TUI Group GmbH

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TUI Group GmbH

Karl-Wiechert-Allee 23
D-30625 Hannover
Germany
Telephone: (49) (511) 567-0
Fax: (49) (511) 567-1301
Web site: http://www.tui.com

Private Company
Incorporated: 1968 as Touristik Union International GmbH
Employees: 28,242
Sales: $6.54 billion (2000)
NAIC: 56151 Travel Agencies; 481111 Scheduled Passenger Air Transportation; 72111 Hotels (Except Casino Hotels) and Motels

TUI Group GmbH, based in Germany, is Europe’s largest tourism conglomerate. TUI Group unites over 3,600 travel agencies under one umbrella. Mainly located in Germany, the United Kingdom, the Netherlands, and Belgium, 39 tour operators belong to TUI Group, including the major brands TUI Schöne Ferien!, 1-2-FLY, Arke Reizen, Holland International and JMC, as well as many smaller tour operators specializing in narrower target markets. TUI customers often travel with one of TUI Group’s airlines, including German Hapag-Lloyd and British JMC, which own over 60 aircraft with about 14,000 passenger seats. Besides its own 18 incoming agencies, TUI Group offers tour guide services in 69 countries. The company controls over 185 hotels in 19 countries, including the RIU, Grecotel, Iberotel, Grupotel, Dorfhotel, ROBINSON, and the Swiss Inn chains. Most of TUI Group’s hotels are located in Spain and other Mediterranean countries. With a major focus on holiday travel, TUI Group is also active in the business travel market. On January 1st, 2000 TUI Group became the tourism division of restructured Preussag AG.

Four German Travel Enterprises Form TUI in 1968

On December 1, 1968, four German tour operators signed the shareholder agreement for a new enterprise in Hannover, Germany: Touristik Union International, in short TUI The companies that formed TUI included Touropa, Scharnow-Reisen, Hummel-Reisen, and Dr. Tigges-Fahrten. The latter was a company with roots reaching back before World War II, founded in 1928 by husband and wife Hubert and Maria Tigges in Wuppertal. Traveling had been a hobby for city college staff teacher Dr. Hubert Tigges. Finally, in 1928, he decided to take a chance and make it a full-time occupation. Tigges invited his brother-in-law Alois Fischer to join the enterprise. At a time of economic depression, holiday trips were out of reach for many and they had to be cheap for people who could afford to go on vacation. Tigges provided buses that were equipped with a mobile kitchen and that carried tents and collapsible boats to holiday destinations.

Because of Germany’s cool climate, German travelers early on developed a preference for warm and sunny holiday destinations. Looking for new places, Tigges was the first German tour operator to “discover” the Balearic Island Mallorca, which belonged to Spain, for organized vacations. The island later became Germany’s number one holiday destination. However, when Tigges visited the island with a group of Germans in 1934, it was still mostly untouched by tourism. Tigges and Fischer found a domestic collaborator, hotel owner Luis Rui, and the three men soon became close friends. In the 1950s they developed the idea of offering long-term stays in Mallorca’s mild climate during the winter months. The idea was an instant success and opened the door in the early 1960s for year-round international tourism on the Balearic Islands. In the mid-1950s, Tigges also started cooperating with the small Spanish travel agency Utramar-Express on Mallorca which had unprecedented service standards in regards to reliability and high organizational flexibility.

Deeply influenced by the misery of the two World Wars, Tigges and Fischer developed a new vision for a tour operator that was rather unusual at the time. Based on the belief that the experience of foreign countries and cultures and meeting people there could foster mutual understanding, Dr. Tigges-Fahrten started offering study-trips that went beyond the typical sightseeing. This too became a huge success. Supported by the high number of loyal customers, study trips became Dr. Tigges’s new hallmark.

