Case Study: Information Management in TUI - one of the world's largest tour

operators
Josef van Kisfeld, Head of Information Management, TUI Group

Some of you have been following what has been going on in the tour industry in the
USA, there are some significant changes happening. Traditionally the wholesale tour
business has in the USA has been very fragmented with really no single company
owning more than 5% of the market and what we have seen really happening starting
last year is some significant consolidation, which will I believe reduce significantly the
number of tour companies in the USA but increase the number of tours per
companies. I just saw a couple of days ago that John Martinen the former CEO of
Globas Cosmos has now started an organisation to go out and acquire tour
companies for consolidation as well. So we have at least four groups in the USA who
are actively seeking to acquire tour companies and grow them into significant
organisations. Of course that's different, in Europe they've had significant
organisations for a long time and they are no strangers to massive organisations who
own significant parts of the market. And that really leads into this case study which is
from TUI which is one of the largest tour companies in Europe and giving this case
study is Josef van Kisfeld, who will discuss Information Management at TUI. Josef
joined TUI 19 years ago, and has held various positions in various IT departments
and organisational departments. He was appointed the director of Information
Management in 1996.

Thank you

First of all I think I must apologise for my English because I'm not so clever with this
language. So we will see. What I will explain to you today is not information
management from a technical point of view, it's more the organisational approach.
How we understand information management within our company as a part of
information technology. Because we think about information management as a
broker between the peripheral needs on the one side and the technical
implementation on the other. So let me first to introduce you a little bit to the German
market, Bill just mentioned that the market is different in Germany than in the US, let
me introduce TUI and what TUI does and where are the differences between the
markets where TUI places it's roles and the American markets. Second why did we
implement such a role, Information Management, and how we did it, and then we
heard yesterday about Carlson, today from Thomas Cook that there is an ongoing
concentration process in Europe, and I will try to point out how the development of
Information Management is part of information technology will also have to change in
our company or in our group. TUI is a big operator, founded in 1968 grouped
together from different operators at this moment, and from 1969 we were Vestart, it's
an electronic network we sold two packages online in travel agencies, so we have a
very long experience in information technology and selling terrific products. The
whole group has about 9,250 employees and we speak about customers because we
know our customers since a couple of years. We have nearly 7 million customers
each year and the turnover was about 9.3 billion in 1997, we have no extra update
from the last year, but the group profit was about Df170.

Let me introduce a little bit more, TUI is a group of different companies, you can see
on this chart on the top level different tour operators, some of them are also
operating or sending clients to America. But there are also Airtours which is a
German tour operator or Dutch operator as indicated here, but there are also tour
operators joined to the group in Switzerland, in Poland, Austria and so on, and also in
middle Europe let me say. But to your eyes not only a tour operator we have not yet
completed the vertical integration with other partners in this business so there are
other chains like VU and others and Robernvonluk and these partners have also
hotels in the Caribbean and in the United States and perhaps you know some of
them. On the other side there are incoming agencies in the destination area, namely
in the Mediterranean environment and also travel agencies in Germany and now
coming on also in other European countries. Let me speak about the business TUI
that builds pre-package tours. That means that we have a lot of charter seats we
contract for our companies and we have a lot of hotel beds that are contracted
directly from the hotel owner for the whole season. So we make these contracts one
year before the brochure appears on the market, and so you have a long distance
between the selling process of the hotel and the selling process to the client. There
was a lot of discussion yesterday why the market in Europe is not so good for the
multimedia and I think one of the reasons is that here in America you have big hotel
chains and when you book a hotel chain via the internet you know what this hotel
chain means, what quality you can expect from this hotel chain. Whereas in Europe
you have a lot of very big hotels and they are not known by the client. So the quality
of the hotel is let me say branded by the tour operator who offers this hotel to the
client. And so this is the one reason, the other reason is that these are very small
hotels they have not their own reservation system. So if they want to sold via internet
and so on, they need the reservation system and for only small hotels who do not
have the organisation to have such reservation systems they have not this time. So
you find more and more the tour operator which offers this product also via the
internet and via his brochures and so on and not directly as a provider in the internet.

