Kuoni Travel Holding Ltd.

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Kuoni Travel Holding Ltd.

Neue Hard 7
CH-8010 Zurich
Telephone: (+41) 1-277-44-44
Fax: (+ 41) 1-271-52-82
Web site: http://www.kuoni.com

Public Company
Incorporated: 1906 as Travel Bureau
Employees: 6,552
Sales: SFr 4.11 billion (2000)
Stock Exchanges: Swiss
Ticker Symbol: KUNN
NAIC: 561510 Travel Agencies; 561520 Tour Operators

Kuoni Travel Holding Ltd. oversees one of Europes top five travel and tour groups. Based in Zurich, Switzerland, the company is particularly strong in both its domestic and U.K. markets, but is also present throughout Europe, especially in Scandinavia, with a rising presence in the United States and Asian markets. Kuoni Travel operates in three primary areas of business: Leisure Travel, which accounts for more than 85 percent of the companys sales; Business Travel, through its BTI unit, which handles travel coordination activities for the small and mid-sized and large-scale corporation markets; and Incoming Services, which provides travel destination services, such as touring and sightseeing packages. The company markets it high-end tours and travel packages under the Kuoni name. Discount travel packages are offered under the Helvetica brand name. Switzerland remains the companys single largest market, representing slightly less than one-third of its total sales. The U.K. and North American markets together provide less than one-third of sales. The European continent, including Scandinavia, added another roughly 30 percent to Kuonis total sales, which topped SFr 4 billion in 2000. Kuoni has been stepping up the pace of its acquisitions at the turn of the century. After being thwarted in its attempt to merge with the United Kingdoms First Choice Holidays Pic, which would have helped the company create a counterweight to Europes marketleading Preussag-Thomson alliance announced in early 2000, Kuoni has changed direction, targeting the Scandinavian, Indian, and North American markets for its future growth. Listed on the Swiss stock exchange, Kuoni is led by Chairman Daniel Affolter and President and CEO Hans Lerch.

Early Twentieth-Century Travel Pioneer

A native of Chur, Switzerland, Alfred Kuoni moved to Zurich to open a travel agency in 1906. If the companys nameTravel Bureauwas not all that original, Kuoni quickly established itself as a pioneer in exotic travel destinations. One of the companys first organized tour packages took Swiss citizens on a guided tour to far-off Egypt. In 1925, Kuoni reincorporated as a joint-stock company, with shares remaining within the Kuoni family. Through the years leading up to World War II, Kuoni expanded from its original location to include a number of sales offices throughout Switzerland. Despite its success in its home market, the company recognized early on that Switzerland was too small for its growing ambitions. The company also opened its first international office, in Nice, in the south of France. Further international moves were thwarted by the buildup to and outbreak of World War II.

Kuonis international expansion began almost immediately after the end of the war. In 1948, the company opened its first international subsidiaries, in Italy and France. Kuoni also continued to pioneer new and exotic travel destinations, such as the organization of the first charter flights to Africa. In 1957, the Kuoni family established the Kuoni and Hugentobler Foundation under which to group their holding; much later, with Kuonis public listing, the foundation would became the companys primary shareholder.

Kuoni began looking farther afield in the 1960s. In 1963, the company made its first entry into the Asian markets with the opening of a branch office in Japan. Two years later, Kuoni entered what was later to become one of its most important single markets when it acquired the United Kingdoms Challis & Benson Ltd. The importance of the U.K. market to Kuoni was seen at the beginning of the 1970s when the company changed its nameand its U.K. operations nameto Kuoni Travel Ltd.

The companys listing on the Swiss stock exchange provided fuel for new growth, while opening up the companys shares to new partners, including SwissAir, which built up a 30 percent share in Kuoni. The public listing enabled the company to step up its international growth. After opening a subsidiary in Austria at the beginning of the decade, Kuoni now launched subsidiaries in Germany and Spain, both in 1973, and a subsidiary in Greece the following year. The year 1974 also saw Kuoni step up its position in the U.K. market, when it acquired Houlders World Holidays, based in England.

While building up its international network, Kuoni also was launching new products. In 1977, the company began marketing its first around-the-world tour. In the 1980s, Kuoni began to acquire properties in many of its most popular destinations, adding a number of hotels, including the Hawksbill Beach Hotel in Antigua in 1981 and the Discovery Bay Beach Hotel in Barbados, bought in 1984. In 1986, Kuoni became the first tour operator to offer around-the-world charter flights on the Concorde supersonic jet. Although this latter product catered to the companys strong high-end and high-margin clientele, Kuoni also launched a new brand name, Helvetica, to encompass its discount tour and travel operations.