The other three tour operators that formed TUI in 1968 were founded in the early 1950s of post-war Germany. With the country still in ruins but with signs of an economic upturn on the horizon, the Germans’ desire to go somewhere else for their holidays was awakening. In 1948, the Munich-based travel joint venture DER-Gesellschaftsreisen was founded and three years later transformed to Touropa. In 1957, when people traveled between continents on scheduled ferry lines—a rather boring and time-consuming undertaking—Touropa’s CEO Dr. Carl Degener came up with the idea to charter a ship exclusively for cruises—just for fun. Moreover, the cruises ran on a weekly schedule, taking the same route: from Venice to Dubrovnik to Corfu to Delphi and, via Rhodes, back to Piraeus and Athens. The advantage for travelers was that they could interrupt their trip at any harbor, maybe take a trip on land or just stay at a certain place for a week at the beach, and then continue their trip on the next cruise ship.

In 1953, the year when Dr. Tigges offered flights to Mallorca for the first time, two travel operators were founded in Hannover: One was Hummel Reisen which originated from a side business of publisher Axel Springer Verlag in Hamburg and Jochen Stickrodt’s Hannover-based travel agency Stickrodt, the other Scharnow-Reisen founded by Willy Scharnow. Three years later the two companies formed a joint venture to be able to carry the higher cost and financial risks of the upcoming air travel. In 1957, Scharnow and Hummel joined forces with Touropa and offered Germany’s first air travel catalogue under the label Deutsche Flugtouristik. When Germany’s economy picked up speed rapidly in the second half of the 1960s, a strong demand for a broad variety of affordable travel packages developed. Degener and Scharnow recognized that only a larger company with sufficient financial and organizational resources would be able to offer just that on a large scale. In 1966, Touropa and Scharnow-Reisen swapped parts of their shares. One year later, Hummel Reisen joined the group, and Dr. Tigges Reisen followed soon after. In 1968, the year of TUI’s founding, the first sales office opened in Berlin. Touropa Austria was established in the same year. By 1969, the number of TUI customers exceeded one million.

New Partners and New Services Spur Growth in the 1970s and 1980s

In 1970, another company joined TUI: airtours international, Germany’s biggest tour operator that offered customized air travel with scheduled carriers for educated upscale holiday vacationers to first class and deluxe hotels around the world. Founded in 1967, airtours served about 140,000 customers in 1970. To be able to deliver adequate service to its well-to-do clientele, the company invested in the travel agencies that carried their catalogue by sending a thousand travel agents a year on “educational trips.” In 1971, another big player in the tourism market, TransEuropa-Reisen, was founded as a joint venture between German department store giant Karstadt and the country’s largest mail order company Quelle. A year later TransEuropa became part of TUI—for a share in the dynamically growing group. In 1974, TUI’s sales reached DM one billion for the first time. In the same year the tour operators that constituted TUI, including Scharnow, Hummel, Dr. Tigges, Touropa and TransEuropa, were transformed into TUI subsidiaries. In 1976, Karstadt gave up its TUI shareholdings so that their planned acquisition of another leading German tour operator, NUR Touristik with its flagship brand Neckermann Reisen, would be approved by the cartel authorities. Department store company Horten AG took over Karstadt’s TUI shares in 1977. Beginning in 1979, the headquarters of all TUI subsidiaries were moved to Hannover. Three years later all of the company’s divisions, with about 1,000 employees altogether, moved into a brand-new office building on Karl-Wiechert-Allee.

In the 1970s and early 1980s, TUI invested in a number of travel agencies and hotels. The company acquired shares in tour ship operator seetours international: the travel agencies Dr. Degener Reisen in Salzburg; Pollmann’s Tours and Safaris Ltd. in Kenya, Africa; and Ultramar Express S.A. in Spain. On the hotel side, Spanish hotel chains Iberotel and RIU became part of the TUI group in the 1970s. TUI also founded their own hotel ventures. In 1971, the company created Robinson Hotel GmbH & Co. KG together with Steigenberger Hotelgesellschaft, a chain of “club hotels.” The first Robinson Club was established in the same year on Fuerteventura Island, Spain. In 1981, TUI established the new hotel chain Grecotel with partners in Greece.

