MyTravel Group plc Analyst Presentation 21 March 2006 1
Agenda 1100 Presentation John Bloodworth and team Market trends and analysis Product Relevance Developing the UK brand portfolio Internet Customer Relationship Management Reducing costs in MyTravel UK Distribution and wrap-up Tim Marsden Phil Aird-Mash Tim Marsden Russell Gould Simon Hulme Aidan Connolly John Bloodworth 1230 Questions 1300 Lunch 1340 Coaches to MyTravel Airways, Manchester Airport 1430 Presentation Frank Pullman and Airways team 1515 Tour of hangar 1600 Close 2
Group strategies People - Focus on improving the quality and performance of management and employees Productivity - Maintain a culture focused on controlling and reducing costs Demand Strike the right balance between supply and demand, focusing on profitability, rather than market share in the package holiday market Product quality - Ensure the quality of the products we offer Customer focus - Continue to develop the ability to respond quickly to evolving consumer attitudes and ensure the relevance of the product Distribution - Improve the effectiveness and balance of distribution Grow profitably in the independent travel market 3
Market trends and analysis Tim Marsden Marketing Services and Planning Director 21 March 2006 4
MyTravel UK brands mass market Desired holiday Experience A : 3% Thomson and Thomas Cook More Authentic More Familiar B : 21% C1 : 27% C2 : 21% Escapades, Twentys, Freestyle, Club 18-30 Airtours and First Choice DE : 27% Absolute Price driven % of UK pop Aspro Pre-family (28%) Family (27%) 3 rd Age (25%) Retired (20%) 5
MyTravel UK brands focused Desired holiday Experience More Authentic More Familiar A : 3% B : 21% C1 : 27% C2 : 21% DE : 27% Escapades, Twentys, Freestyle, Club 18-30 Panorama and Manos Thomson and Thomas Cook Panorama and Manos Airtours Direct and Holidays First Choice Absolute Price driven % of UK pop Aspro Pre-family (28%) Family (27%) 3 rd Age (25%) Retired (20%) 6
MyTravel UK brands non-risk* Desired holiday Experience A : 3% Thomson and Thomas Cook More Authentic More Familiar B : 21% C1 : 27% C2 : 21% Escapades, Twentys, Freestyle, Club 18-30 BCT BCT Airtours and First Choice DE : 27% Absolute Price driven % of UK pop Aspro Pre-family (28%) Family (27%) 3 rd Age (25%) Retired (20%) * Group has made no financial commitment before the customer books 7
Market trends and analysis International Passenger Survey AC Nielsen Travel Track Product types Haul mix and destinations Board basis mix 8
UK foreign holiday market Number of UK holidays abroad (m) 50 40 30 20 10 0 32.3 35.0 36.7 38.7 39.9 41.2 42.9 44.5 14.9 15.9 16.6 18.0 19.3 21.7 23.1 25.5 17.4 19.1 20.1 20.6 20.6 19.5 19.8 19.0 1998 1999 2000 2001 2002 2003 2004 2005e Package share Package bookings Independent bookings (%) 54% 54% 55% 53% 52% 47% 46% 43% Independent travel accounted for majority of growth and is increasing share, but package holiday market remains significant Source: International Passenger Survey (All Modes) Figures for 2005 are estimated assumed same yoy growth for 2005 full year as for Q1-Q3 2005 IPS (All Modes) Q4 2005 figures released on 7 th April 2006 9
Full year 04/05 holiday type mix Flat market overall, with supply side package passenger reductions driving increased average selling prices Market Total Packages Seat Only Pax % YoY -1% -7% 14% ASP % YoY 3% 6% -1% MTUK Total Packages Seat Only Pax % YoY -19% -15% -39% ASP % YoY 9% 10% 21% MTUK charter tour operator capacity reduced by 23% in 04/05 Tour Operator A Total Packages Seat Only Pax % YoY -8% -10% 7% ASP % YoY 9% 9% 7% Tour Operator B Total Packages Seat Only Pax % YoY -2% -5% 14% ASP % YoY 6% 4% 18% Tour Operator C Total Packages Seat Only Pax % YoY 1% 2% -19% ASP % YoY 7% 8% -10% Source : AC Nielsen Travel Track. MTUK, plus Big 3 data relates only to their charter tour operators. Full year : Nov 04 to Oct 05. Total includes packages, cruise, seat only and accommodation only 10
