Executive Report – The Magazine For The Tourism, Hospitality and Leisure Industry - Part One

Dare I say it but, we seem to be enjoying a period of sustained recovery – although due to escalating HR costs, overall, margins are still behind the 2000 levels. The important thing is that the outlook, on all fronts, is robust, underpinned by strong fundamentals. These are the ever growing appetite for air travel, the impact of the emerging markets of China, India and Russia and a generally positive economic outlook. It is the same for the USA where consumer confidence is waning and may set back the world‘s biggest tourism market in 2007. Even the threat of escalating oil prices has, for the time being at least, receded.

In this edition, we take a closer look at the future consumer, the power of brands, the emerging market of Brazil, the future of the casino industry, the increasing public to private play and focus on the performance of the Middle East hospitality industry. All good news…

As the New Year begins, the single most important ‘To Do’ on most CEO agendas is the war for talent. Changing demographics, an ageing population and a significant shortage of young talent in many developed countries means that the industry, more than ever before, needs to focus on recruitment and retention. The hospitality industry, with a non-managerial turnover rate of 50% and managerial turnover rate of 25% will simply not live up to its brand promise unless this critical issue is addressed. The war for talent is on. What is your winning strategy?

As always, I welcome your feedback on our report.

No wonder it is a favourite topic among tourism, hospitality and leisure market analysts. Here, we consider why this sector is so attractive to Private Equity investors; we look at recent acquisition activity and question whether the current level of activity will continue.

Unique opportunities for growth
Even though the tourism, hospitality and leisure industry is cyclical and vulnerable to external factors such as terrorist attacks and political upheaval the performance of the sector has proved amazingly resilient over the past few years, and confidence remains high.

Private Equity has dominated the top ten leisure sector deals across Europe during the first nine months of 2006 – accounting for six out of the top seven transactions.

European deals overview
Steady cash flows and typically asset-backed businesses make this an exciting sector for Private Equity investors. Many areas of the tourism and leisure industry are still relatively fragmented, offering ‘buy and build‘ consolidation opportunities. Banks are keen to finance add-ons, so Private Equity firms can profit from relatively high gearing.

The hotel sector is a great example of successful Private Equity interest. In 2005, 40% of European hotel deals involved Private Equity groups, compared to just 1% five years earlier. Today, every time a hotel deal comes onto the market, property funds and private equity firms fall over themselves to sign the contract. Clearly, private investors, looking for businesses with potential in an expanding market, are maximising the opportunities in this high-growth sector.

More transactions
If we look first at the UK, the diverse leisure sector has proven to be a strong magnet for Private Equity. Since 2002, around 10% of Private Equity transactions in UK companies have been in the leisure sector.

The size of Private Equity leisure deals in the UK are gradually increasing, rising from €210 million, in 2004, to €270 million the following year and €290 million in the first three-quarters of 2006, when some 22 leisure-related deals have transacted. Recent successes included EQT’s €2.6 billion acquisition of Select Service Partner and Creative Host Services from Compass, and Dubai International Capital’s €0.9 billion acquisition of Travelodge from Permira.

Growth patterns are similar across mainland Europe, albeit from a considerably lower base. In 2005, there were 23 deals valued at around €9 billion, up from 10 deals worth €2 billion the previous year. Much of the growth in average deal size was driven by Cinven and BC Partners €4.3 billion move for Amadeus Global Travel Distribution and Starwood Capital Group's €2.6 billion takeover of Groupe Taittinger and Société du Louvre.

More money
Although scrutiny from several regulatory bodies is increasing and many analysts are predicting a slowdown in Private Equity merger and acquisitions, record aggregate funds are still being raised.

For the first nine months of 2006, €300 billion was raised globally compared to €250 billion for the whole of 2005. These record levels of fund raising are driven by the recent emergence of the mega buyout funds, including the $15.6 billion

(€12.3 billion) raised by Blackstone Capital Partners, which created the world’s largest Private Equity fund. There was also the $15 billion (€12 billion) raised by both Kolberg Kravis Roberts & Company (KKR) and Texas Pacific Group (TPG); €11.1 billion by Permira and €6.5 billion by Cinven.

Lenders are also making senior debt available on ratios considerably higher than historically offered. This, coupled with the increasing levels of available equity, has intensified bidder competition amongst Private Equity investors themselves, and with other private investors (property and hedge funds).

More competition
More aggressive competition and larger transactions have resulted in two trends. Firstly, Private Equity funds are clubbing together to reduce risks and circumvent investment limits from one fund on any particular asset. Private Equity investors typically expect a return of 20% - 25%, but the increase in competition and hence prices is increasing the risk on exit multiples.