But let me now come back to Information Management. To discuss Information

Management, let me show you a little bit complex chart, which shows I think it was
Delsie Webb yesterday from Carlson also mentioned that we talk about travel
agencies but tour operator is the same thing. The main task of the tour operator is
compiling information, is doesn’t produce real products, it compiles information for
the client and he promises the client he will deliver a service, which he doesn't deliver
himself. The hotel or the carrier who delivers the service afterward. So the work of
the tour operator is to combine information from distribution centres from the
competitors from the clients, but the tour operator of course also has his own data,
his own history, his price history and so on, his clients and so on. He has information
about the providers, of carriers, hotels and so on, and he combines it to bring out a
package to offer to a client with a correct price so that he can be sure that this
package will be accepted by the client at the right time. So it's a very very complex
business to combine all this information and as you heard, one year before departure
you have to make these plans, to bring up the right products for your clients. So you
can imagine to do this, you need a lot of systems which support this process the
complete process. Not all the systems we run in our company for supporting these
processes but this as a main system I think. For example, for sale, of course there
are reservation systems that was online in 1969 and we have a reservation system
that is in the German market with about up to 1 million transactions per day. Of
course internet reservation systems we are online, I mentioned it yesterday since two
years, this separate information system and reservation system, with direct booking
facilities because there are very low booking on this system. Line management
system, we have about 20 million clients in our system, knowing what they did in the
last five years. What was their business so we can mail them and so on. But there
are also to prepare all this data you need planning systems for flights, charter flights
for the product and so on, and of course you need after that administration systems
for booklet for the package tours and also for accountants and so on, and a data
warehouse for controlling purposes. So you can see there's a lot of technology
supporting the processes within TUI and if I look back in the last let me see 10 years
in TUI, now has 3 times more clients than it had 10 years ago but there are only I
think 50% of additional people, all the rest of the work is done by computerisation, by
improving the systems we have in our company.

I spoke about the touristical needs and there are on going touristical drivers to bring
us to develop new systems to improve our systems, as there are short term bookings
which are coming on more and more. There is vertical integration between the hotel
groups, tour operators, carriers and so on and we must link all these companies
together. There's of course business expanding I mentioned that we have now not
only tour operators in Germany but also in other countries, and with this problem you
have in Europe different languages you have different currencies and this all leads to
complexity in your system. But there are of course technical drivers we heard
yesterday from IBM about network computing, to do network computing you must
have prepared your systems that you can run such technical possibilities. Server
computing, network computing, and internet are technical drivers with others. And
when you have seen the lot of system you can never say well throw away all the
systems and make now new systems. You will always have to improve your systems
but you must accept that the business must go on with your system so you never
have the chance to begin at zero.

How from an organisation point of view we manage all these problems, on the top
you find the touristical departments in our company and with the touristical
departments we have built business engineering groups. We did business process
re-engineering project over the whole company 3 years ago and one of the results
was to implement such business protégé engineering groups in the touristic
departments very close to the business so that they can optimise the business.
Optimise does not mean only to find new technical possibilities to optimise the
business often there are also organisational solutions which are much better than to
find technical solutions, because technical solutions of course are a possibility but if
you can do it in an organisational way to cut the process to occupy the processes
without the technical solutions its better, cheaper.

On the other side, here on the blue side we have the information technology and
between the IT development groups and the IT technical groups, in the touristical
department we placed Information Management as a group, let me now go a little
more into detail of this 3 main players in the game. How to build and how to optimise
the system.

I mentioned the process, in the engineering group of course they had to optimise
processes, solutions could be organisational or technical, when they are technical
solutions they define the system requirements and of course when the system has
been built they test and integrate the system into the touristical process and they
manage the existing applications in terms of first level support. They know the
systems for their clients and they help the client to operate the systems.

What is the main task of Information Management? Information Management has a

task to define and to develop the IT application architecture, we have define and
coordinate IT plans, but we also have to coordinate the business requirements and
technical needs within projects, to bring together the technical step with the touristical
step to create the appropriate solutions for the problem they have.

IT development, 2 main tasks, of course maintaining the running systems everybody

knows it's more interesting often to develop new systems, but you gain your money
with running systems and this is the most important task of this department. But of
course we develop new systems and enhancements, also systems in IT projects.
We are speaking here about 33,000 mandates per year for this development. IT
development we nearly permanently do in projects, it means that with temporarily
organisations who do it only to fulfil this project. With its own steering group so its
not responsible to the normal organisational structure, but it has its own
organisational structure to do his work.

Let me go a little bit more in detail on Information Management. Let me speak about
coordination. When we speak about coordination of Information Management, there
are different possibilities when there is an ongoing project for example, or
maintenance of existing systems of course the Information Management has not the
task to be permanently between the business project engineers on the one side and
the developers on the other side. Its only necessary for us to be integrated in
projects where there are architectural issues. And to define these projects. But
normally there's a lot of work in this daily business done without Information
Management.

