Key Performance Indicators
| KPI rationale | Performance/Target | Key Performance Indicators |
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| We believe that improving our financial performance will allow us to invest in the future of our business for the benefit of shareholders, colleagues and customers. Our main strategic objective is to improve the Group’s profitability and to enhance returns on investment. See Financial highlights. | To measure our financial progress we have two financial KPIs: (i) operating margin % and (ii) return on invested capital (ROIC).
In the year, despite the tough economic conditions, operating margins improved by 30 basis points to 3.2%, primarily driven by the delivery of merger synergies. ROIC increased from 8.4% to 9.2% driven by improved profitability.
In January 2008, we set out a roadmap to increase TUI Travel’s operating margins from 2.0% to 4.7%.
We also set out a target of doubling the Group’s ROIC from the 5.4% achieved in 2007. We are confident that we can achieve the improved financial performance implied by these targets by delivering our margin improvement roadmap. | | Operating margin % | ROIC | | 2009 | 2008 | 2009 | 2008 | | 3.2% | 2.9% | 9.2% | 8.4% |
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| KPI rationale | Performance/Target | Key Performance Indicators |
|---|
| Differentiated content is a central pillar of our product and content strategy across all our businesses. Differentiated product earns superior margins, achieves higher customer satisfaction and delivers higher customer retention. See Product & Content. | In the year, we increased the differentiated product mix by 4 percentage points, including investment in Sensimar, a new 5-star spa concept in the German source market and further development of the Sensatori concept in the UK source market after its successful launch in 2008. We expect to continue to increase the number of units under these concepts over the next five years.
We are targeting a differentiated product mix of over 50% in our Mainstream Sector. | Differentiated product mix as a proportion of total Mainstream Sector holidays
| | 2009 | 2008 | | | 37% | 33% | |
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| KPI rationale | Performance/Target | Key Performance Indicators |
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Our portfolio of market-leading brands helps to increase the direct distribution mix by driving bookings through our controlled channels. Increasing the direct distribution mix is a key driver to improve customer retention, reduce our distribution costs and enhance customer relationships. See Distribution & Brands.
| We have increased our controlled distribution mix in the year in all source markets, with the most significant increases in the Nordic region and Germany. The increase in the Nordic region was driven by the online channel, which now distributes over half of all holidays sold. In Germany, the increase was due to increased sales through our own retail network and through direct brands.
We are targeting a controlled distribution mix of greater than two-thirds in our Mainstream Sector.
| Controlled distribution mix as a proportion of total Mainstream Sector holidays
| | 2009 | 2008 | | | 58% | 53% | |
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| KPI rationale | Performance/Target | Key Performance Indicators |
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| Maintaining a substantial mix of operating profits from our Specialist Sectors as a proportion of our Group result is a strategic priority. The Specialist Sectors are a major point of differentiation and a key source of the Group’s future growth. These Sectors add significant value to the Group as they enjoy higher margins and growth characteristics, often exhibit counter-seasonal profitability and are virtually impossible to replicate as we have crucial first-mover advantage. | The proportion of operating profit contribution from the Specialist Sectors has remained flat in the year.
We expect the mix of profits from the Specialist Sectors to increase in the medium term due to their superior underlying growth characteristics, although, in the next financial year the synergy delivery in the Mainstream Sector may reduce the proportion of profit from the Specialist Sectors.
| | The proportion of Group operating profit* generated by our Specialist Sectors | | 2009 | 2008 | | 35%
| 35% | | | *Before central costs |
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| KPI rationale | Performance/Target | Key Performance Indicators |
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We are experiencing greater consumer awareness of sustainability and believe that creating more sustainable holidays will help protect our product into the future and also support product differentiation, brand loyalty and competitive advantage. See Responsible leadership.
| Our airlines' carbon efficiency compares favourably with both scheduled and low-cost airlines. Carbon emissions from TUI Travel's airlines decreased by 3.75% in the financial year, saving over 220,000 tonnes of carbon dioxide. However, the total number of revenue passenger kilometres flown decreased in the same period, resulting in a very slight increase in our fleet average CO2/RPK (carbon dioxide emissions per revenue passenger kilometre).
The Group has committed to reducing its direct carbon emissions by 6% by 2013/2014 (against a baseline of 2007/2008) in terms of total carbon emissions as well as relative carbon emissions, based on 2008/2009 operational structure and plans.
| | Aircraft carbon efficiency, measured through TUI Travel airlines’ fleet average CO2/RPK | | 2009 | 2008 | | 78.1g CO2/RPK | 77.9g CO2/RPK |
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