Investor Presentation - Rhodes, June 2017 - Thomas Cook
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Investor Presentation Rhodes, June 2017
Agenda
Overview Introduction Peter Fankhauser
Customer At Our Heart Dennis Hochberger
Care
Caring for our customers Michael Scheidler
Contact Customer engagement Magnus Wikner
Own-brand hotels Ingo Burmester
Holidays
Our holiday offering Magnus Wikner
Services Letting our airline fly Christoph Debus
Partnerships
Streamlining our operations Thomas Hohn
Efficiencies
Page 2
Overview
Introduction
Peter Fankhauser – Group CEO
Page 3
Creating value by putting customers first
We introduced Customer At Our Heart as an initiative in 2015…
Holistic view on customer care and
customer contact
Quality and service focus across all › More satisfied customers
customer touchpoints
› Enthusiastic colleagues
A bold 24-hour satisfaction promise
› Whole company energised
Introduction of NPS and link to
management bonus › Profitable growth engine
Refreshed culture aligned with our 3
customer promises
… and partnered this with our New Operating Model
Page 4
Result: our strategy on a page
Customer At Our Heart is the cornerstone of our strategy for profitable growth
Page 5
What makes us different from our competitors
Clear strategy directly linked to growth AND structural efficiencies
Focus on customer care and contact as the engine of growth
Excellent holiday experiences through our differentiated products, services and reassurance
Growth levers beyond core markets: China JV, Russia and financial services
Asset-light with a focus on higher capital returns
Deleveraging strategy to transfer value from debt to equity holders
Strongest brand in travel with a portfolio of strong local brands
Page 6
Care
Customer At Our Heart
Dennis Hochberger – Customer Experience
Page 7
Our way to customer centricity
Page 8
What is Customer At Our Heart?
› Group-wide initiative to improve our customer experience
› Happy customers are more likely to return and recommend us to their family and friends
Higher More
customer retention recommendations
(repeat bookings) (new customers)
Growth
Lower customer acquisition costs
Page 9
How we are implementing it
› Group Customer Experience Team created in 2015
› Working across all our source markets to set our Customer Experience strategy
› Develops and implements customer experience improvements
A structured 4 year plan
2015: Fix the basics
› Identify satisfaction 2016: Deliver
drivers › Voice of the Customer
2017: Differentiate
› Implement NPS as › Implement changes
Group’s single customer › Roll out of new values 2018: Delight
from fixing the basics
satisfaction KPI, linked › Customer-led operations › Consistently exceed
to incentive structures › Differentiation expectations
Page 10NPS is our main customer satisfaction KPI
› Measured across entire customer journey using questionnaires
› Lead indicator of customer loyalty and recommendation
› Helps us to improve the customer experience in a structured way
Page 11Culture: our customer promises and values
Page 12Customer-led operations
Examining and improving the customer journey at every stage…
› Systematic approach
Share Dream
› Consistent experience
Return Plan
› Qualitative insight
Experience Book
› Customer segmentation
Transfer Depart
… and getting the details right
Page 13Managing hotel quality through NPS
Hotel review cycle
NPS, Complaints, ORM
› Continuous feedback loops
› Automated monitoring and flagging
1 2
Bi-weekly Define
Bi-weekly Define
Review
Review actions
Actions › Rigorous quality management:
̶ 100 UK hotels removed over Winter 16/17
̶ > 60 hotels improved through our Training
Improvement Actions Phase
3 & Consulting and Online Reputation
NPS /
Terminate Customer KPI
Management services since Summer 2016
consistent Improvement
underperformers
Page 14Training, consulting and online reputation management
Training & Sunny Heart Online Reputation
Consulting Academy Services
› Improving hotel › Open seminars for › Online Reputation
processes and functions interested hotels Management on behalf of
hotels
› Focus on customer › Platform for E-Learning,
excellence networking and follow up › Answering of Reviews,
Content Management
› External trainers
Page 15Good progress so far
Strong increase in NPS... … and NPS has a clear link to loyalty3
+8
points1 NPS
Northern
Group overall NPS Europe
Germany
UK
Belgium
+7
points2
Netherlands Loyalty
Airline NPS
1. Overall Group NPS improved from 37 to 45 in H1 FY17
2. Airlines NPS (including 3rd party flying) improved from 24 to 31 in H1 FY17
