CENTRAL EUROPEAN OFFICE F E B R U A R Y 2007

CENTRAL EUROPEAN OFFICE F E B R U A R Y 2007 Prepared by: Barbara Schuch-Beckers Director Central Europe MARKET TREND/MARKET INFORMATION UBS buys up and sells off TUI shares Swiss banking group UBS was briefly the largest single shareholder in TUI in the last few weeks, raising speculation about its intentions. UBS crossed the 5% threshold on January 26, increasing its holding to 5.84%, TUI announced on February 5. But the group then reduced its shareholding to below 5% on January 31, lying at 4.96%, TUI announced on February 9. Speculation quickly circulated about UBS intentions following the announcement of the increase in its TUI shareholding. But a UBS spokeswoman stressed that the holding was purely financial and there was no strategic purpose behind the share acquisition. The developments mean that Spain s Riu Hotels is once again the largest single TUI shareholder with a 5.1% holding, while the Spanish bank CAM holds 5.0%. Another important industry investor is Spain s Matutes Group, with about 3%. The three Spanish investors bought into TUI at the end of 2004 to support CEO Michael Frenzel s two-pillar strategy of tourism and shipping. This strategy has been under strong attack from financial investors such as Britain s Hermes fund which want Frenzel replaced and the group to be split into its two core businesses. Frenzel has long sought to win additional friendly investors to defend the company from these attacks. KarstadtQuelle takes over Lufthansa holding in Thomas Cook KarstadtQuelle has officially acquired Lufthansa s 50% stake in Thomas Cook AG, gaining 100% ownership of Europe s second-largest leisure travel group. The deal, which was agreed between the two companies just before Christmas, remains subject to approval by anti-trust 1

authorities and the Lufthansa supervisory board. Under the deal, KarstadtQuelle has bought the 50% holding for 800 million while Lufthansa increases its direct holding in Condor from 10% to 24.9% and receives Condor s stake in the Turkish carrier Sun Express. KarstadtQuelle has the option to acquire Lufthansa s Condor stake after two years. Thomas Cook s 2006 profit of 170.8 million remains within the group rather than being divided between its shareholders. Survey predicts more Germans will travel this year Some 71% of German consumers are planning a holiday of five days or more this year, according to this year s annual travel trend survey from the BAT institute. This is a slight rise on the 68% who planned such a holiday last year, and the 65% who actually then went on holiday. Germans want to travel more again, and put the crisis atmosphere of the last few years behind them, said Horst Opaschowski, author of the survey. The positive mood among consumers has reached the travel industry. Germany, Spain and Italy remain the most popular destinations, Eastern Europe countries and Scandinavia are more in focus this year but interest in Austria, France, Turkey and Greece has declined, according to the survey results. Mixed fortunes for summer 2007 bookings German tour operators have made a mixed start in 2007 for summer bookings, and some are extending early booking discounts and other offers to boost business. TUI appears to have higher growth rates than Thomas Cook where Neckermann is lagging behind last year s strong growth rates, while Rewe Touristik also has moderate sales to date, according to an FVW survey. Most operators report strong growth rates for Spain but bookings for Turkey are still only moderate, although better than last year. In response, various operators are offering more discounts. Neckermann has extended its Turbo discounts in 140 hotels from January 31 to March 31, including for Spain, the Mediterranean and North Africa. TUI has extended its XXL discounts (worth 110 on average) from 223 to 248 hotels, mostly in Turkey, Greece and the Canary Islands. FTI has also added two more months to its super early booking offers for Turkey holidays. Long-haul holidays in Asia are selling strongly, according to Dertour and Meier s Weltreisen. Thomas Cook buys Britain s MyTravel to create new European travel giant KarstadtQuelle has pulled off a major surprise with the announcement that Thomas Cook and Britain s MyTravel Group will merge into a new leading European travel group. The new UKbased company, which will be named Thomas Cook plc, will become market leader in the UK 2