Full year 04/05 haul mix Consistent movement from short haul to mid and long haul across both the market and the Big 4 Market Total* Short Haul Mid Haul Long Haul Mix % 100% 38% 48% 14% Mix % YoY -3% 2% 1% ASP % YoY 5% 6% 8% 1% MTUK Total* Short Haul Mid Haul Long Haul Mix % 100% 37% 50% 13% Mix % YoY -4% 2% 2% ASP % YoY 7% 8% 11% 3% Internal data Short Haul Mid Haul Long Haul Mix % 37% 51% 12% Tour Operator A Total* Short Haul Mid Haul Long Haul Mix % 100% 39% 53% 8% Mix % YoY -3% 2% 1% ASP % YoY 10% 7% 11% 0% Tour Operator B Total* Short Haul Mid Haul Long Haul Mix % 100% 43% 50% 8% Mix % YoY -5% 5% 0% ASP % YoY 6% 5% 3% -1% Tour Operator C Total* Short Haul Mid Haul Long Haul Mix % 100% 31% 55% 14% Mix % YoY -2% 1% 1% ASP % YoY 7% 7% 8% 3% Source : AC Nielsen Travel Track. * : Total = package + AO excluding cruise. MTUK + Big 3 data relates only to their charter tour operators 11
Full year 04/05 destination movements Eurozone countries across short and mid haul continue to show declines, non- Eurozone countries display growth Short haul Top 10 Full year 04/05 000 pax % YoY Mid haul Top 10 Full year 04/05 000 pax % YoY Long haul Top 10 Full year 04/05 000 pax % YoY Short Haul Total 5064-14% Mid Haul Total 6320-2% Long Haul Total 1891-2% Balearics 1521-16% Canaries 1654-16% Caribbean 476 5% Mainland Spain 1114-18% Greece 964-9% USA 275-1% Portugal 370-18% Turkey 696 29% Florida* 199-7% France 308-18% Cyprus 477-3% Mexico 164 7% Italy 301-4% Tunisia 263 14% Maldives 55-17% Austria 78-7% Egypt 237 142% India 49-2% Andorra 37-11% Bulgaria 115 32% Thailand 22-1% Czech Republic 35 22% Malta 108-11% Canada 21-7% Netherlands 28-22% Morocco 39 99% UAE 18 45% Irish Republic 25-25% Croatia 28 62% Sri Lanka 14-14% World Top 10 Full year 04/05 000 pax % YoY * Florida pax included in USA pax World Total 13275-7% Total Spain 4289-17% Greece 964-9% Turkey 696 29% Cyprus 477-3% Caribbean 476 5% Portugal 370-18% France 308-18% Italy 301-4% Tunisia 263 14% Egypt 237 142% Source : AC Nielsen Travel Track. Pax numbers relate to package + accommodation only excluding cruise. Base : Big 4 charter operators 12
Full year 04/05 board basis mix All inclusive showing growth but at reduced average selling prices whilst self catering displaying opposite movements. Market Total* Hotel (excl AI) All inclusive Self catering Unknown Mix % 100% 38% 13% 29% 20% Mix % YoY 0% 3% -5% 2% ASP YoY 4% 4% -2% 6% -7% MTUK Total* Hotel (excl AI) All inclusive Self catering Unknown Mix % 100% 34% 16% 41% 10% Mix % YoY 2% 5% -4% -3% ASP YoY 10% 7% 3% 7% 4% Tour Operator A Total* Hotel (excl AI) All inclusive Self catering Unknown Mix % 100% 31% 18% 40% 11% Mix % YoY 0% 4% -4% 0% ASP YoY 8% 5% 1% 7% 13% Tour Operator B Total* Hotel (excl AI) All inclusive Self catering Unknown Mix % 100% 44% 13% 31% 12% Mix % YoY -3% 2% -1% 1% ASP YoY 4% 4% -1% 4% 1% Tour Operator C Total* Hotel (excl AI) All inclusive Self catering Unknown Mix % 100% 36% 23% 29% 12% Mix % YoY 1% 4% -6% 1% ASP YoY 7% 6% 0% 5% 1% Source : AC Nielsen Travel Track. * : Total = package + accommodation only excluding cruise. Unknown is predominantly accomm on arrival. MTUK and Big 3 data relates only to their charter tour operators 13
Summer 2006 Market Update In the UK market as a whole, advanced package holiday bookings for summer 2006 continue to be down by 7.6% Source : AC Nielsen Travel Track : Packages only MyTravel UK charter tour operator bookings for summer 2006 are down 3.5% on a reduced capacity of 2% Source : Internal MTUK data 14
Summary Market growth, with package market still significant Supply side reductions rather than waning consumer demand for packages Mix movements towards mid and long Non-Eurozone newer destinations growing more rapidly Consumers trading up into all inclusive 15
Product Relevance Phil Aird-Mash Managing Director, UK Charter Tour Operations 21 March 2006 16
MyTravel response to changing market dynamics destinations Winter Customer migration from short-haul destinations to medium haul and long haul is more marked in the Winter Destinations from UK (% of passengers) Winter 03 Winter 04 Winter 05 Winter 06* Change 03 to 06 Short 35% 30% 25% 21% (40%) Medium 52% 54% 58% 60% 15% Long 13% 16% 17% 19% 46% Short haul - 6 Andorra, Austria, France, Italy, Portugal, Spain Medium haul 14 Bulgaria, Canary Islands, Croatia, Cyprus, Egypt, Gambia, Greece, Israel, Madeira, Malta, Morocco, Romania, Tunisia, Turkey Long haul - 12 Barbados, Brazil, Canada, Cuba, Dominican Republic, India, Jamaica, Kenya, Maldives, Mexico, Sri Lanka, USA * Winter 2006 Projected Mix 17