3. Graph plots latest NPS for each source market versus loyalty rate in H1 FY17
Page 16Why NPS matters to our financial performance
Higher NPS leads to growth in bookings and improved margins
NPS growth linked to bookings growth NPS growth linked to margin improvement
+60%
Change in margin vs average
+15%
Change in bookings
+10% +40%
2016 to 2017
2016 to 2017
+5%
+20%
+0%
+0%
-5%
-20%
-10%
< -10% < 0% > 0% > +10% > +20%
< -10% < 0% > 0% > +10% > +20%
Change in hotel NPS 2015 to 2016 Change in hotel NPS 2015 to 2016
Note: Based on Summer performance of >700 hotels sold by our UK business between 2015 and 2017
Page 17What makes us different – Customer At Our Heart
› Customer values and promises foster a culture
Culture
of customer excellence
Customer-led › We systematically review the customer journey More satisfied
operations to improve every customer interaction customers
Hotel portfolio › We regularly review our hotel portfolio to help Higher loyalty
review ensure quality thresholds are met
More
recommendations
C@OH training for › We train hotel staff in our values to provide
hotels consistency of customer service Growth
› We identify innovative holiday features
Value-add
through workshops and innovation labs
Page 18Care
Caring for our customers
Michael Scheidler – In-Destination Services
Page 19What Care means at Thomas Cook in destination
Advice & customer service Quality assurance Help if something goes wrong
Proactive quality
Staff in destination Complaint resolution
management
Connected service 24 hour satisfaction promise Crisis management
Care package provided to customers by In-Destination Services (iDS)
Page 20What our In-Destination Services business does
iDS is key to delivering our unique care package
2,500 colleagues in 19m customers from
Summer 100 offices
all of our source 11 languages
worldwide
1,000 in Winter markets
Service & Quality Destination Management Connected & Crisis Entertainment
Page 21Quality assurance
What our 24h promise means Quality management
If, on arrival, your hotel isn’t as we described, › 49 dedicated quality managers in Summer 16
we’ll sort the issue out within 24 hours. If we can’t
resolve it, we’ll offer a 25% discount voucher for your › Ensure all suppliers offer best quality
next holiday (or a full refund and early flight home)1
› Work with local hoteliers on quality
improvement plans
Key 24h promise figures from Summer 16
› 1,600 hotels where 24hr promise applied › Over 5,500 hotel visits conducted in 1,800 hotels
› 3.5m guests
› Over 500 quality improvement plans
› 23 vouchers issued implemented
1. This is a summary. Please see our website www.thomascook.com for the full terms of the 24h Promise
Page 22Help if something goes wrong
Helping our customers in times of crisis Turkey72coup
“Within hours TC had repatriated
thousands of holiday makers … – acting
› Crisis Management becoming increasingly rapidly to do whatever was necessary to
important given frequency of disruptive secure their safe return home”
events Chris Grayling Dept of Transport
› Special Assistance Teams provide support on
the ground in response to major incidents “You have every right to be proud of your
staff … I am and will continue to tell
› Welfare Teams in-destination provide day-to- everyone, about how you treat your
day support to customers customers in general and in particular,
when they need your help in a desperate
› Positive customer feedback situation. I will never forget your help and
kindness”
Page 23We are delivering results
NPS Accommodation CSQ Rep Service CSQ Transfer Complaints resolved in
destination
+18 pts +14% +11% +27%
45 78% 80% 87% 50%
39 66% 84%
27 38%
76% 23%
2014/Q4 2016/ Q4 2017/Q2 2014/Q4 2016/ Q4 2017/Q2 2014/Q4 2016/ Q4 2017/Q2 Su 15 Su 16 Su 17
Note: Figures are from Central Europe
Page 24And there is more to come…
• TC promises and
values training
• Customer
Heroes
Expanding • Happy Hearts
24-hour promise Initiatives to Budget
to all Single view of the strengthen • Mystery
differentiated customer customer culture Traveller
hotels • Best Practice
Page 25What makes us different – Care
Unique care › We look after our customers throughout their
system holiday
Local knowledge › Over 2,500 staff working in-destination in Reassurance
and support Summer to ensure holidays go smoothly
Peace of mind
› Customers know our holidays will match our More satisfied
Quality assurance
quality thresholds customers
Your holiday is our › We take responsibility for the customer’s
responsibility holiday from start to finish
Page 26Contact
Customer engagement
Magnus Wikner – MD Northern Europe
Page 27What do we mean by Contact?
