Kuoni faces challenges in brave new world

Kuoni decided to close its high-street travel agencies in Switzerland in January Keystone

One of Switzerland’s best-known retail brands, travel enterprise Kuoni, has left the high street in an attempt to stay afloat in the less visible space of visa processing. But the group still faces a tough environment despite its strategy overhaul, according to industry observers. 

The impending sale of its European tour operating business to the Rewe Group’s DER Touristik will end direct association with the Swiss public that began in 1906. Kuoni is also seeking a buyer for its India, China and Hong Kong retail travel services. 

“Tour operating is still a good business to be in,” Urs Wagensweil, a tourism expert at the Lucerne University of Applied Sciences and Arts, told swissinfo.ch. “But to succeed now, you have to either be a huge international player or target specialist niche groups.” 

“Kuoni is something in between. It either had to grow bigger, by acquiring smaller competitors, or get out altogether.” 

Since launching more than a century ago, Kuoni has expanded into Europe – particularly Britain and the Nordic countries – and more lately into India, China and Hong Kong. But the company is still dwarfed by European competitors such as Tui. 

Squeezed by competition from online holiday booking sites and low cost airlines, Kuoni took the decision to step away from bricks-and-mortar travel shops in January. 

“The travel market environment is likely to remain fast-changing, requiring travel companies to choose distinct development priorities,” the company said in a statement in January. 

It will now specialise in processing visas, where it holds a 50% global market share, hotel accommodation wholesale and services for group travellers. 

Tough competition

But even here Kuoni will face tough competition from the likes of American Express and Expedia, according to analysts.

“It will still be in a tough, competitive business and will have to work hard to succeed,” said Wagensweil. “The next few years will continue to be challenging, but at least the company can now concentrate all its forces in one direction.”

Kuoni is most likely to find success in the visa-processing business, according to Zurich Cantonal Bank analyst Marco Strittmatter. But the company faces “a more competitive situation” with its two other remaining units, global travel distribution and global travel services. 

Swiss customers, used to booking their holidays through an established local brand, will now have to get accustomed to the new German-owned travel agencies. Hotelplan, owned by the Swiss retail giant Migros, is now the only sizeable homegrown tour operator left in Switzerland. 

“There may be some Swiss customers who will switch to Hotelplan or other smaller local operators if they want the Swiss style experience,” said Wagensweil. “But most customers also look for performance and value for money. As long as Rewe keeps Kuoni staff and retail shops, they have a good chance of retaining Swiss clients.” 

Despite the proliferation of online competitors in recent years, the number of physical retail travel agencies in Switzerland has remained stable, according to Strittmatter.

And Wagensweil cited recent research that revealed that more Swiss consumers have been returning to the high street travel shop in recent years. 

“Five years ago only 17% of clients who wanted to book more complex travel itineraries went to their high street store,” he told swissinfo.ch. “That number has now climbed to 21% which shows that there is still demand for face-to-face professional advice.” 

“Some travellers have been put off simply by the sheer scale of offers available on the internet.” 

Kuoni’s tour operating business generated CHF2.2 billion ($2.4 billion) in sales in 2014, nearly 3% lower than in 2013. Growth in the group’s total CHF5.5 billion sales was generated by the units the company will retain.