Winter 2005 Capacity and Year on Year Variances Destination Grouping Canaries Mainland Spain Short haul Ski Egypt Tunisia Eastern Med (Turkey, Cyprus, Greece) Long haul East Other Long haul West Dominican Republic Florida Other Short haul Balearics Cuba Medium haul Ski % of Winter 2005/06 Capacity 36% 10% 9% 8% 7% 6% 4% 4% 4% 3% 3% 3% 2% 1% Year on Year Capacity Variance (14%) (21%) (9%) 118% 0% 11% 13% (34%) (3%) (2%) (2%) (22%) 204% 65% Internal expected winter outcome 18
MyTravel response to changing market dynamics destinations - Summer Anticipated slowdown in the migration from Short Haul to Medium Haul influenced by stable demand for Balearics Destinations from UK (% of passengers) Summer 04 Summer 05 Summer 06* % change 04 to 06 Short 43% 40% 39% (9%) Medium 49% 50% 51% 4% Long 8% 10% 10% 25% Short haul - 6 Andorra, Austria, France, Italy, Portugal, Spain Medium haul 14 Bulgaria, Canary Islands, Croatia, Cyprus, Egypt, Gambia, Greece, Israel, Madeira, Malta, Morocco, Romania, Tunisia, Turkey Long haul - 12 Barbados, Brazil, Canada, Cuba, Dominican Republic, India, Jamaica, Kenya, Maldives, Mexico, Sri Lanka, USA * Summer 06 capacity, management projection 19
Summer 2006 Capacity and Year on Year Sales Variances Destination Grouping (Ranked by Descending Capacity) Balearics Canaries Greece Mainland Spain Longhaul West Turkey Cyprus Africa Florida Egypt Croatia, Bulgaria and Malta Year On Year Capacity Variance 0% 0% (3%) (6%) (11%) (27%) (8%) 11% (5%) 83% 22% Year on Year Sales Variance 6% (1%) (2%) (9%) (28%) (43%) (7%) 10% (1%) 66% 22% * Summer 06 internal capacity, management projection; Net sales to 12 March 2006 20
Turkey Summer 2006 Planned Year on Year Growth +8% Year on Year Reduction (27%) Total Reduction to Turkey S06 Programme (32%) Of Turkey Capacity Reduction MyTravel Airways Capacity Reduction 31% 3 rd Party Capacity Reduction 69% 94% MyTravel Airways Turkey Capacity Diverted to alternative destinations including Ibiza, Costa Dorada and Bulgaria resulting in little or no impact on the airline 21
Margins Creating a Margin optimising Network and Product Portfolio Existing Consumer Demand Creating Destination Markets Capacity Management to Destination Markets Accommodation Board Basis Accommodation Star Rating Managing the interconnectedness of these variables to meet demand and supply optimisation at a micro level. There is no straightforward Haul Type, Board Basis, Star Ratings formula that can be applied at a macro level. 22
Margin by Haul Type Significant variance in margin within each Haul type Short Haul Medium Haul Index (All Haul Average=100) 200 150 100 50 0 Min Average Max Index (All Haul Average=100) 200 150 100 50 0 Min Average Max Long Haul Nielsen Full Year 2004/05 Market Haul Mix Index (All Haul Average=100) 200 150 100 50 0 Min Average Max 38% 14% 48% Short Haul Medium Haul Long Haul Data Source Summer 05 End of Season Margins Airtours Holidays Package and Seat Only Sales 23
MyTravel response to changing market dynamics accommodation board basis The shift from self-catering to hotels and growth of all-inclusive within the hotels category is less marked in the summer Self-catering remains the largest segment of the summer market Board Basis (pax) FY 03/04* FY 04/05 FY05/06 Projected % Change 03/04 to 05/06 All-inclusive 1 12% 14% 17% 42% Hotel 2 32% 34% 36% 19% Self-catering 3 56% 52% 47% (16%) (1) All-inclusive all meals and drinks provided in hotel as part of package (2) Hotel bed & breakfast and half-board in hotel as part of package (3) Self-catering no meals or drinks provided in hotel as part of package * Refers to pro forma 12 months ended 31 October 2004 24
Market Board Basis Mix by Haul Board Basis Mix Within Short Haul Board Basis Mix Within Medium Haul 34% 47% 43% 35% 10% 9% Hotel (Excl AI) All Inclusive Unknown Self Catering 8% 14% Hotel (Excl AI) All Inclusive Unknown Self Catering Board Basis Mix Within Long Haul 6% 12% 33% 49% Hotel (Excl AI) All Inclusive Unknown Self Catering Data Source : Nielsen Summer 2005 Total Market Package and Accommodation Only 25
Margin By Board Basis by Haul All Hauls Board Basis Margins Short Haul Board Basis Margins Index (All Haul Average = 100) 200 150 100 50 0 Self Catering Hotel All Inclusive Index (All Haul Average = 100) 200 150 100 50 0 Self Catering Hotel All Inclusive Medium Haul Board Basis Margins Long Haul Board Basis Margins Index (All Haul Average = 100) 200 150 100 50 0 Self Catering Hotel All Inclusive Index (All Haul Average = 100) 200 150 100 50 0 Self Catering Hotel All Inclusive Data Source : Airtours Summer 2005 end of season Package Sales (Excludes Florida) 26