How we attract our customers Customers interact with us throughout
Content & ̶ Rich, inspirational content their holiday journey
marketing ̶ “One campaign”
̶ Social, digital
Share Dream
How we sell to our customers
̶ Growing online Return Plan
Distribution
̶ Reshaping retail
̶ Omni-channel approach
Experience Book
How we stay close to our customers
̶ Pre-departure emails Transfer Depart
CRM
̶ Companion App
̶ Personalisation
Page 28Developing rich, inspirational content & marketing
+80,000 images…
+1,000 floor
plans…
… added to
our websites
+130 hotel since January
videos…
Page 29Hotel plans help customers select room type and location
Page 30Detailed visualisation through 3D room plans
Page 31Investing in our websites
Our actions to improve our websites… … are leading to strong growth in web
bookings for our major markets
› Rolling out OneWeb in Benelux
Growth in web bookings, H1 FY17
̶ UK and Belgium now fully migrated to OneWeb
̶ Netherlands migration underway
+35%
› New platform launched in Germany
̶ Recently ranked one of Germany’s best online portals1
̶ Significant acceleration in bookings +15%
› Northern Europe technology upgrade
̶ Faster and more responsive
+10%
̶ Mobile-first
1. Survey by ntv and German Institute for Service & Quality rated thomascook.de first for “offer and performance” in May 2017
Page 32Increasing our digital presence
Group share of web sales Web metrics by by device type1
45%
43% Sessions 35% 20% 45%
40%
38%
Bookings 10% 20% 70%
FY14 FY15 FY16 FY17 YTD Mobile Tablet Desktop
1. For all Group websites, FY17 year to date
Page 33Staying close to our customers – apps
Our Companion App supports the whole customer journey
App features1
› Extends the value of customer
contact › Easy-to-find flights & hotels
› Personalised offers & search results
› Develops closer customer › Best-in-class booking
relationships › Pre-departure checklist
› Ancillaries and excursions
› Customers can manage their
› Flight check-in and boarding pass
holiday via their smartphone
› Hotel and holiday info
› Leverages technology to › Hotel check-in and room key
improve customer experience › Local restaurants
› Easy-to-contact reps
› Live in Northern Europe, the › Customer appreciation
UK and Germany › Post-travel survey
1. Not all features currently available in all countries; some under test
Page 34What makes us different – Contact
› Unique personal customer relationships by
Customer closeness
providing entire holiday experience
Omni-channel › Accessible via mobile, tablet, desktop, stores,
approach contact centres and in-destination staff More effective
customer
› Focus on controlled distribution to ensure a engagement
Own distribution
better customer experience
Rich & inspirational › Close hotel relationships allow us to provide
content rich, inspirational and interactive content
Page 35Q&A
Page 36Page 37
Holidays
Own-brand hotels
Ingo Burmester – Hotels & Resorts
Page 38Why are own-brand hotels important?