Second, horizontal coordination the TUI of course consists of a lot of departments

and if you have in each department such a business process re-engineering group
you have to coordinate between these departments because many solutions are not
only for one department but the solutions has an impact on different processes so
there is a lot of coordination work to do between such processes from Information
Management. But the coordination task becomes more and more important for other
projects we have to do, for example if there is optimisation processes in the value
chain, let me say between the hotel chain, the incoming agency and the tour
operator, because the data we have from our client must be transferred from the
incoming agency, the incoming agency has to make transfers, has to offer a round
trip and so on, and the hotel also needs this data for his property management
system, for his hotel management system. Nobody likes to repeat this data for the
second time or the third time, so you have data links to your partner to do so. And in
this process for example, you have a lot more integration.

With the ongoing concentration process in this market, not only in America but also in
Europe. (Tape finishes) which are the backbone systems of such an enterprise and
our reservation system is kind of backbone system but its from CICS and BB2 so we
have moved a little bit more to this system, but we also need of course, this layered
structure to allow PC based applications which has central database of course has
the same database as the backbone system, the same data used online on the
system. For example, we have a flight application, for a flight disposition, and this is
a 3 tiered model with computer or PC based human interface, and on the other side
is the same database where the flights are booked from the travel agencies in the
online mode.

But if you speak about coordination and architectural tasks there are also other
functions which must be done by such a Information Management group. There are
standards to assure groupwide interoperability and synergy, technical standards,
defined interfaces for different companies working with the system. And of course
you have to make annual plans and company dated previous project plans which
must be harmonised over the whole group. This is the tasks which are done by
Information Management within TUI to external clients let me say to fulfil the needs of
the touristical clients, but of course information technology also has its own
processes and these processes due to technical changes, change permanently and
you have to follow these changes and offer as it were proper develop tools for
example, or to assure that the proper development is done as you want to have it in a
secure base.
To summarise this, Information Management has two tasks I mentioned before, one
is done by education consultants, this is there for correlation for architectural tasks
and so on, there are process engineers for the IT to define software develop
environments and to support the software development processes, quality
development and so on. And on the right side you find a point which I didn't mention
before but this is I think also very important. I mentioned that three years ago, we
implemented business process engineers in all the touristic departments but of
course when you implement such a task you must harmonise the business of this
process engineers so that on the one side they have a chance to operate or work
together as they have to use the same tools for the process documentation, the
process measurement and so on. And to help to introduce this business we have a
coach for business focus engineering and this focus also here in my Information
Management group.

So this is the accurate situation let me say, what is happening now. The TUI Group
has merged with Happedlord which is a charter carrier and travel agency chain in
Germany to a new group called HTUI, this merge of course leads to integration of all
the systems which are used by the company to have the benefits of such a merger
we integrate all the systems in the area which are now done only once which had
been done twice before, for example flight control price. Now we have joined this
task together to only one task.

The next step, Proysag which have been named sometimes today and yesterday, is
the new owner of HTUI, and has shares in the British market, and of travel agencies
group Thomas Cook. So the next step will be how to work together in this new
group, to have the synergies and the shareholders attempt from such mergers and
we will have to follow this development to bring an integrated IT service for the whole
new group.

So to meet this need the TUI has built a company called TUI Information Technology
which is now 100% a subsidiary of TUI, and we have concentrated all the information
technology of the TUI Group. What are we intending to do, we have defined tasks on
a group level, and we have a competence centre and within this competence centre
we think to deliver the services for the company, for example, of co-operating of the
travel agencies, of the incoming agencies of the hotel group so that we can offer
integrated tasks for it, and this model of competence centre allow also to introduce
for example, the competence of the flight, or I don't know what will be competences
needed in this whole value thing.

But there are some tasks as IT strategy, standards and so on and there also are
services defined on a group level, for example, there are group bought applications
within TUI but we don't know how we'll continue it in the new group, for example for
the group available applications, for example our book keeping and financial
management.

When we see this development also Information Management will be concerned with
this development because if you look at the past I mentioned before there are some
tasks which much be done on the level of the competence centre, you will have to
define contact persons for each IT client within such a competence centre we will
build a competence centre for example for incoming agencies in April this year, and
we have incoming agencies in 16 different countries around the Mediterranean and
when you build solutions, which they run all the same business for all the same users
but you need that contact person for the IT client so they can have a direct access to
the solutions and to the services. Across the let me say architectural tasks will be
done on the level of competence centres and the other tasks I mentioned before will
be done at the group level. For example, for technical application architecture of the
group wide application architecture on the application side and of course sending a
correlation and so on will be on the group level.

So perhaps in 10 years we will see what has been realised from this.