Star Rating Margins by Haul All Hauls Short Haul Index (All Haul Average = 100) 250 200 150 100 50 0 1 & 2* 3* 4 & 5* Index (All Haul Average = 100) 250 200 150 100 50 0 1 & 2* 3* 4 & 5* Medium Haul Long Haul Index (All Haul Average = 100) 250 200 150 100 50 0 1 & 2* 3* 4 & 5* Index (All Haul Average = 100) 250 200 150 100 50 0 1 & 2* 3* 4 & 5* Data Source : Airtours Summer 2005 end of season Package Sales (Excludes Florida) 27
Summary Creating a Margin optimising Network and Product Portfolio Existing Consumer Demand Creating Destination Markets Capacity Management to Destination Markets Accommodation Board Basis Accommodation Star Rating 28
Developing the MTUK Brand Portfolio Tim Marsden Marketing Services and Planning Director 21 March 2006 29
Development process Brand revitalisation Marketing Intelligence and Customer Insight Brand development Product and destination development Channel development and communication 30
Summary Programme of brand development underway across all our brands Airtours used as an illustrative example Airtours needs to develop and revitalise its brand in order to attract more customers to the brand, but more importantly, to command a higher selling price and so deliver enhanced margins Two pronged strategy Expand the market space it covers to be more appealing to a greater range of customers and their holidaying needs Focuses on new propositions, new destinations and extending into market segments not currently well served Communicate what the brand stands for more effectively than in the past Give the customer more reasons to go on holiday with Airtours and convince them they are still receiving value for money whilst we earn greater margins 31
Extending market coverage New propositions Core : Familiar, Lazy Days Holidays New authentic holidays New destinations New premium holidays 32
New propositions Family First Targeting families with kids 0-11 Promotes earlier booking and allows rationalisation of children s club operation Launches Q2 2006 Customer reaction Net positive Ease of understanding Young families 96% Brand fit 86% Appeal 60% Likelihood to take Degree of difference 39% 25% Suncentre Targeting couples and families with children 5-16 seeking a familiar holiday experience Focal point for core guarantees and allows rationalisation of entertainment operation Launches Q2 2006 Customer reaction Net positive Ease of understanding Familiar 89% Brand fit 84% Appeal 46% Likelihood to take Degree of difference 35% 29% Net positive takes the % of positive scores and removes the % of negative scores on a dimension to create a net positive score 33
New propositions Beach resorts Targeting pre-family couples Drives all inclusive mix over self catering Launches Q2 2006 Customer reaction Net positive Ease of understanding Pre-family 95% Brand fit 89% Appeal 59% Likelihood to take Degree of difference 40% 10% Revamped Local Flavours Targeting authentic customers Extends business in authentic territory Relaunches Q2 2006 Customer reaction Net positive Ease of understanding Authentic 100% Brand fit 72% Appeal 94% Likelihood to take Degree of difference 89% 48% Net positive takes the % of positive scores and removes the % of negative scores on a dimension to create a net positive score 34
New propositions New premium product Targeting affluent customers Stretches the brand, more robust ranging with brand portfolio Launches Q3 2006 Customer reaction Net positive Ease of understanding AB 99% Brand fit 52% Extended long haul programme Targeting customers with cultural discovery need state Builds on current long haul mix strength Opportunity to move into many new long haul destinations Launches 2H 2006 Appeal 92% Likelihood to take Degree of difference 69% 40% Net positive takes the % of positive scores and removes the % of negative scores on a dimension to create a net positive score 35
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Communications strategy Objective Persuade holidaymakers to re-evaluate and reconsider the Airtours brand and improve brand preference Support delivery of new products and experiences Approach Airtours brand : value for money, hassle-free, expertise Collection of reasons plus unifying bold strapline Campaign A number of campaign options are currently being reviewed 37
Potential communications strategy 38