Takeover Target in the 1990s

The worldwide travel industry remained highly fragmented in the 1990s, with numerous small-scale operators competing against a smaller number of quickly growing industry heavyweights. Kuoni, which had already captured the lead in the Swiss market, was determined to maintain a leadership position as the travel industry headed into a drawn-out consolidation drive leading up to the turn of the century. The company acquired Reiseburo NUR Neckermann in 1987, boosting its position in the Austrian market. Three years later, the company regrouped its Austrian activities, launching the NUR Neckermann Reisen AG joint venture with Germanys Neckermann Touristic. Kuonis part of the joint venture remained at 49 percent.

Back home, the company continued to consolidate its dominance of the Swiss market, acquiring Privat Safaris, the countrys leading operator of tours to eastern Africa, and Reiseburo Popularis, which combined retail offices with direct sales operations marketing discount tour and travel packages. Yet Kuonis strong position in the Swiss market and its growing share internationally soon led it to become the target of a takeover attempt. The sale of SwissAirs 30 percent holding created the opening for Germanys Krauthof AG department store group to acquire a 50.1 percent majority of Kuoni in 1992.

Kuoni, through the Kuoni and Hugentobler Foundation, nonetheless retained majority control of the companys voting rightswhich provided the leverage to the resolution of the takeover attempt. In 1995, the Kuoni and Hugentobler Foundation bought out Krauthof s stake in the company. The company then changed its name to Kuoni Travel Holding, a move that also reflected a new diversification drive: in 1995 the company acquired Danzas Reisen AG, a Switzerland-based specialist in business travel services. The Danzas acquisition led Kuoni to create a dedicated business travel unit. The company also acquired retailer Kewi Reisen, while integrating its majority share of Railtour Suiss SA, acquired the year before.

Industry Consolidator for the list Century

With its independence assured, Kuoni launched its own acquisition drive in the late 1990s. In 1996, Kuoni added Frances Voice SA, and Scanditours, focused on the Nordic region. The company moved into The Netherlands with the acquisition of Special Traffic that same year. Kuoni also looked to the potentially huge market of India for the first time, acquiring SOTC Holiday Tours, which provided the basis for its Kuoni India Ltd. subsidiary. Two other acquisitions completed the companys busy years, those of Rotunda Tours, expanding Kuoni into South Africa, and CIS Intersport, a Swiss company catering to the growing demand for sports-oriented holiday packages. In 1996, also, the companys Edelweiss Air launched its charter flight operations.

Kuonis expansion campaign continued strongly through the end of the century, including the launch of the P &O Travel Ltd. joint venture with Peninsular and Oriental Steam Navigation Company, based in Hong Kong, with offices in Bangkok and Singapore. The 1997 joint venture strengthened Kuonis position in the Asian market, which, despite the austere economic climate in the region at the end of the decade, promised to become one of the worlds stronger holiday markets. Closer to home, Kuoni continued lining up acquisitions, especially Voyages Jules Verne, a U.K. upscale tour operator, and Switzerlands Manta Reisen, which specialized in scuba and other deep-sea holidays. The company also acquired German business travel specialist Euro Lloyd Reisenburo, which it combined with its other German operations into the new subsidiary BTI Euro Lloyd, one of that markets top five business travel companies. Also in 1998, Kuoni launched a joint venture with Italys Gastaldi Tours.

The next year saw Kuoni face a major setback. At the beginning of 1999, the company announced its agreement to merge with the United Kingdoms number three travel operator, First Choice Holidays. The merger, agreed to by both sides, was thwarted by a surprise takeover attempt from rival U.K. operator Airtours Pic, which offered a higher per-share price. When the majority of First Choices shareholders chose to back the Airtours offerwhich itself was blocked by the European monopolies commissionKuoni pulled out of the merger talks.

Company Perspectives:

We are committed to creating best value for people: our customers, employees, shareholders and business partners. We strive to be successful in our core business activities: Leisure Travel, Business Travel and Incoming. We motivate our staff by encouraging entrepreneurship and innovation at all levels. We think and act internationally. We strive to enhance shareholder value. We support environmentally friendly solutions. Kuoni stands for reliability, best value for money, quality and fairness in business.

The First Choice merger might have allowed Kuoni to become not only a major player in the U.K. travel market but to boost its position to the top ranks in all of Europe. After the collapse of the merger, however, Kuoni redirected its strategy to other markets. Three markets in particular were to receive its attention: the United States, Scandinavia, and India. In 1999, Kuoni acquired upscale travel company Intrav, based in St. Louis, Missouri; the Intrav acquisition, which cost Kuoni $115 million, gave it a strong opening into the booming U.S. market for luxury vacations. The following year, the company acquired T Pro, an incoming services specialist based in New York and the number three incoming services provider to the U.S. market.