Company Perspectives:

Quick success is over quickly. To ensure the long-term successful existence of our company, we pursue long-term objectives. These enable us to maintain a clear focus in an increasingly complex and complicated environment which is changing ever more quickly. We aim to be the leading leisure company in Europe, offering quality-conscious holiday-makers holiday and leisure experiences all from one single source. It is important for our staff to be familiar with the objectives of the company, because they contribute to setting the targets for their own areas of responsibility.

In the first two decades after its founding, TUI put a high emphasis on creating a broad portfolio of high-quality services. In 1970, the company created its travel service division TUI Service. Instead of relying on outside vendors, TUI Service staff welcomed their guests at their holiday destinations, gave them tips on how to make the most out of their vacation, helped organize special trips, and took care of problems with other service providers such as hotels. The variety of services offered by the tour operators that comprised TUI were also greatly expanded. The broad spectrum of packaged and individual trips by air, train, car or ship were complemented by new holiday formats ranging from club holidays and stays at country farms to special trips to nude beaches for sunbathers, tennis and sport centers for fitness freaks, and the special youth travel program “twen-tours.” In 1971, TUI together with German airline Lufthansa and the government-owned rail company Bundesbahn founded Studiengesellschaft zur Automatisierung für Reise und Touristik, in short START, a joint venture to develop an electronic booking system—a revolutionary idea for the time. By 1979, START GmbH, in which all three shareholders had equal shares, had a working system. In the same year the first TUI trip was booked through a computer, setting off a new age in Europe’s travel industry. By 1993, about 90 percent of TUI’s bookings, representing approximately 22 million trips, were booked electronically through the START booking system.

In 1981, TUI took over the marketing for cruise ship MS Astor, which a year later became the setting for Traumschiff, a popular German TV soap. Cuba became a new TUI holiday destination. In the late 1980s, TUI intensified its activities again when the travel market became more competitive. TUI invested in Dutch tour operator ARKE and Bremen-based Wolters-Reisen and founded tour operator take off. Turkey and the Dominican Republic became two major destinations for the company. In 1988, TUI rehashed its corporate design and launched its first national advertising campaign. In cooperation with Bundesbahn TUI introduced the Autoreisezug, a train that carried the tourists’ own cars to their holiday destination. To raise customer loyalty, TUI issued a card that earned return customers various benefits including discounts and special offers. In 1989, the company launched its own franchise system TUI UrlaubCenter.

Restructuring in 1990 and 1997

By 1990, TUI had grown significantly. In fact, the company had become Europe’s largest tour operator. Losses resulting from the Gulf War and violent conflict in Yugoslavia were balanced out by gains from the about 16 million new customers from the reunited eastern part of Germany. Serving more than 3 million guests in business year 1990–91, the company had generated over DM 5 billion in sales. In order to stay on top of things, TUI enacted its first restructuring program. All tour operators were integrated into the TUI holding company, all of which carried the TUI brand in their names, and separate profit centers were established. The offers of the different tour operators were organized and marketed by country under the TUI brand. In 1991, a new three-step distribution concept was introduced: TUI Reisebüro served customers directly through; TUI UrlaubCenter marketed TUI products through their franchise partners; and TUI Profi-Partner served independent travel agencies. The company’s next goal was vertical expansion into the hotel and incoming agency business on an international level. Between 1990 and 1993, TUI acquired shares in incoming agencies—travel agencies that served tourists at their holiday destination—in Morocco, Portugal, and Tanzania, Africa. In 1993, TUI together with hotel chain RUI founded a hotel operating company for Spain. In 1995 and 1996, TUI expanded into the Netherlands, Belgium, Austria, and Switzerland, where it founded new subsidiaries.

