Luxury holiday operator Kuoni has built itself up as a travel brand associated with quality long-haul breaks, but the performance of its UK business is causing consternation at the company's Swiss headquarters.
In its most recent results for the first nine months of 2007, released last month, Kuoni admitted that its UK business was continuing to fall 'short of its objectives'. Although third-quarter turnover increased by 23.8% - a figure that reflects its recent acquisitions of specialist operators - profits plummeted from 拢6.4m in Q3 2006 to 拢3.6m. The firm attributed the slide to the performance of its Kuoni-branded tour-operating business.
To make matters worse, this summer the company suffered a major blow with the departure of managing director Sue Biggs, one of the best-known names in the UK travel industry and a 25-year Kuoni veteran.
Being on the back foot is an unusual position for the organisation, which was launched in Zurich in 1906 by Alfred Kuoni. Over the years, it has built up a strong position in the world travel market, and now has operations in more than 30 countries across Europe, Asia, Africa and North America. Notably, in 1999, Kuoni UK led the way in the online revolution by launching what it claimed was the first real-time online booking facility for a tour operator.
But the market has since changed. Mainstream operators have entered the long-haul sector and improved their offering, while Kuoni's quality proposition has faced stiff competition from companies such as Carrier and Cox & Kings. What's more, relative newcomer Abercrombie & Kent is stepping up its marketing activity and this year appointed M&C Saatchi to handle its advertising business.
Kuoni has taken some steps to redress the balance. As well as a restructure of its divisions to better reflect modern travel trends, last year the company overhauled its website to enable holidaymakers to tailor packages to their preferences. Customers can organise elements such as accommodation, excursions and flights, in a stage-by-stage process.
However, will this be enough to enable Kuoni to turn around its performance? We asked Ruth Evans, head of marketing at The Co-operative Travel Group, and Mark Roalfe, chairman of RKCR/Y&R, which handles Virgin Atlantic's advertising.
DIAGNOSIS 1 - RUTH EVANS HEAD OF MARKETING, THE CO-OPERATIVE TRAVEL GROUP
Kuoni has consistently delivered an inspirational customer offering, but in recent times it appears to have suffered, as many market leaders do, from some complacency, resting on its laurels while the industry has changed around it.
As the traditional short-haul market has been squeezed by the invasion of low-cost flight suppliers, mainstream operators have dipped their toes into the long-haul sector, improving their product and reducing the quality gap between themselves and firms such as Kuoni.
At the same time, Kuoni has become more reluctant to work with long-term travel agency partners, distancing itself from revisiting commercial terms in an increasingly competitive market. The company has perhaps underestimated customer loyalty to high-street travel agents, which is most evident in the niche product sectors, where well-trained staff can add value for the customer.
On the plus side, Kuoni's reputation in the industry for providing a high level of product training is second to none - this needs to be developed further.
REMEDY
- Work with agency partners to increase presence through their high-street networks, recognising customer loyalty to local travel shops.
- Reinvigorate the training programme for travel agents.
- Refresh the product innovation scheme on which its reputation was built.
- Re-evaluate the values of its core client segments. Concerns may include those related to the environment.
DIAGNOSIS 2 - MARK ROALFE CHAIRMAN, RKCR/Y&R
The trends of today's travel industry are undoubtedly heaping the pressure on Kuoni. Web-savvy consumers continue to drive down prices, while the relentless desire for original holidays is making Kuoni's product seem plain vanilla - the brand feels 'then', not 'now'.
In short, Kuoni is occupying a dangerous middle ground where it is neither the cheapest nor the most compelling proposition, just as the market is segmenting into those two extremes. It is difficult to imagine finding anything unique in Kuoni's brochure, but it is easy to believe that one could find some of its holidays cheaper elsewhere.
Furthermore, Kuoni's brand problem is a serious one that it needs to address urgently. It is doing some good stuff - enter 'luxury holiday' into Google and Kuoni appears at the top of the first page of search results - but everything about its look, livery, tone and character feels dated.
Its tagline, 'The future of travel. Since 1906', only serves to highlight the problem the brand faces.
REMEDY
- Define Kuoni's take on luxury and help us understand what it stands for.
- Create exclusive products that change every season - expensive to do, but essential to differentiation.
- Radically overhaul the brand identity; navy blue on spearmint green simply doesn't work.
- Create online content that isn't all about flogging holidays. Tell customers more about the destinations on offer.