and Scandinavia, as well as number two in Germany. It will catch up dramatically on Europe s largest travel group, TUI. Just days after officially buying Lufthansa s 50% holding in Thomas Cook AG to become 100% owner of the German-based group, KarstadtQuelle surprised the markets and the travel industry with the announcement of the My Travel agreement. It had been widely expected that Cook would beat off rival bidders to buy First Choice s package holiday business. Instead, the German retail group said that Thomas Cook and MyTravel would merge under a share exchange transaction that will not require any cash payments. KarstadtQuelle will own 52% of the company which it will also fully consolidate. MyTravel shareholders will hold 48% of shares in the new Thomas Cook plc, which will also be listed on the London Stock Exchange. The merger is subject to the approval of the anti-trust authorities and the shareholders of My Travel plc, and is expected to be completed by June 2007. KarstadtQuelle CEO Thomas Middelhoff, currently head of the Thomas Cook supervisory board, will be chairman. Thomas Cook AG CEO Manny Fontenla-Novoa will be Joint CEO of the new company while Thomas Cook AG CFO Ludger Heuberg will be CFO of the new company. The MyTravel CEO, Peter McHugh, will be Joint CEO for a transitionary period until retiring on December 31, 2007. The merged company, with sales of about 12 billion, will overtake Thomson / TUI as British market leader and catch up considerably on Europe s largest travel group, TUI, which has sales of 14 billion. Thomas Cook AG, which is number two in Germany and the UK and has strong positions in Benelux, France and Central Europe, had turnover of 7.8 billion in 2005/06. MyTravel, with sales of 4.2 billion in 2006, is number three in Britain and is market leader in Scandinavia. The new tourism group will be free of debt, have high financial reserves and thus will be well positioned to proactively participate in further market consolidation in Europe, should we see the opportunity to increase value for our shareholders, declared KarstadtQuelle AG CEO, Thomas Middelhoff. KarstadtQuelle would increase its turnover to 21 billion under the merger, with about 60% of revenues coming from tourism in future and 50% of revenues generated outside Germany. Thomas Cook AG CEO, Manny Fontenla-Novoa, commented: We believe in the future of the mainstream package holiday market, which will continue to be a core product of our ongoing business strategy. An immediate priority of the group will be to grow the independent travel, online and financial services segment of the business, where we see significant growth opportunities. No job reductions are planned in the Germany head office even though Thomas Cook plc will be based in London in future. Cook has 4,200 employees in Germany, including about 1,800 at the head office in Oberursel. In Britain, in contrast, synergies worth at least GBP 75 million a year 3

are expected, with job reductions most probable in the travel agency networks and airline operations. Middelhoff indicated in an analysts conference that the merged company might downsize its UK fleet by six jets. MyTravel has successfully completed its financial turnaround following heavy losses and returned to profit last year. Thomas Cook has also restructured over the last few years following large-scale losses and last year made a record profit. The loser of the deal is First Choice since both companies had been interested in acquiring its package holiday business. First Choice announced that it had cancelled the auction of the business and no negotiations were now taking place. The merger will also increase pressure on European market leader TUI which is under attack from financial investors and facing forthcoming restructuring of its tourism business to reduce costs. Most Thomas Cook/MyTravel cuts to be in UK The British market will suffer the brunt of cutbacks resulting from the forthcoming merger of Thomas Cook and MyTravel. Thomas Cook CEO Manny Fontenla-Novoa told FVW that most of the synergies from the merger would be achieved in the UK airline business but confirmed that travel agencies in Britain will be shut, although the number was not yet clear. The new company would retain strong MyTravel brands such as Airtours, Panorama or Direct Holidays since most complemented the Thomas Cook UK brands, he added. Experts point out, however, that there are also overlaps in the tour operating business and the MyTravel head office in Manchester could well be closed. Thomas Cook is expected to disclose UK job loss figures and cost-saving measures within the next few weeks. Fontenla-Novoa stressed there would be hardly any changes in Germany as a result of the MyTravel deal. The German market will remain the core of Thomas Cook, he stressed. Although the plc would have its main office in London, it will receive support in important corporate functions from the central office in Oberursel, he said. On possible future acquisitions, Fontenla-Novoa ruled out any further deals in Britain. But to its strong financial position, the company will definitely look at other opportunities if they arise. Speculation has increased that Condor is in advanced talks with LTU but this has been denied by both sides. SALES ACTIVITIES February 6 to 8 were spent in Zurich and Vienna to attend the Swiss and Austrian Visit USA seminars. The seminar in Zurich took place at the Event Dock at the airport. A very impressive travel market was built up for a total of 39 partners. In addition, 9 companies/destinations 4