Own-brand hotels are at the heart of our holiday offering
More satisfied customers – higher NPS and higher loyalty
More exclusivity – less price competition and more differentiation
More influence and control over service levels and quality standards
Deeper, longer-lasting relationships with hoteliers
Additional source of margin for the Group as a hotelier – management, incentive and franchise fees
Increased brand value
Own-brand hotels are operated and franchised by Thomas Cook Hotels & Resorts
Page 39Our hotel brand architecture
Adults only Families
Our hotel concepts
Best
Developed for both families and adults with
consistency in design, rooms and features Better
Clear customer segmentation between
families and adults only Good
Our hotel brands
Premium
Synonymous with quality and value, with
differences in design and features across
the portfolio Budget
Page 40Our portfolio of own-brand hotels
We operate or franchise over 180 hotels in 17 destination countries
11 new hotels for this Summer
68 66
› Austria › Italy
NEW: NEW: NEW: NEW: NEW: NEW:
› Bulgaria › Maldives
1x Bulgaria 1x Spain 1x Greece 1x Cyprus 1x Spain 1x Croatia
› Cape Verde › Morocco
1x Croatia 1x Maldives
› Croatia › Portugal
1x Italy 1x Spain
› Cyprus › Spain
1x Turkey
15 18 › Egypt › Thailand
13 › Gambia › Tunisia
2 › Germany › Turkey
› Greece
Page 41Quality improvements are reflected in NPS improvements
NPS is highest in own-brand hotels – and improving
Improvement in own-brand hotel NPS by brand1 Overall improvement in own-brand hotel NPS1
+2 pts
+4 pts
+7
points
+7 pts
+8 pts
+14 pts
1. Summer 16 vs Summer 15
Page 42How Thomas Cook creates value in own-brand hotels
Brand features and tour operator sales focus leads to margin uplift
Brand premium
Brand premium example:
+5% ~35%
+5% › Sunwing Fanabe (Tenerife)
+5% average room rate EUR 85
~20%
› Market rate of unbranded
› Upgrade to › Add brand › Joint selling peer hotel in same location
brand features and power of 16 EUR 60 – 65
requirements training source markets
› Brand premium 30 – 40%
Initial gross Refurbishment Quality & Sales focus Uplifted gross
operating profit software operating profit
Note: Margin uplifts are illustrative
Page 43Growing our own-brand hotel business
Growth levers Further 11 hotel launches for Summer 2018
› Refine brand propositions
› Further develop unique features x2 x3
› Add new hotels to the portfolio – focus on Cape Verde Greece
Spain, Greece, Cyprus and Croatia x2
› Target new management and franchise Cyprus
contracts
x2 x2
› Invest in long-term hotel relationships
Croatia Spain
› Develop sales channels
Page 44Holidays
Services
Our holiday offering
Magnus Wikner – Northern Europe
Page 45Differentiated and complementary hotels
Differentiated
Own-brand Selected Complementary
› Franchised, managed or › Contracted by Thomas › Contracted and sourced
owned by Thomas Cook Cook and developed in by partners/third parties
partnership with
hoteliers
Classic package
Package
Dynamic package
Upsell Cross sell
Hotel only
Components
Flight only
Page 46Our product strategy: focusing our holiday offering
Number of
Customers
Differentiated
~2/3 of holiday
customers › Focus on added value to our customers Own-brand sales up
› Greater influence on hotel quality Rationalising hotel portfolio
› Leverage scale across the Group Sharing more inventory
Complementary
~1/3 of holiday
customers › Automated low-cost production Webjet partnership
› Source electronically 4,000 contracts by Summer 18
› Expands choice for customer Access to WebJet’s existing
Number
inventory
of Hotels
~ 3,000 ~ 30,000
Own-brand hotels Differentiated hotels
Page 47Progress in our product strategy
Growth in own-brand hotel bookings Reduction in directly contracted hotels2
‘000 customers1
930
846
758 ~6,000
~3,000
3,630 3,480 ~3,000
FY15 FY16 FY17 YTD Summer 16 Summer 17 Summer 19
target
Differentiated hotels
Complementary hotels – directly contracted
1. Excludes Turkey, Egypt and Tunisia Complementary hotels – outsourced
2. Figures shown only for sun & beach hotels
Page 48Higher share of wallet through personalised ancillaries
Ancillary sales to tour operator customers increased by 14% in H1 2017
Example of ancillaries opportunity – Sunwing Arguineguin, Gran Canaria
Booking › Basic package EUR 2,735
Feb 2017 Original
› Room upgrade +400
booking
› All-inclusive board +690
› Spa treatment +80