The year 2000 saw Kuoni not only strengthen its hold on the Swiss travel markettaking a 49 percent share in ITV, Switzerlands third largest tour group and subsidiary of Germanys Preussagbut also expand its presence in its new target markets of Scandinavia and India. The first was served by the acquisition of 49 percent of Apollo Resor, based in Stockholm, Sweden, and then boosted by the acquisition of Denmarks Dane Tours. In March 2001, the company announced its decision to restructure most of its Scandinavian holdings into a single subsidiary.

On the Indian subcontinent, which represented one of the worlds single largest potential markets, the company formed a cooperation agreement with that countrys Tata conglomerate at the beginning of 2000. That year the company also acquired Indias travel leader, Sita Travel, which was then merged into the companys Kuoni Travel subsidiary. Kuoni was now the leading travel group in India. As the company entered the new century, it promised to continue its acquisition drive to reinforce its new geographic objectives. To fuel its continued expansion, Kuoni performed a ten-for-one stock split, raising another SFr 144 million.

Principal Subsidiaries

Alletiders Rejser A/S (Denmark; 95%); Cosmos Internationales Reise- und Touristenburo GmbH (Austria); Edelweiss Air AG (73%); Euro Lloyd Reiseburo GmbH (Germany); Hellenic Tours SA (Greece); Jet Tours AG; Kuoni Gastaldi SpA (Italy; 55%); Kuoni India Ltd.; Kuoni Japan KK; Kuoni Reisen AG; Kuoni Travel Inc. (U.S.A.); Kuoni Travel Ltd (U.K.); Kuoni Travel Nederland BV; Kuoni Travel (Scandinavia) A/S (Denmark); Kuoni Utazasi Iroda Kft (Hungary); Manta Reisen AG (90%); P &O Travel Ltd. (Hong Kong); Railtour Suisse SA; Voyages Jules Verne Ltd (U.K.); Voyages Kuoni SA (France).

Principal Competitors

Airtours Plc; American Express Company; Carlson Wagonlit Travel; First Choice Holidays Pic; Preussag AG; Thomas Cook Holdings Ltd.

Key Dates:

Alfred Kuoni opens Travel Bureau in Zurich.
Kuoni organizes first guided tour to Egypt.
Company is incorporated as a joint-stock company.
Subsidiaries in France and Italy are opened.
First charter flights to Africa are launched.
Kuoni and Hugentobler Foundation is established.
Japanese branch office is opened.
Challis & Benson Ltd (U.K.) is acquired.
Austria office is opened; name is changed to Kuoni Travel Ltd.
Company is publicly listed on Swiss stock exchange.
German and Spanish subsidiaries are established.
Houlders World Holidays (U.K.) is acquired; Greece subsidiary is opened.
Hawksbill Beach Hotel (Antigua) is acquired.
Discovery Bay Beach Hotel (Barbados) is purchased.
Reisburo NUR Neckermann (Austria) is acquired.
Privôt Safaris and Resieburo Popularis are acquired.
Krauthof AG makes takeover attempt.
Kuoni acquires Railtour Suisse SA.
Name is changed to Kuoni Travel Holding Ltd.; Danzas Reisen and Rewi Reisen are acquired; Edelweiss Air AG is founded.
Kuoni acquires Voice SA (France), Special Traffic (Netherlands), SOTC Holiday Tours (India), Rotunda Tours (South Africa), and CIS Club Intersport.
P &O Travel Ltd. joint venture is launched.
Voyages Jules Verne (U.K.), Manta Reisen (Switzerland), and Euro Lloyd Reiseburo (Germany) are acquired; Kuoni Gastaldi Tours joint venture is formed.
Merger is attempted with First Choice Holidays (U.K.); Intrav (U.S.A.) is acquired.
Kuoni acquires T Pro (U.S.A.), Sita Travel (India), Apollo Resor (Sweden), and Dane Tours (Denmark).
Scandinavian holdings are restructured.

Further Reading

Carey, Christopher, Intrav Accepts $115 Million Buyout from Swiss Travel Firm, St. Louis Post-Dispatch, July 20, 1999, p. C12.

Court, Mark, Well Fight Them on the Beaches, Sunday Telegraph, May 2, 1999, p. 6.

Drees, Caroline, Kuoni Slips on Capital Increase News, Reuters, March 28, 2000.

Gelnar, Martin, Kuonis First Choice Merger Seen Falling Through, Reuters, June 2, 1999.

Kuoni Maps Out European Expansion Strategy, Financial Times, March 29, 1999.

Kuoni on Hunt for Takeovers, Financial Times, March 29, 2000.

Pitcher, George, Patient Players Triumph in Travel Industry Takeovers, Marketing Week, May 18, 2000.

M. L. Cohen