Tour Insights: Tui’s Sale of Specialist Holidays Group Will Close an Era
The Tui Group confirmed to TravelPulse that it is preparing to put its Specialist Holidays Group up for sale. The Specialist Holidays Group includes a number of tour operators that sell in the U.S. market, such as Travcoa, TSC Expeditions, Zegrahm Expeditions, Europe Express, International Expeditions and Quark Expeditions.
Tui is putting the group up for sale as a unit, not as individual companies.
The Tui Group, which calls itself “the world’s number one tourism business,” is an almost inconceivably vast, vertically integrated travel company that owns more than 300 hotels with 210,000 beds in 24 countries, 13 cruise ships, six airlines with 130 airplanes 1,800 travel agencies and online retail portals, and many tour operator brands, including Airtours, Thomson and First Choice. With 76,000 employees Tui serves 30 million customers with holidays in 180 regions.
Tui’s history can be traced back to the German mining, steel and petroleum company Preussag AG, founded in Berlin in 1923. An industrial giant throughout the stormy history of 20th century Germany, Preussag AG entered the tourism industry in 1997 with the purchase of Hapag-Lloyd. The company then proceeded to buy up a series of major European tourism companies, including the UK’s Thomson and France’s Nouvelles Frontières.
Tui became one of Europe’s giant tourism companies, combining hotels, airlines, cruise lines, tour operators and retailers in a single group. Among its few major competitors on that scale were Airtours and First Choice, which Tui absorbed, merging with First Choice in 2007.
It was through the merging with First Choice that Tui took possession of what is now the Specialist Holidays division. First Choice had bought the group of tour operators known as Grand Expeditions in 2005. Grand Expeditions was one of a handful of companies that bought up American tour operators in the late 1990s and early 2000s during a frenzy of consolidation that took off at that time.
Major financial interests suddenly took note of the U.S. tour operator market. Though it was a vast industry, it was highly fragmented. The market consisted mainly of relatively small companies led by individual entrepreneurs that all had their own visions and personalities. Investors, looking for ripe areas in which to sink investment capital, decided it was time for those individual companies to be combined into large companies such as those that dominated the travel industry in Europe.
They believed it was an historic inevitability that the U.S. industry would consolidate. It was based on economies of scale. Small operators would not be able to compete in the future, they said.
A few investment companies set about acquiring U.S. based tour operators, resulting in the rise of several tour operator groups, including Global Vacation Group, Far & Wide Travel Company, Global Leisure Group and Vista Travel Ventures.
Phil Bakes, the CEO of Far & Wide Travel, one of the leaders of this movement, framed the argument for historical inevitability like this.
•The supplier base has consolidated.
•The cost of necessary automation is beyond the financial capability of one tour operator.
•Consumers want one-stop shopping.
•The distribution channels are changing, consolidating, and agents want to deal with fewer wholesalers who can bring them a wide range of products.
The first of the superstar consolidators was Roger Ballou, who had made his name working with American Express, Alamo Rent a Car and Certified Vacations. Ballou led an investment group in building the Global Vacation Group. In 1998, Ballou swept through the industry acquiring tour operators, including Globetrotters, MTI Vacations, Island Resort Tours and Classic Vacations and several others.
That summer the company had its public offering and very quickly things started to turn bad. It turned out that putting individual tour operators together was not so easy. They did not interlock well. Their technologies didn’t merge. Their ways of business were different. Without their founders, the relationships they had built and their brands, their markets started to drift away.
By 1999 Global Vacation Group was losing millions, its stock price plunged to $15 a share and the downward spiral was irreversible. The company crashed and the pieces that were left were picked up by other interests. Classic Vacations was the sole success story, and it ended up being purchased by Expedia.
In 1999, Phil Bakes, who had an impressive history as one-time head of both Continental Airlines and Eastern airlines, followed Ballou through the industry buying up tour operators to form a giant operator called Far & Wide.
Bakes’ buying spree consolidated at least 17 tour operators, including African Travel, Brian Moore International Tours, Central Holidays, Grand European Tours, IST Cultural Tours, Pacific Bestour, Regina Tours, Swain Tours, Tourlite and Zeus Tours & Yacht Cruises.
“To put under one roof those products,” Bakes said, “whether those travel experiences be a particular destination or a particular specialty, like adventure, fitness, cultural and educational — that the traveling public wants, so that theoretically they would never have to go anywhere else to get it.” Far & Wide would be able to provide “all the meaningful travel experiences of a lifetime.”
Far & Wide held on until 2003, at which time its fiscal problems caught up with it in a gigantic collapse that initially left 15,000 travelers hanging and more than $100 million in debt by the time its constituent tour operators were auctioned off to the highest bidders.
But not all efforts at consolidation were failures. Some of the veteran travel companies, such as the Travel Corporation and the Mark Travel Corporation, bought tour operators, integrated them into their businesses and operated them successfully. Apple Vacations succeeded in building a vastly successful travel company on the vertically integrated model.
And then there was Grand Expeditions, which was part of the wave of rollups, but was ultimately successful.
It was started by Travis Tanner, another impressive travel industry leader whose resume included executive positions with Carlson Wagonlit, Walt Disney Attractions and Republic Airlines. Tanner sought to buy up tour operators, but focused only on the luxury tier.
Grand Expeditions acquired Adventure Network International, Country Walkers, International Expeditions, Park East, TCS Expeditions, Travcoa, Voyagers International and The Moorings.
Grand Expeditions was sold to First Choice in 2005 and became First Choice Expeditions. Grand Expeditions was the only one of the big rollups to succeed.
But the Apple Leisure Group notwithstanding, the vertically integrated model never took hold in the U.S. The tour industry remains fragmented, consisting of a few giants and many smaller companies.
Now in 2016 Tui, which absorbed First Choice and thereby First Choice Expeditions, is planning to divest itself of its Specialist Holidays Group, the surviving vestige of Grand Expeditions.
Tui is still an enormously successful company in Europe, and on its website it lists its “international brands,” which are many. But it doesn’t even include U.S. brands in the listing. And now it is backing out of that market.
For some reason, the European model has never taken hold in the U.S. and European companies have not succeeded in getting a strong hold in the U.S. tour operators market. It’s just a different world here.
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