In 1997, TUI again restructured its organization to make its management more efficient. The company was divided into five business divisions. The first one included tour operators in Central Europe; the second one united tour operators in Western Europe; the third one managed the incoming agencies and guest services and purchasing of hotel capacities at the travel destinations. The new IT division offered central services such as accounting, personnel management, and legal services to all other TUI divisions. The fifth division bundled TUI’s own hotel subsidiaries and shareholdings, which numbered more than 120 and which were a main focus of the company’s growth strategy. The latter were streamlined in the following years. The Spanish hotel chain Iberotel which had been in financial trouble in 1990 was integrated into the RIU group, which in the meantime had grown to Spain’s second largest hotel chain. In Switzerland TUI founded a joint venture together with Swiss tourism groups Imholz and the Charles-Voegele Group. Imholz TUI Voegele (ITV) became Switzerland’s second biggest travel company.

The Consolidating Travel Market of the 1990s

In the 1990s, processes of concentration in the German travel industry intensified. Dropping prices drove many smaller, specialized, and even mid-sized companies to the edge of bankruptcy or out of business completely, while the big players were arm wrestling and trying to stay ahead of the crowd. In 1993, the company’s 25th anniversary year, a battle for influence over TUI erupted. TUI’s shareholders included travel agencies Deutsches Reisebüro GmbH (DER) and Amtliches Bayerisches Reisebüro GmbH (abr), which by then were both owned by Deutsche Bundesbahn; Hapag Lloyd Reisebüro GmbH, owned by airline and logistics company Hapag Lloyd; a holding company that held the shares of mail order firm Quelle and department store chain Horten AG; publisher Axel Springer Verlag; and Walter Kahn Verwaltungs-GmbH & Co. Beteiligungs-KG, a holding company that bundled the interests of 16 smaller TUI shareholders, mainly travel agencies. The Kahn group owned about 30 percent of TUI, Quelle—which was owned by the Schickedanz group—and Horten owned 25 percent, Bundesbahn held a little over 23 percent, Hapag Lloyd owned over 11 percent, and the Springer group another ten percent. When the Kahn shareholders offered to sell their share in 1992, they received a very lucrative offer from Westdeutsche Landesbank, WestLB for short, a large bank that had started to form a tourism concern of considerable size—on behalf of someone else, according to many speculators. Through its own Horten and Hapag Lloyd shareholdings, the bank was connected indirectly with TUL WestLB also owned part of the LTU group, another big player in Germany’s travel market including a holiday charter airline and some major tour operators. The airline, however, had invested too heavily in its fleet of aircraft. Consequently, it had a hard time filling its seats and was craving business.

Key Dates:

1968:: Four German travel enterprises form Touristik Union International (TUI).
1970:: German tour operator airtours international becomes part of TUI.
1972:: The company expands into Spain by acquiring hotel chain Iberotel.
1981:: TUI establishes the new hotel chain Grecotel with partners in Greece.
1989:: Franchise system TUI UrlaubCenter is initiated.
1990:: TUI holding integrates its tour operators.
1995-96:: TUI expands into the Netherlands, Belgium, Austria, and Switzerland.
1998:: The company is taken over by the German Preussag Group.
2000:: TUI becomes Preussag’s tourism brand.

However, the other TUI shareholders were not so happy with WestLB’s plans—they had plans of their own. Schickendanz was planning to make the travel business a second strong business division and to cash in on synergy effects by selling trips through its mail order catalogues. Hapag Lloyd’s airline had a major chunk of TUI’s flight business and wasn’t interested in sharing it with LTU. Bundesbahn hadn’t developed any particular concept of its own, but was not interested in letting any more investors in. Besides TUI’s old share holders, two other groups showed a lively interest in more influence over the company: Deutsche Lufthansa and the wholesale and retail giant Metro Group. Lufthansa’s subsidiary, charter airline Condor, had the second biggest part of TUI’s flights and the airline was seeking to secure this business by gaining more influence. The company was planning to raise its 15.5 percent shareholding in Hapag Lloyd by the ten percent share that TUI held. Metro subsidiary Kaufhof, another department store chain, owned shares in two of the country’s biggest tour operators, NUR-Touristik and International Tourist Länderreisedienste (ITS), and a minority share in Hapag Lloyd. Kaufhof was also expressing interest in TUI.