were chosen to give presentations to the audience. Together with the Orlando Tourism Bureau we had 20 minutes lecturing time. We were the only Florida destinations featured. More than 360 travel agents from all over Switzerland attended this seminar a real success! In Vienna, 20 USA partners met at a Western style saloon. Also here we distributed our brochures at a travel market and each participating company was interviewed by a professional moderator on their product. In Vienna we had approximately 180 travel agents also an excellent turnout. At both events, a raffle concluded the evening events. Our sponsors in Zurich were the Sheraton Sand Key Resort and the Condos by Sirata and in Vienna the Sheraton Sand Key Resort with 7 nights accommodation each. The largest trade fair in Hamburg, Reisen Hamburg, took place from February 7 to 11. Also here, St.Petersburg/Clearwater was represented by a Visit the USA Committee booth. Our brochures were distributed by knowledgeable counter staff. The fair again attracted more than 90.000 visitors. We had a meeting with Golfreisen International, Mrs. Corinna Kandler in Vienna. So far, the operator has not offered the St.Petersburg/Clearwater area but is interested in our golf resorts, especially Innisbrook. We have supplied Ms. Kandler with our information material and she will come back to us at ITB time regarding a possible cooperation. Thomas Cook/Neckemann has offered us as their good partner brochure distribution free of charge on their road show at the end of February and beginning of March. The cities of Dresden, Leipzig, Erfurt, Hamburg, Bremen and Frankfurt will be visited. Approximately 50 travel agents are expected to attend in each city, i.e. we do reach 300 travel agents through this important tour operator channel. The brochures and some giveaways have already been delivered to Neckermann. On February 14 (Valentines Day) we organized together with the Orlando Tourism Bureau and Martinair a travel agents roundtable get-together in Bremen, North Germany. Even though two other tourism functions took place and the Bremen soccer team played against Amsterdam on the same evening, a total of 43 travel agents came to our event. It was a good group highly interested and well educated agents. We handed out our brochures and afterwards made a power point presentation of 20 minutes each. A questionnaire was given to each agent with 6 questions in total. The Sheraton Sand Key Resort again was the sponsor of 5 nights accommodation, which together with a 5

Martinair ticket and overnights in Orlando made a real nice first prize. Every agent received flowers for Valentines Day sponsored by Martinair. Through the Austrian Visit USA Committee we arranged for brochure distribution at two major tourism fairs in the country. Ferienmesse Vienna which took place from January 11 to 14 and the Salzburg fair from February 9 to 11. A total of 116.000 visitors came to Vienna and Salzburg attracted 43.000 interested clients. The Visit USA booth was shared by Austrian Airlines introducing their new flight between Vienna and Chicago. The Holiday World Fair in Prague, the largest tourism fair in the Czech Republic, took place from February 14 to 18. We were offered brochure distribution by the most important Czech tour operator for the U.S.A., America Tours at a very reasonable price. We sent 500 Visitor Guides and 500 maps and were informed that most of the material had been given out during the show. The rest will be used at the America Tours branch offices. A total of almost 40.000 visitors came to the fair. This included approximately 7.000 trade visitors and 1.000 journalists. Our promotion with Swiss tour operator Skytours has started. A special offer with several St.Petersburg/Clearwater packages has been put on the Skytours website. In addition, a joint raffle is being published whereby the winner gets two tickets on Delta Air Lines to Tampa and 7 nights accommodation at the Sheraton Sand Key Resort. This raffle terminates on March 31, 2007. Furthermore a 4 color flyer offering St.Petersburg/Clearwater is being distributed at 5 consumer/trade fairs throughout the German speaking part of Switzerland, namely in Berne, Basle, St. Gallen, Zurich and at the VUSA Workshop and as well in a French version at the Geneva fair. This flyer has also been sent out to all German speaking agencies total of 1.500. To complete the promotion an e-mail newsletter will be sent out to 70.000 consumers in Switzerland during the month of March. We assisted Mr. Stefan Fleig, Tourism Manager of TUI-ReiseCenter-Mainz, with his personal travel plans. He will come to our area in June 2007. We provided him with helpful information, sent him our latest Visitor Guide as well as helped him with hotel reservation at the Hilton Clearwater Beach, which was chosen by him. Mrs. Margarete Bryla of Atlas Reisen, DER Deutsches Reisebüro GmbH in Essen, contacted us regarding the prize she won at a winning game which we conducted last year in the German trade paper Travel One. The prize is a seven nights stay at the 6

Sheraton Sand Key Resort and we helped her making a reservation for October 2007. She was very thankful and is really looking forward to her stay at Florida s Beach. Together with British Airways we initiated a winning game to be published on Valentine s Day on their Speedbird Club Website. We provided them with a hotel sponsor, pictures, logos and a text about the St. Petersburg/Clearwater Area. The Speedbird Club is a travel agency club with approximately 14.000 members. It helps the travel agents to educate themselves on the British Airways product by providing latest news, product and services information, as well as personalized offers for agents easy-touse, fast and free of charge. British Airways is the UK's largest international scheduled airline, flying to over 550 destinations at convenient times, to the best located airports. The raffle will be online at their website: www.speedbirdclub.com in the Germany section for more than six weeks with March 31 st being the participation deadline. The CBR exhibition in Munich took place from February 22 to 26. the Visit USA Committee Germany was represented with a large booth and offered destinations brochure distribution. We were one of the partners and supplied the organization with 300 of our brochures. The fair is one of the most successful in Germany. Last year a total of 136.000 trade visitors and consumers came to the show. A special mailing was organized with German tour operator Canusa Touristik in February. The Orlando Tourism Bureau and St.Petersburg/Clearwater were featured on this newsletter with various offers/packages from the Canusa program. In addition our Superior Small Lodging program was explicitly offered and explained. This electronic mailing went out to approx. 400.000 e-mail addresses in Germany. We finalized our preparations for the Visit USA Belgium Workshop in Brussels on March 05. We will be present at a luncheon for tour operators, airline representatives and the trade press organized by Visit Florida and later on at the Workshop which will attract approximately 200 travel agents from all over Belgium. Logos and all requested information were sent to the Visit USA Committee Belgium, as well as brochures for distribution ordered from the mailing house. In addition we requested prize donations from sponsors for raffles which will be conducted during the event and the Visit Florida luncheon for all Florida related tourism partners. The CVB sent out this request for a complimentary hotel stay in our area. In addition, we completed our appointment schedule for ITB Berlin which takes place from March 7 to 11. We arranged approximately 40 appointments with tour operator product managers from various countries, airline representatives, internet providers and trade press. In addition we organized an evening function with high ranking 7