Brand development Destination and Product Development Communication Strategy Revitalised brands Defined market space Enhanced margins 39
Internet Russell Gould Director of Internet Marketing 21 March 2006 40
MyTravel Internet Strategy Our broad online strategy centres on a four point plan which is broken down into a series of defined tactics 1. Customer Acquisition 2. Customer Retention & Growth 3. Customer Conversion 4. Measurement & Optimisation Attracting new customers Tactics Harvesting repeat business from existing customers Turning more lookers into bookers Tactics Tactics Tactics Tracking and analysing every aspect of activity Search engine marketing Affiliate marketing Partnerships Aggregators Interactive advertising E-mail marketing Offline promotion Customer service E-mail marketing Increasing average selling price Cross sell activity 3 rd party offers Personalisation CRM activity Usability Navigation, search, quote & book Accessibility Enhanced Content, Copywriting, Functionality & Presentation Promotions & Merchandising Payment Options Web Analytics Site performance monitoring Competitor benchmarking Online surveys Usability testing Online panels Online PR E-Mail marketing Viral marketing Customer decision support 3 rd Party Certification / Accreditation 41
Key Developments Completed Through the implementation of the broad four point strategy plan the following key developments are already driving improved performance Details Strategy Delivery 1 New Web Platform Entire web infrastructure rebuilt to improve performance. All Q4 04 2 Digital Marketing Centre of Excellence established Central team tasked with spearheading internet strategy and delivery. All Q1 05 3 Going Place Store Locator Launched Nearest store search plus directions. 3 Q2 05 4 Baseline Acquisition Strategy Defined and Implemented Created a paid marketing baseline through extensive promotional spend across a number of online activities. 1 Q2 05 5 Integrated Extra Functionality Ability to add Extras to booking. 2 Q3 05 6 Wanadoo Cruise Partnership White label cruise service. 1 Q4 05 7 Online Balance Payment Functionality Ability to make balance payments online. 2 Q4 05 8 Usability Phase 1 Search, Quote & Book Exceeded the budgeted 10% uplift in conversion. All Q4 05 9 BCT Websites Launched Cresta, Tradewinds, B2B site All Q4 05 10 ebrochures Interactive online brochures with links to book. All Q1 06 Cost of all the above developments = 3m 42
Internet Distribution The percentage of UK charter sales via web continues to grow directionally in line with our strategy. Percentage of CTO Sales via Web 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 (up to 19/03) 2004 2005 2006 For each of the last 6 weeks we have exceeded 20% 43
Internet Performance Summary Our growth trend is continuing through 05/06 Online Performance 2004-2006 03/04 vs. 04/05 Year-on-Year Variance 04/05 vs. 05/06 Year-on-Year Variance* Passengers Charter 47% 51% Non-risk 24% 55% % via Web Charter 72% 53% Non-risk 59% 162%** ASP Charter 13% 7% Non-risk 8% -1% Revenue Charter 67% 62% Non-risk 34% 54% * Nov 19 March **Jan 19 March 44
Competition UK Travel Website Market Share Growth A recent extract from the front cover of the Travel Trade Gazette highlights the visitor growth MyTravel and the other Charter Operators have achieved versus the new online travel agents 45
Competition Hitwise Traffic Rankings The graph highlights MyTravel s ranking improvement based on share of the online travel agency visitors. MyTravel s ranking position has increased six positions February 05 versus February 06. Our acquisition strategy focus is on acquiring passengers in a cost effective way as opposed to simply driving a high volume of traffic. 0 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Ranking Position 1 2 3 4 5 6 7 Expedia Lastminute Thomson MyTravel Thomas Cook First Choice 8 9 10 11 Expedia Lastminute Thomson MyTravel Thomas Cook First Choice Source: Hitwise 46
