Our strategy remains focused on strengthening our core mainstream business and investing in areas of future growth, primarily independent travel, travel-related financial services and other opportunities via mergers, acquisitions and partnerships.
Strategy
Our strategy is built around our vision of going further to make dreams come true. For many of our customers, their holidays are the highlight of their year and we want to ensure that those holidays live up to their very high expectations. At the same time we also aim to deliver outstanding long-term value to our shareholders. Our strategy, which was originally formulated when our Group was formed in 2007, is designed to deliver against this vision, and whilst we have refreshed this strategy regularly to adjust to changes in our marketplace, it still holds true. The foundation of our strategy is our outstanding team of people and their shared values. They work together to deliver the four tenets of our strategy, our growth drivers, supported by key enablers such as our portfolio of leading travel brands, our products and our technology backbone.
Risks and uncertainties
The key areas of risk to our business come from unforeseen changes to consumer confidence, such as major global terrorism attacks, natural disasters, health scares or a worse than expected economic outlook. Other risks come from unforeseen changes to market dynamics caused either by government intervention in the form of legislation, new consumer trends or competitor moves.
To mitigate these risks, we have pursued a strategy of reducing the amount of inventory we have ‘at risk’ from assets deployed that generate high fixed costs. Our flexibility means we can shape our business to meet consumer demand, which we track and monitor very closely. We also devote significant time and resources to ensuring we react quickly to any unforeseen change, as we demonstrated earlier in the year with the outbreak of swine flu in Mexico, swiftly offering customers refunds and alternative travel options and reassigning capacity to other destinations. Finally, we believe our strategy with its mix of maximising the value of our core mainstream business, and investing in growth areas, combined with the quality of our people, vision and values, gives us a competitive advantage in the long term.
Read moreGrowth drivers
Maximise value of mainstream
Our core business remains our mainstream business, which is primarily the sale of charter packages where two or more components of travel, such as flights, hotels, transfers and rep services, are bundled together in advance and sold to customers through brochures and agents in stores, online through our various websites or over the phone from our call centres. The charter package holiday remains very popular as customers appreciate the value for money it provides, the ease of choice and selection, and the security offered. However, in the longer term, growth is expected to be moderate in established economies. Our strategy, therefore, is to maximise the value of our mainstream business through cost efficiencies and through increasing the proportion of higher value product such as all inclusive board basis, four and five star properties and medium haul destinations. To this aim we will accelerate many of the activities started this year.
In mainstream travel, we are reorganising our purchasing and destination management activities into a more centralised structure to maximise the benefits of our size and scale, whilst retaining our local market expertise. We will also continue to grow the proportion of products sold online, making the most of the efficiencies offered by this distribution channel, as well as continuing to improve product and destination mix.
Read moreBecome a leading independent travel provider
Independent travel, where consumers build their own trip either on their own or with the help of an agent, has gained in popularity boosted by greater online penetration and new technologies that allow consumers to create their own packages (dynamic packaging). This area of travel also includes scheduled tours where consumers either tailor make their trips or buy pre-packaged itineraries. It also includes our wholesale business, where we operate as an intermediary between suppliers and other agents providing them with the ability to build holidays for their customers.
In independent travel, we plan to make further changes and investments in our e-commerce capabilities to strengthen our position as an online travel agent, leveraging our brands, inventory, buying organisation and multi-channel model. We also continue to invest in our dynamic packaging capabilities and our independent product portfolio in general.
Independent travel will continue to grow helped by technology improvements and continued consumer demand. Our strategy is to take advantage of that growth, in particular the increase in online penetration. We plan to significantly grow both sales of our in-house inventory online and sales of third party products, performing the role of an online travel agent.
Read moreBecome the leading travel-related financial services provider
Travel-related financial services broadly fall into the categories of travel money, which are products that help customers pay for goods and services whilst travelling such as pre-paid foreign exchange; travel assurance, which are products that cover the various risks associated with travel such as insurance for accidents and thefts; and travel finance which are products that allow customers to finance their travel, such as credit cards. These are typically high margin products, and are naturally sold alongside other holiday components. Our strategy is to make the most of our brands and distribution capabilities to continue to grow this important part of our business.
In travel-related financial services we are looking both to maximise cross-sell opportunities and to grow our direct-to-consumer sales within existing markets. We are also planning to launch a number of innovative new products across the Group and are looking at opportunities to use the Thomas Cook brand to expand into new source markets.
Read moreCapture growth and value through M&A and partnerships
To support our growth drivers, we are constantly open to opportunities to bolster our business through mergers, acquisitions or partnerships. As developed markets mature, we are focused on the one hand on ways to consolidate these markets and maximise the value from them, and on the other on the new growth areas of emerging markets, in particular, large fast growing markets such as India (where we are already a leading player), Russia, China and parts of South America. We are in advanced stages of discussions with both Russian and Chinese travel providers and aim to complete at least one of these early in 2010. In addition, we are always on the look out for smaller deals that enable us to maintain our competitive advantage.
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