One example of a consortium bid was the acquisition in 2005 by a consortium comprising Lehman Brothers, Realstar and the Government of Singapore (LRG) of 73 UK Hotels from IHG for 9.3 times Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA).

Secondly, the increasing use of auctions – More and more deals across the UK and mainland Europe are going to auction, often attracting in excess of 30 first round bids. This move towards auctions and controlled sales give sellers more say in the transaction process, and limits the amount of pretransaction planning in which a buyer can engage. Private Equity firms are rapidly becoming adept in open auctions. In the UK market, Private Equity was successful in 74% of auctions in 2005, compared with only 30% in 2001.

A recent study by Deloitte also revealed that the superior transaction execution of Private Equity bidders has enabled them to frequently knock out the corporate competition.

If they are to truly compete with the Private Equity sector, corporate buyers now need to update their skills in the buyers’ marketplace and deliver shareholder value, or they could ultimately become targets for private investors themselves.

Playing for time
Private Equity investors are now looking for opportunities with a strong headline exit, and the gaming industry ticks all the boxes.

Operators of bingo and casino establishments, for instance, are assetbased, with non-elastic customer demand, and are very cash generative. There is also a significant amount of deregulation taking place, particularly in the UK.

In 2005, Permira acquired a 33% stake in the Gala Group (valuing the business at circa £1.9 billion). Leading the way in 2006 was the acquisition by BC Partners of 51.57% of Hyatt Regency Hotels & Tourism from its majority shareholder Hellenic Casinos Company. Headquartered in Athens, Hyatt Regency Hotels & Tourism is the leading operator of casinos in southeastern Europe with casinos in Athens, Thessaloniki and Tirana.

Despite the proposed smoking ban, the bingo sector, where a high proportion of customers are smokers, has seen continued interest by Private Equity investors – Buckingham (Alchemy Partners LLP), Mayfair Gaming, and Thomas Holdings LLC (Hermes Private Equity).

Hotel market heats up
The hotel industry has seen unprecedented levels of transactional activity in the past five years. In 2005, European volumes were up 57% – at €15.7 billion – year on year. We expect 2006 levels will be almost as impressive at circa 20% up on the previous high in 2001.

With hotels offering a yield of around 6%, compared to the sub 5% through offices, retail and other forms of property, it’s not surprising that hotels have become more attractive to buyers. Separating hotel ownership from operations has been a clear trend in the hotel industry in recent years with opco / propco splits and sale and leasebacks or sale and managebacks driving many of the recent transactions.

Further structuring opportunities and expected earnings growth are proving attractive to Private Equity firms, who, keen to unlock the value in an industry supported by strong fundamentals, have pounced on this sector. Private Equity groups have taken a stake in around 35% - 40% of hotel deals across Europe in the last couple of years – an amazing leap since 1998 when it was less than 20% and the year 2000 when it was just 1%.

The major Private Equity acquisitions in the European hotel sector in 2005 included Starwood Capital’s acquisition of Louvre Hotels as part of the wider acquisition of Groupe Taittinger and the acquisition by Starwood Capital and Lehman Brothers of the Le Meridien hotel chain. 2006 has to date included the acquisition of 24 InterContinental Hotels across Europe (comprising a mix of Crowne Plaza Hotels & Resorts, Holiday Inn Hotels and Express by Holiday Inn Hotels brands); 6 Principal Hotels being acquired by Permira; and Blackstone’s purchase of 8 hotels across Europe previously owned by Hospitality Europe B.V.

However, as in other sectors, Private Equity investors are facing increasing competition for hotels from other buyers, such as property investors and institutional investors, as well as from strategic partnerships which include joint venture entities comprising a mixture of buyer types. An example of a particularly active strategic partnership is HHR Euro CV, which comprises Jasmine Hotels – a subsidiary of the Government of Singapore Investment Corporation; Host Hotels – a US Real Estate Investment Trust – and Stichting Pension funds. This group joined together to acquire a portfolio of Starwood Hotels in Europe and the Hotel Arts in Barcelona.

Decreasing yields across the property sector as a whole coupled with increasing competition amongst bidders has driven up prices. Excepting ‘trophy hotel assets‘ multiples 2-3 years ago were typically in the range of 8x to 12x EBITDA depending on location; upside potential etc. This contrasts with the EBITDA multiples currently being achieved which have generally been above 12x and as high as 20x in 2006.

