Specialist & Emerging Markets Sector
Proportion of Group revenue
The Specialist & Emerging Markets Sector is an international portfolio of travel businesses focusing on specific destinations, premium travel experiences or particular customer demographic segments often with differentiated and exclusive product.
This Sector consists of 40 businesses operating from nine source markets in North America, Europe and, most recently, emerging markets such as Russia and Ukraine. Specialist travel experiences include around-the-world private jet expeditions, student educational tours and tailormade trips to the Far East, Africa or Australia. Brands include TCS & Starquest Expeditions, the private jet tour operator, Sovereign and Hayes & Jarvis, premium travel brands and Turchese and Mostravel, destination specialists.
The Specialist & Emerging Markets Sector reported underlying operating profits of £31m (2008: £26m). This was due to the delivery of incremental synergies of £3m and acquisition profits of £1m, with trading slightly ahead of the prior year.
| £m | Europe | US | Specialist |
|---|---|---|---|
| 2008 | 14 | 12 | 26 |
| Acquisitions | – | 1 | 1 |
| Synergies | 3 | – | 3 |
| Trading | (1) | 2 | 1 |
| 2009 | 16 | 15 | 31 |
| Specialist & Emerging Markets | 2009 | 2008 | Change % |
|---|---|---|---|
| Customers (’000) | |||
| Europe | 530 | 634 | 16% |
| US | 303 | 339 | 11% |
| Total | 833 | 973 | 14% |
| Revenue (£m) | |||
| Europe | 584 | 609 | -4% |
| US | 241 | 210 | +15% |
| Total | 825 | 819 | +1% |
| Underlying operating profit/(loss) (£m) | |||
| Europe | 16 | 14 | +14% |
| US | 15 | 12 | +25% |
| Total | 31 | 26 | +19% |
| Underlying operating margin (%) | |||
| Total | 3.8% | 3.2% | +60bps |
Europe
The Europe division reported underlying operating profits of £16m in 2009 (2008: £14m), an increase of £2m. The division delivered incremental synergies of £3m in 2009, primarily due to the integration of the former Thomson and First Choice businesses in the UK. The majority of the UK businesses are now on one common reservation platform and this has significantly increased call centre and online conversion rates for the former Thomson businesses this year.
Underlying trading decreased by £1m in 2009 compared to the prior year, primarily reflecting softer trading in some markets where conditions were challenging. Volumes reduced by 44% and 26% in the Spanish and Irish businesses, respectively, due to the significant weakening of the economies in these markets. Citalia, the Italian specialist business, suffered a 15% decrease in volumes due to the Sterling weakening against the Euro which led to customers switching to non Euro destinations. Hayes & Jarvis and Sovereign performed well, however, with margins ahead of the prior year and volume growth of 8% and 14%, respectively.
US
The US division reported underlying operating profits of £15m in 2009 (2008: £12m), an increase of £3m. Underlying trading improved by £2m in 2009 over the prior year and acquisitions contributed an incremental £1m of profits in the year.
The luxury private jets segment performed very well in 2009 as its winter programme was fully sold before the recession fully impacted the US economy. This was partly offset by softer trading in the escorted tours businesses, as demand decreased for its specialist premium products due to the weakening of the US economy.
Emerging Markets
Our growth plans in Russia & CIS are progressing well. During 2009, the TUI Russia & CIS joint venture completed the acquisition of a 75% stake in certain assets of VKO, a tour operator and travel agency group based in Russia and the acquisition of a 75% stake in certain assets of Voyage Kiev, a tour operator and travel agency group based in Ukraine. We expect the joint venture to complete the acquisition of 75% of Mostravel shortly. The result for the Emerging Markets division is included within joint ventures and associates.