› Lollo & Bernie visit +20
Ancillaries
› Flight meal and transfer +135
Departure › Flight seating and tax-free goods +210
July 2017 › Total price EUR 4,270
Page 49What makes us different – Holidays
Focused holiday › Focusing our efforts on a much smaller number
offering of directly contracted hotels
› Fewer, deeper hotel relationships enable us to
Differentiation More efficient
offer more unique holidays
More unique
› Value add to the customer by personalising
Ancillaries
their holiday Better able to grow
Outsourcing non- › Strategy to partner for complementary hotels
core simplifies our business
Page 50Holidays
Letting the airline fly
Christoph Debus – Chief Airlines officer
Page 51Thomas Cook Group Airlines at a glance
Key facts and figures
94 aircraft 17m passengers
+19 summer-only leases
11
33 8,000 employees £2.6bn revenues
45
5*
Our brands
No. of
aircraft in
each region UK, Scandinavia, Belgium* Germany
* Until the end of 2017, when TCA Belgium will be combined with Brussels Airlines
Page 52Our airline vision
… is to be the best leisure airline, part of Thomas Cook,
the most loved holiday company
£
Employee Engagement Customer Profitable Operational Efficiency
& strong leadership @ our Heart Growth & Safety
› One airline, one team › Fully modernised fleet › Significant growth in seat › Reduced 3 hour delays by
only and long haul 70% since 2013
› Staff engagement score › NPS higher year-on-year
up 4 years in a row › Seat only & 3rd party share, › Safe@heart
now ~50%
Page 53The improvements are recognised by our customers
Page 54Significant growth in seat-only and long haul
Seat only & 3rd party Long haul
tour operator passengers (m) passengers (m)
+20% +30%
8.2 3.0
6.9
2.3
FY13 FY16 FY13 FY16
Page 55Low cost long-haul carrier with a broad network of destinations
› Strong position in profitable
leisure long-haul market:
̶ Maintain leading position in Germany
̶ Building up strong presence in UK
› 30% long-haul growth in last 3 years,
supportedCaribbean
by:
̶ Good long-haul unit cost position
̶ Strong and unique multi-channel
distribution capabilities
Page 56We have unique multi-channel distribution capabilities
Thomas Cook
tour operator
50% …
3rd party
tour operator
15%
Web 20% Web sales grew by 12% in FY16
Seat only
OTA/Travel “GDS” provide direct access to all relevant IATA
agencies 10%
travel agencies
Interline 5% 40 interline agreements for long-haul feed/defeed
Note: Percentages indicate proportion of seats sold through each channel
Page 57Focus on ancillaries to drive profit
Extras (in GBP)
£79m
£64m
£54m
£38m
£270m ancillary revenue in FY16
£14m
£11m £16/passenger
£10m
“An Ancillary is any value adding product that is sold on top of standard airline ticket at any point of the customer journey”
Page 58Managing cost is key to sustained advantage
Cost management levers
› Lean overhead structures
› Increased productivity
› New maintenance strategy
Aeroflot › Improve reliability and
Group
TC Airlines ‘13
operational performance
TC Airlines ‘17 › Improve seasonality with new
Winter partners
› Optimised structure for
stronger governance
Page 59More financial disclosure about our airline
We introduced new disclosure of our financial performance by business
line for FY16 and now report performance KPIs every 6 months
Group Airlines (£m)
2,825
› EBIT decline in FY16 due to market disruption
2,809
impacting Condor in Summer 2016
4.4% 5.4%
2,748 2.9% › Initiatives to return Condor to a full year profit
152
122
83
in FY17 are on track
FY14 LfL FY15 LfL FY16
Revenue EBIT EBIT Margin
Page 60What makes us different – Airlines
Tour operator › Tour operator customer base (50% of
backed seats) supports load factors
Strength in › Track record of profitable long-haul
long haul growth (+30% in the last 3 years) Competitive cost position
Unique distribution › Own & 3rd party tour operators Attractive value-for-
model › Seat-only via own web, agencies & GDS money offering
› Strategic partnerships (summer & winter) Basis for further growth
Partnerships
› 40 interline agreements
Integration › Potential for more efficiencies from
benefits further airline integration
Page 61Partnerships
Efficiencies
Streamlining our operations
Thomas Hohn – Chief of Source Markets
Page 62Our approach to operational efficiency
Our growth and cost agendas are tightly linked
Benefits from implementing our strategy Group-wide and local efficiency programmes
