Tui boss admits Cook's problems are 'unsettling'

It is better to have a strong predictable competitor than a weak unpredictable one, the former UK boss of Tui Travel told the Institute of Travel and Tourism today.

Johan Lundgren, who was promoted to the role of deputy chief executive of Europe’s largest travel group earlier this year, admitted the troubles at rival Thomas Cook could be seen as unsettling.

But he added that there were encouraging signs that Cook was turning things around, following the appointment of Harriet Green as new chief executive, and that this was a positive.

“We could be upset because it has dragged our share price down and it’s getting people to look at the industry in a sceptical way. But they are making a transition to get a new chief executive in and they have good people in the business in the UK like Ian Ailles and are in track.

“What we do not want as a competitor is unpredictability. We would rather them be strong and predictable than weak and unpredictable. In that sense I’m rather encouraged that they are going to get in track to improve their business.”

Speaking in a session on the opening day of the ITT conference in Barbados, Lundgren said one of the main issues a large organisation like Tui faces is legacy systems, some of which are 40 years old.

He said if he could start Tui from scratch now he would make sure it did not have such problems caused by legacy technology.

“I would make sure that I never got into that situation because these are systems that are costly to maintain – we have to call people in from retirement to cater for it.
Legacy systems like that are clearly a barrier. We are addressing that but it takes money and resources.

“Most businesses are now becoming more technology driven and having an old system does not necessarily help to do that.

“In some areas of Europe we are very well advanced but that’s a project to consolidate the systems across the whole mainstream business.”

Lundgren told the audience that, despite the firm’s continuing move to sell more of its own exclusive product, third party retailers remained an important channel but that ultimately the customer would decide which channels flourish.

He claimed that he no longer places a value on the proportion of business he would like to see through various channels. “For me that’s absolutely consumer driven.  The consumer will choose the distribution levels each channel deserves.

“Every distribution channel has to earn its own right to get the customers. There are independent travel agencies who do a fantastic job, in other areas we have not seen growth.

“We are moving to exclusive concepts and that’s an easy sell for travel agents. Independents are an important part of our distribution and will remain so.”

Tui is keeping a close eye on developments in the Eurozone, particularly in key destinations like Greece and Spain, Lundgren said.

But he added the move to more exclusive product would insulate Tui from the impact of a potential collapse of the single currency and the fact that the firm was building flexibility into its model.

Lundgren said the biggest impact was being seen on the more commoditised end of the market, an area Tui was keen to move out of.

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