Key Developments In Progress The four point strategy plan will continue to drive improved performance through the following key developments Details Strategy Delivery 1 Usability The Cruise Store Redesign Complete end-to-end redesign of web site to include all aspects of usability experience. All Q2 06 2 Usability Phase 2 Navigation & Promotion Navigation and design changes following extensive customer usability research. Expected to improve conversion by 10% All Q2 06 3 Post Booking Ancillary Product emails Introduction of five email touch points post booking to maintain customer contact and offer relevant incremental sales (e.g. FX) 2 Q2 06 4 Going Places third party product Aligning internet to store offering through the introduction of 3 rd party product offerings. 1,3 Q2 06 5 Assisted Selling Pilot Piloting co-browsing technology that allows real time online interaction between call centre agent and online consumer. 3 Q3 06 6 Usability Phase 3 Enhanced Content Enhanced content across destination, resort and hotel (more detail in following pages). Expected to improve conversion by 10%. All Q3 06 7 Online CRM / email Segmentation & Targeting More detail to be provided in the CRM presentation pack. 2,3 Q3 06 Approximate cost of all the above developments = 2m 47
Usability Phase 1 Search, Quote & Book (Completed) Usability Phase 1 introduced an improved search, quote and booking process following extensive customer usability research coupled with reviews across travel and other industry leading websites Delivered in December 2005 Reduced booking process from 8 steps to 5 Conversion expectation of a 10% uplift exceeded Historic Quote Page New Usability Quote Page 48
Usability Phase 2 Navigation & Promotion (Live May) Usability Phase 2 introduces a series of navigation and design changes following extensive customer usability research coupled with reviews across travel and other industry leading websites Navigation structure is intuitive Page real estate is optimised to deliver against customer search requirements deal, inspiration, browse, or specific search Existing Home Page New Usability Home Page 49
Usability Phase 3 Enhanced Content (Live July) Usability Phase 3 introduces enhanced content across destination, resort and hotel, including travel guides, resort overviews, hotel facilities and imagery Research has identified the need to improve current content Enhanced content provides consumers with links to all the information they require to make a selection and purchase online More comprehensive information expanding brochure content approximately three fold Existing Single Hotel Details Page New Usability Hotel Details Page & Links 50
Internet Key Performance Indicators (KPIs) Here are some core metrics to highlight performance and improvement across MyTravel websites. 1. Number of weekly site visitors (Unique Users) Averaging over 900k (Jan Mar 06) up from average under 500k (Jun - Dec 05) Unique Users per week. 2. Percentage of business booked online YTD (FY) equates to 18.8% and in the last 6 weeks exceeding 20% 3. Seasonal Mix (% of future sales versus lates) Over 20% of S06 booked online (Thomas Cook announced 18% last week) 71% of sales (year to date) have been future season. Of the remaining 29%, 10% were current season but NOT Lates and 19% were Lates (Based on 8 week late period) 4. email Marketing Over 5% of bookings directly linked to our email marketing programme 51
Benefits of Internet All of this online activity together gives us three key business benefits. 1. Financial Benefits: Direct online business provides commission savings in comparison to third party commission Ranging between 2-4% saving depending on activity Cost Internet delivers commission savings and CRM activity will deliver further savings 100% 2. Control Benefits: Provide us with full control and flexibility for directional selling thus reducing the reliance on third parties 3. Relationship Opportunities: Building customer relationships and repeat purchase activity CRM potential Acquisition Cost 70% Online Discount 55% Online Discount 3 rd Party Internet (Current) Internet (Future) 52
Internet Platform leading to Customer Relationship Management 1. The four point strategic plan focusing on Customer Acquisition, Customer Retention, Customer Conversion, and Performance & Optimisation is showing expected progress 2. Our customer centric approach and web development programme, including the three usability phases, is expected to deliver continued growth 3. We have not discussed Phase 4 and beyond however we are already investigating a number of new technologies across internet and other digital mediums that will help improve both the service we offer customers and our overall performance. To mention a few» Mobile device technology» Voice over PC» Digital Video brochures over PC» Animation and Others 4. Retaining customers is key to reducing online acquisition costs and our internet platform will play a significant role in the delivery of our future Customer Relationship Management (CRM) strategy 53