Our strategy leads to efficiencies: Improve efficiency and reduce costs through:
› More focused differentiated hotel offering › Better Group-wide coordination
› Lower cost sourcing of complementary hotels › Greater use of Group buying power
› Simplified IT platforms › Best practice sharing
› More web distribution; optimised retail estate › More functional integration across the Group
Lower cost base allowing for further investment in growth
Page 63Managed through the New Operating Model
£41m of net EBIT benefits achieved by H1 FY17, with a further £100m
expected by 2019
Expected to be delivered through our ~50m 130m – 150m
efficiency programmes
Expected to be delivered from ~50m
benefits from implementing our
strategy: own-brand hotels,
differentiated, CRM & ancillaries
41m
26m
FY16 H1 FY17 To be delivered by FY19 FY19
Page 64We’ve done this before, and it remains a constant focus
Wave 1 achieved significant cost reductions and EBIT improvements
between 2012 and 2015
UK turnaround
EBIT improved by £182m
Integrated air travel strategy
Organisational structure EBIT margin up from 2.0% to 4.3%
Product/infrastructure/technology
Overheads reduced by £146m
Other
Page 65Potential for further improvements
Internal benchmarking between our own businesses shows there is
plenty of opportunity for further reductions in the cost base
Overheads as % of gross profit (pre-commissions) in FY16
100%
80%
60%
40% Other costs
20% Distribution costs
0%
Northern Europe UK Continental
Europe
Page 66Key initiatives for further operating efficiencies
Efficient sourcing of complementary sun & beach
Partnership with Webjet
hotels; further opportunity in City & Domestic
Harmonisation and Centres of Excellence Reduce duplication in source markets
Local cost-out in the source markets Local efficiency projects using Group scale
Online and controlled distribution especially in UK
More efficient distribution
and Germany
Page 67Benefits from the Webjet partnership
Webjet partnership allows us to focus on our core holiday offering
100%
80%
% of tour
operator
revenue
Differentiated Complementary
3,000 hotels > 30,000 hotels
Before In house production
After In house production Outsourced / automated production
Page 68Harmonisation and Centres of Excellence
Moving from country siloes to Group-wide functions
Examples of process harmonisation UK Germany West/East Nordics
and Group functions
› Process harmonisation in Continental Europe
› Creation of tour operating Centres of
Excellence in Frankfurt and Ghent
› Single Group contracting and destination team UK Continental Europe Nordics
› Marketing integration
› IT harmonisation
› Finance shared service centre in Palma
Page 69Local efficiencies in the source markets
Examples of local efficiency programmes
Russia turnaround France turnaround
› Integrating scattered locations and systems › Reducing overhead staff by a third
› Reducing the overhead cost by >50% › Closing unprofitable stores
› Building up new business and source markets › Improving B2C and B2B retail channels
UK contact centre transformation UK retail optimisation
› New systems and tools › Digitally led, integrated with online
› Improved efficiency and handling times › Right-sizing store portfolio
› Internal benchmarking and training › Focus on larger format “concept” stores
Page 70In conclusion
Streamlining our business will help to deliver profitable growth
Operating efficiencies
allow us to… Supporting investment into…
› Reinvest in growth › Marketing spend
› Counter inflation and
other cost in › Customer value and
uniqueness Profitable growth
› Deliver our New and increased
Operating Model › Thomas Cook Hotels &
shareholder value
efficiency targets Resorts
› Strengthen our › Sales channels
competitive position
Page 71What makes us different – Efficiencies
Our strategy leads › Growth strategy connected to cost
to efficiencies management and restructuring
More efficient
› Good track record of reducing costs and it
Track record operations
remains a constant priority
Lower cost base
High potential › Opportunity through integrating activities
Reinvestment in
through scale across our source markets
growth
Culture of continuous › Initiatives part of broader programme to
improvement achieve sustainable structural efficiencies
Page 72Q&A
Page 73Conclusion
Summary and wrap-up
Peter Fankhauser – Group CEO
Page 74You can also read
