Accommodation & Destinations Sector
Proportion of Group revenue
The Accommodation & Destinations Sector (A&D) sells and provides a range of services in destination to tour operators, travel agents, corporate clients and direct to the consumer worldwide.
Services include hotel accommodation, transfers, excursions, roundtrips, organising meetings, incentives, conferences and events (MICE), cruise handling as well as integrated website solutions for our customers.
A&D has a portfolio of online and offline businesses employing brands – including TUI, Hotelbeds, Bedsonline, Hotelopia, LateRooms.com, AsiaRooms.com and Intercruises – to distribute its products. A&D is structured along key business lines which reflect the customer base and the business model of that particular segment – Business to Business (B2B) and Business to Customer (B2C).
The A&D Sector reported underlying operating profits of £60m in 2009 (2008: £57m). The increase was due to incremental merger synergies of £3m and contribution from new acquisitions of £1m, partially offset by the adverse impact of the swine flu in Mexico of £1m.
| Accommodation & Destinations | Change % |
|---|---|
| Customers | |
| B2B roomnights | +10% |
| B2C roomnights | +17% |
| Incoming passenger volumes | -10% |
| Specialist & Emerging Markets | 2009 | 2008 | Change % |
|---|---|---|---|
| Revenue (£m) | 552 | 502 | +10% |
| Underlying operating profit (£m) | 60 | 57 | +5% |
| Underlying operating margin (%) | 10.9% | +11.4% | -50bps |
A&D delivered synergies of £5m in 2009, an increase of £3m over the prior year synergies of £2m. These synergies were delivered through the integration of the former TUI and First Choice Destinations businesses, primarily in Dominican Republic, Mexico and Spain. The integration process continues to be ongoing in this Sector, with further integration to take place in Spain, Portugal, Turkey and Greece.
During 2008 and 2009, A&D acquired three cruise handling businesses and an online bedbank business, and these contributed £1m in additional profits in 2009 versus the prior year.
The business was impacted by the swine flu outbreak in Mexico in 2009, as customer presence in the Mexican resorts was significantly reduced, leading to lost transfer and excursion revenue. This resulted in lost contribution of £1m in 2009.
Underlying trading was broadly in line with the prior year. The Destinations businesses were adversely impacted by the capacity reductions implemented by the tour operators in its core markets, such as Spain and Greece, in 2009. Customer volumes were down 10% in 2009 versus the prior year. Additionally, excursion revenues were lower in the agencies based in Euro destinations due to the significant weakening of Sterling, which reduced in-resort spending by UK visitors.
The online businesses performed well due to the diversity of the B2B and B2C portfolio. Weaker performance in the more mature destinations of Spain and Portugal due to the economic environment and competitive pressure was compensated by growth in demand in emerging markets such as Asia and the Americas. LateRooms.com also performed well in 2009, with volumes up 47% over the prior year due to its effective marketing campaign and a strong increase in content. Following the successful launch of LateRooms.es in 2008, LateRooms.it was successfully launched into the Italian source market in 2009.