn Offline 58 bn + 2 bn Offline 60 bn Online 12 bn + 9 bn Online 21 bn + 8 bn Online 29 bn Source: Euromonitor 2005 2009 2013 Online channels in the independent market growing fastest TUI Travel PLC Investor Day January 2011 Page 32
1 Independent Travel Market Global OTA market Global OTA Market Growth by Product Segment Accommodation OTA Market Size & Growth by Region 9% 10% Growth* +21% +8% +4% 6% 7 bn 8 bn 5 bn 3% Flight Only Accommodation Only Car Hire Other Source: PhoCusWright (CAGR 2008-2011) APAC Europe US Source: PhoCusWright (*CAGR 2008-2011) Accommodation OTA and APAC region exhibit highest growth TUI Travel PLC Investor Day January 2011 Page 33
1 Independent Travel Market TUI Travel online accommodation growth Accommodation Wholesaler TTV 1 ( m) Accommodation OTA TTV 1 ( m) 679 23% CAGR 804 957 38% CAGR 294 362 518 Market growth 9% CAGR 137 137 174 174 Market growth 15%CAGR FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 FY07 FY08 FY09 FY10 1 TTV = Total transaction value Our online accommodation businesses are continuing to deliver strong growth TUI Travel PLC Investor Day January 2011 Page 34
Independent & Emerging Markets Agenda 1 Independent travel exhibits superior growth, particularly through online channels 2 Specialist businesses exhibit strong margins and growth 3 Emerging markets provide large and growing addressable market opportunities TUI Travel PLC Investor Day January 2011 Page 35
2 Specialist & Activity High margins EBITA margin 3%-5% 5% 10% 10% 15% 344m Of which 133m of revenue is at >15% EBITA margin 220m 211m 228m Revenue UKISD 127m 134m Ski 88m Proportion of Sector EBITA Specialist Holiday Group NA Specialist Sport Adventure Marine Education 27% 18% 55% 7% Organic EBITA CAGR growth between 2007-2010 FY10 Revenue and EBITA margins TUI Travel PLC Investor Day January 2011 Page 36 Page 36
Independent & Emerging Markets Agenda 1 Independent travel exhibits superior growth, particularly through online channels 2 Specialist businesses exhibit strong margins and growth 3 Emerging markets provide large and growing addressable market opportunities TUI Travel PLC Investor Day January 2011 Page 37
3 Emerging Markets Addressable markets Russia Brazil India China Population 141 million 191 million 1.2 billion 1.3 billion Addressable Population GDP Growth (real) Outbound Leisure Market (pax) Credit Card Penetration 22 million 25 million 30 million 43 million 7.3 % 3.6 % 8.8 % 10.1 % 8 million 4 million 6 million 27 million 3 % 38 % 2 % 3 % Emerging markets seeing strong growth in disposable incomes and propensity to travel TUI Travel PLC Investor Day January 2011 Page 38
3 Emerging Markets Current participation Mainstream Tour Operations Specialist Tour Operations Retail Russia Brazil India China - - - - - - * Accommodation & Destination Services Russia & CIS has the most developed strategy to date TUI Travel PLC Investor Day January 2011 Page 39 * Pending approval of outbound licence for TUI China
Independent & Emerging Markets Strategy summary A&D Specialist & Activity Continue to grow online accommodation only businesses Expand source & destination market B2B presence Drive organic growth from our market leading positions Emerging Markets Increase presence from existing platform in Russia Determine participation strategy in other markets Leverage existing presence in non-mainstream markets to drive growth TUI Travel PLC Investor Day January 2011 Page 40