Customer Relationship Management Simon Hulme Director of Business Integration 21 March 2006 54
What Are The Benefits Of CRM? CRM is a set of tools and processes that use our knowledge of our customers to: Increase our sales and profits, by offering the right products to the right customers in the right way at the right time Improve our understanding of our customers buying habits and so develop the right product portfolios Develop our service proposition to increase loyalty, and build our brands through differentiation Utilise our customer feedback to improve our quality Improved CRM capability over the coming months will deliver significant benefits to the business from 06/07 onwards 55
The Customer Database The Oracle CRM system has been implemented, which integrates with the Oracle ebusiness suite Direct Customers GP Customers Web Customers Customer Service Questionnaires (CSQ s) Oracle CRM -Database -Toolkit Email newsletters Customer Service Quality Management Direct Mail, outbound calling The size of this database is expected to grow by at least 50% in the first year, and will continue to grow in following years, as we improve the scope and quality. 56
Prioritising CRM Opportunities Opportunities have been identified through which, with better insight and understanding of our customer, we can increase our share of their holiday spend Development activity has been defined to enable us to achieve our goals in these areas: Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty 57
Improving Margin Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Improve our targeting of customers to focus our spend on the right prospects Better segmentation and relevance of our marketing activity will improve proportion of brochure bookings, with higher margin Identify and develop cross-sell opportunities We anticipate that this set of initiatives will improve our brochure booking mix by at least 1% 58
Using Customer Insight Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Our sales staff will have access to customer buying history, and so enable them to better meet our customers needs Greater understanding of previous customer purchasing behaviour will increase the likelihood of upsell and conversion Build Rapport Recognition and appreciation Awareness of purchasing history Marketing Intelligence and Data Mining Enquiry capture Higher ASP, reduced discounting Recommendation of right products and ancillaries Better follow-ups and higher conversion 59
Selling Extras Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Improve our revenue of post-booking sales through personalised, timely and targeted post-booking contacts Couple - Maldives Pre-dep Airport Hotel Pre-booked Car Parking Family - Florida Pre-dep Airport Hotel Pre-booked Car Parking Airport Lounge Car Hire Upgrade Premiair Gold Pre-bookable seating Champagne On board Excursion Tickets Move from generic-based pricing (eg from 199 per week ) to specificbased pricing based on booking details Use web, homeworking and dedicated outbound call centres to offer ancillary products based on booking profiles 60
Exploiting The Selling Cycle Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Use email to maintain customer contact throughout and after booking cycle, and offer relevant ancillary sales products Booking Made Secure new booking New Holiday Offers to our previous bookers Confirmation email 24 hours after booking Personalised monthly newsletters Begin countdown. 2 or 3 days after booking Post-Booking Contacts embedded ancillary sales messages Pay Balance. 8 10 weeks prior departure Build excitement. 3 4 weeks pre-departure Personalised monthly newsletters Final check. 1 week pre-departure Welcome home. 1 week after arrival home 61
Holiday Countdown Starts.. Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Confirmation email sent to all on-line bookers Builds customer confidence of booking the right product Introduces concept of holiday countdown Further emails sent: Ancillary sales On-line payment facilities E-documentation 62