representatives from the German travel trade to celebrate the 10 year anniversary of our cooperation with Orlando for a group of 40 people. St.Petersburg/Clearwater will have a large and important delegation at the booth which we will share with Orlando. During the month of February we received the following number of inquiries: Trade 11 Consumer 146 TRAINING TRIPS We met with Walter Fehsler, Sales Manager for Delta Air Lines in Austria. As of 2007, Delta will offer a non-stop flight from Vienna to Atlanta and we have discussed to bring a group of tour operator sales agents to St.Petersburg/Clearwater and Orlando in late fall. Mr. Fehsler will check on the possible dates. PUBLIC RELATIONS Swiss trade paper Travel Inside features St.Petersburg/Clearwater in their Florida special in the February 9 issue. Two articles report about the 25 year anniversary of the Dali museum in St.Petersburg and the developments in Clearwater Beach. We put together all material for the winning game in the Travel One, issue 4/2007. The publication requested logos, pictures, a short text and a winning question from us and all partners. Therefore, we contacted the airline sponsor Martinair as well as our hotel partner, the Belleview Biltmore to put all necessary information together. The winning game is featured on a 4 c half page in the Travel One Magazine as well as on their website www.travel-one.net for over a month. TRAVEL ONE stands for hands-on and useful expert information for travel agencies and all other distribution channels of the tourist industry. With their products TRAVEL ONE Magazine, TRAVEL ONE Morning News and TRAVEL ONE Online they reach travel agencies in Germany, as well as service providers and suppliers of the travel industry. The magazine for travel pros comes out every two weeks on a Wednesday with a minimum of 48 pages and a circulation of 23.000. Every travel agency receives a free copy. TRAVEL ONE Online The up-to-date website for travel pros. Industry news brought to the offices several times a day. Plus: 8

travel bargains for tourism experts, photo galleries of industry events and competitions. Extra: All TRAVEL ONE editions have free PDF downloads. TRAVEL ONE Online posts around 20,000 visits a month. TRAVEL ONE Readership: Four in five TRAVEL ONE readers work in a travel agency. Many of them are owners, agency managers or experienced counter staff, as was shown by a survey of 2,143 readers in early 2006. TRAVEL ONE readers in travel agencies have advisory functions and sales responsibility. Over 90 per cent of respondents are over 25 years old. A quarter have a university degree, and two-thirds have professional training in the tourist industry. TRAVEL ONE reaches decision-makers in travel agencies. One-third of all travel agency respondents are owners and one-third are agency managers. Furthermore we provided the chief editor of Travel One with information and pictures for a half page advertorial in the issue 5/2007. This issue will be published on March 07 for ITB, the largest international trade fair with an increased circulation and distribution at the ITB Berlin. Together with Profireisen in Austria we wrote a full page advertorial, which will be placed in TIP magazine published March 05, 2007 with four 4 c pictures, the St. Petersburg/Clearwater logo and an information box. TIP is Austria s leading travel trade publication. Their target group includes all Austrian travel agents and decision makers in tourism and travel agencies in the neighbouring regions of Austria in Germany and Italy. With a Circulation of 10.500 all recipients are personally addressed weekly, 50 times/year. Our winning game in the FVW magazine Urlaub Perfekt continued successfully throughout the month of February. More than 1.000 people responded by sending in their coupons which very often contained the request for information material. All fulfilments were made. In addition we will receive from the publisher 2.000 copies of the insert, which will be distributed during ITB. 9

Monthly Sales Activity Report Attach lists of calls, leads # Sales Calls # Sales Leads # TA Educ Workshop # Press Contacts # Trade Mailed # Vis Inq Mailed # Trade Shows October 44 1 6 11 4 1 November 32 4 12 7 15 4 December 37 9 4 106 2 January 51 5 16 7 136 2 February 41 1 3 22 11 146 3 March April May June July August September 10