When it became clear that WestLB wouldn’t have an easy time of it, the bank tried to get in through the back door. In October 1992, a consortium lead by WestLB bought a majority share in Kahn KG. Four months later, Springer Verlag announced it would sell their TUI share to Kahn KG. In the meantime, Horten asked for its voting rights back from Schickedanz to which they had been transferred due to a ruling by the German cartel authorities. With Kahn KG’s 40.2 percent and—theoretically—Horten’s 12.5 percent, WestLB would have dominated TUI. The other TUI shareholders in turn wanted to exclude Kahn KG from the circle of TUI owners since it had not offered its shares for sale to them first, as required by the company’s bylaws. Kahn KG countered by blocking the sale of TUI’s ten-percent share in Hapag Lloyd AG to German airline Lufthansa, a deal which the other TUI shareholders had agreed on without Kahn KG. Finally, in October 1993, the dirtiest battle over the power over Germany’s largest travel group was completed when the parties involved agreed to a new distribution of the company’s shares, while TUI’s top management struggled to stay competitive by cutting cost. According to the agreement, WestLB-owned LTU group and Hapag Lloyd held 30 percent each, while Schickedanz-owned Quelle and Deutsche Bundesbahn owned 20 percent each. Horten AG and Kahn KG were no longer TUI shareholders. The nasty battle had a positive side effect for TUI—its brand name recognition jumped suddenly as a result.

In 1997, Karstadt—which meanwhile was partly owned by the Schickedanz group—started talking with Lufthansa about a liaison between the department store’s tourism arm NUR Touristic, Germany’s number two tour operator, and the airline’s charter subsidiary Condor. Lufthansa’s Condor had gradually lost more and more of TUI’s flight business to LTU and other providers and the two companies were trying to form a new big tour operator that would be able to compete with market leader TUI. It was in that year when German industrial conglomerate Preussag AG, one-third of which was owned by WestLB, announced that it would take over TUI shareholder Hapag Lloyd. In the same year, WestLB transferred the voting rights for its 30 percent share in TUI to Preussag which Preussag passed on to Hapag Lloyd. With the other 30 percent owned by Hapag Lloyd, Preussag had a controlling interest in TUI and announced that tourism would become its number one business. The deal went through after WestLB signed an agreement with the German cartel authorities to sell its interest in LTU. In early 1998, the Schickedanz group, which had formed C&N Condor Neckermann Touristik AG with Lufthansa, sold its TUI share to Hapag Lloyd. The remaining TUI shareholder Deutsche Bahn, however, did not sell its shares as many insiders had expected. The company took advantage of its stock option and acquired an additional 12.5 percent. After the deal, Hapag Lloyd held a 75 percent majority share while Deutsche Bahn owned 25 percent. In 1999, Preussag acquired Deutsche Bahn’s TUI share. One year later, the TUI shareholdings were taken out of the temporary Hapag Lloyd holding company and Preussag formed a new holding, TUI Group GmbH, while TUI became Preussag’s new tourism brand.

Principal Subsidiaries

TUI Deutschland GmbH; TUI Beteiligungsgesellschaft mbH; Hapag-Lloyd Fluggesellschaft mbH; TUI Leisure Travel GmbH; TUI interactive GmbH; TUI 4 U GmbH; TUI Austria GmbH; TUI Suisse Ltd; TUI Polska Sp.z.o.o.; Travel Unie International Nederland N.V. (Netherlands; 91%); Hapag-Lloyd Fluggesellschaft mbH; TUI Hellas AE (Greece); TUI Service AG (Switzerland; 85%); TUI International AG (Switzerland; 85%); L’TUR Tourismus AG (51%); airtours international GmbH; TUI Business Travel GmbH.