Welcome Home. Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty To all customers with email addresses after return from holiday Introduces cross-sell opportunities for MyTravel products Early booking message to secure customer s next holiday 63
Newsletters Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Targeted emails campaigns to registered customers Improved personalisation will increase conversion rate 64
Building Customer Loyalty Marketing Effectiveness & Improved Margin Higher Sales & Conversion Increased Ancillary Sales Greater Customer Loyalty Provide our Resort and Airline teams with specific customer profile information, allowing opportunity for differentiated service New Flexible documentation improved quality, and innovative The opportunity to offer personalised service during irregular operations Booking history offers the potential for personalised email brochures and Direct Mail 65
The Plan The programme of work is divided into a series of projects to reduce risk Each project will be implemented in 2006 and deliver tangible benefits in 2007 and beyond Prioritised to ensure focus on projects delivering best cost-benefit Anticipated Costs: 1.5M Project Delivery Marketing On-Line Q2 06 Ancillary Product Sales Improvements Q2 06 Integrated Customer Complaint Handling Q2 06 Customer Profiling Q2 - Q3 06 Data Mining Q3 06 CSQ Integration Q3 06 Flexible Ticketing Q3 - Q4 06 Airline & Resort - Personalised Service Development Q3 - Q4 06 66
Conclusion Oracle CRM is the strategic system to underpin our CRM strategy: Improved Marketing Effectiveness - targeting the right customers with the right campaigns, delivering higher margin Higher Sales and Conversion through giving customer insight to our sales teams Increased Ancillary Sales relevant, timely and specific sales messages post booking Greater Customer Loyalty provision of differentiated service and recognition of repeat customers 67
Reducing costs in MyTravel UK Aidan Connolly Finance Director, MyTravel UK 21 March 2006 68
Lowering the cost of acquisition Cutting commissions & adapting the distribution model Moving more business to the Web reduces costs Introducing better ways to reach customers using CRM Reduce commission paid to travel agents Closed 100+ GP stores Introduced new websites BCT, GP and improving others Introducing homeworking Reducing marketing costs Targeting brochures distribution, lower print runs & improving campaign effectiveness = lower brochure costs Making richer and broader content available on the Web, together with web brochures = fewer brochures More focused evaluation of spend effectiveness 69
Improving productivity Eliminating duplication Call centres 23 in 2003, now 5 Duty offices cut from 5 to 1 and focused in Helmshore Completion of integration of IT into 1 team Combining the BCT businesses Customer services moved under one management into one location Creation of single Web team to support all brands Simplified UK management structure Risk Tour Operators Standardising back office functions Simplifying UK risk tour operations Increased cross business team working 70
Streamlining the Business Focusing on the customer experience In resort teams better trained, provide 24/7 coverage and are closer to business and customer Improved quality management reduces costs Reducing administrative costs Cutting property costs Improving procurement Renegotiating existing contracts Constant focus on cost control SG&A costs cut in each of past three years - 46m in 2004/05 Materially exceeded plans to date Now expect costs to reduce 30m to 45m in current year 71
Distribution John Bloodworth Managing Director, MyTravel UK 21 March 2006 72
Going Places Number of shops by type: At 28 Feb 06 At 28 Feb 05 High Street 504 614 Out of town 4 7 Concessions 12 5 Total 520 626 Same store gross sales revenue since 1 November 2005 grew by 3.1% year on year 73
MTUK Order Intake by Distribution Channel 01/11/05 05/03/06 TY Revenue LY Revenue ( m) ( m) Going Places 154 31% 148 30% 3rd Party Travel Agents 195 40% 219 45% Direct Call centre 76 15% 83 17% Internet 68 14% 40 8% 144 29% 123 25% 493 490 74
Third Party Commission Policy Implementing a strategy that rewards performing agents 75
What does all of this deliver? 76
Achievement of 3.5% UK margin target in 2007 Roadmap to Margin Targets 3.5% 0% 77 Cost Reductions Margin % Distribution Efficiency Product Improvements Relative timeline -1.7%
Questions 78