The company says that it sees little future growth in tour operating, and believes that the parts of the group it is retaining represent the best opportunities for rapid business growth – although whether that means growth in turnover or profit is not entirely clear.
If you consider that the business being retained is primarily its bed bank operation, it is difficult to understand how that be the source of future large profit margins.
So is the board correct in its strategic thinking? And if so, should other travel businesses change their model too?
“The evidence from the UK appears to be that package sales are strengthening”
I would suggest not, and the two main sources of data in the UK market both appear to support my view. If you look at the Office of National Statistics data, 2013 saw a 6.9% increase in the number of overseas package holidays compared with 2012 – the growth in overseas holidays overall was only 4%, and that trend almost certainly continued in 2014.
Similarly, the number of Atol-licensed seats has been increasing. In the year to March 2013, there were just over 19 million licensed seats. That had risen 12 months later to 21.5 million, and it now stands at more than 25.5 million.
Even recognising that a significant number of these are Flight Plus arrangements, the evidence from the UK appears to be that package sales are strengthening.
As the UK emerges from recession there has been increasing investment in travel, as much in the mainstream market as the new models. Dnata has been active in buying a number of businesses, and venture capital money appears to be flowing into the industry. For Kuoni in the UK, the products – Kuoni, Carrier, Kirker, Voyage Jules Verne, CV Villas and Journeys of Distinction – are all aspirational brands, which tend to be attractive to investors.
So I remain to be convinced that the Kuoni board is right, and I believe that there is a future for tour operators. If anything, I believe that Kuoni’s decision could have a positive impact in the UK. The brands are unlikely to disappear, and while any buyer will probably look to make changes, it is more likely that they will want to grow sales – very different from the views of the current owner.
So good luck to UK managing director Derek Jones and the Kuoni team. They will be in for an interesting ride, and will contribute to the long term continued success of the package holiday.