Future exit strategies are likely to include further secondary buy-outs as well as some hotel companies or hotel investment vehicles listing on Alternative Investment Market (AIM) and Euronext, as an alternative to the main market.

The emergence of Real Estate Investment Trusts (REITs) is also likely to offer alternative exit routes for some investors. The French REITs, Fonciere des Murs, has already acquired 2 Accor portfolios and with the introduction of REITs in the UK in 2007, more hotel REITs are anticipated in the medium term.

Health warning
The Health and Fitness sector is an excellent example of how changing market demand and competition from alternative investors can impact investments and acquisitions. During the 1990s, when everyone wanted to belong to a gym, the health and fitness industry was on a roll. Joining fees were acceptably high as membership became a token of middle class aspirations, but rapid expansion by market newcomers slowed the sector down.

Private equity houses stepped in and acquired Holmes Place, Esporta Health Clubs, Fitness First and Cannons, among others, and these were all de-listed. But even in private ownership, many clubs struggled to attract and retain members, especially as the number of high quality clubs and competition for dwindling numbers of fitness enthusiasts increased.

Consolidation was the obvious solution, and there has been a great deal of activity in 2006. Acquisitions of LivingWell Premier Health Clubs, Fitness Exchange, Dragons Health Clubs, and Next Generation Clubs, as well as the Virgin Active takeover at Holmes Place contributed to one of the busiest mergers and acquisitions (M&A) seasons the health club sector has seen.

Deloitte expects the market to stay buoyant as alternative investors start to circle the sector and Private Equity investors further consider their exit and consolidation plans for their health and fitness investments. Duke Street Capital has recently sold Esporta Health Clubs to Simon Halabi, the Syrian private investor for over £460 million (€678 million), seeing off bids from MidOcean Partners, Legal & General Ventures and Next Generation Clubs. Cannons, meanwhile, remains under strategic review.

Enduring appeal
We believe the leisure sector overall will continue to attract Private Equity investors, and that the betting and gaming and hotel sectors’ will be the hot favourites. Especially as increases in disposable income means that leisure goods and services now make up close to 20% of household expenditure across Europe.

Alex Kyriakidis, Global Managing Partner, Tourism, Hospitality & Leisure of Deloitte sums up the appeal of the market so well. "This industry is appealing to Private Equity because its fundamentals are very robust. Global travel is set to increase from 1.5 billion to 2.3 billion by 2010, the silver segment is not only growing due to the ageing population, but living longer and spending on tourism, hospitality and leisure. In addition, the emerging middle classes in China, India and Central and Eastern Europe will provide the ‘turbo charge‘ to the industry.

The betting and gaming sector is gearing up for a dynamic future. When the UK Gambling Act 2005 comes into play in the autumn of 2007, international competition is likely to intensify, and Gala Coral Group is among the UK players that will be interesting to watch over the next year.

The proposed introduction of a smoking ban across England could also impact investment in the betting and gaming market. Initial findings in Scotland, where smoking has been banned already, suggests customers will drift away, however many operators expect business to return to historical levels. Deloitte’s ongoing involvement in transactions in this sector supports this view, and as noted above, the smoking ban has not deterred private equity investors during the past year.

The hotel sector is also one to watch closely. A panel debate at the 2006 New York University International Hospitality Industry Conference was asked whether the wave of hotel merger and acquisitions had peaked. Several CEOs of leading hospitality companies suggested that we are "two to three innings into a nine inning game." Although most of the mega deals in the hotel sector may have come and gone, we can expect to see plenty of smaller asset and portfolio moves while companies balance their portfolios and dispose of non-core properties. We anticipate more secondary buy-outs by Private Equity investors, but within a more competitive forum, comprising property investors and strategic partnerships.

Currently breaking news in the hotel sector are Blackstone’s acquisition of the Interhotel Gruppe in Germany comprising 16 hotels; and the ongoing disposal of Scandic Hotels by Hilton which is generating significant Private Equity interest. There is clearly plenty of life in the tourism, hospitality and leisure sector yet and the value and volume of deals will stay high for some time to come.

Dominic Graham
Director, Deloitte UK

This raises the spectre of commoditisation, bringing disaster in its wake for companies selling goods and services to consumers. Ruinous price competition ultimately leads to low or even non-existent margins. Even worse, it leads to the destruction of brand equity. It may be the only way to sell cement or petrol, but it is no way to sell appliances, still less meals, hotel rooms or holidays.

Commoditisation has become the defining challenge of our time. Its insidious influence can be found in countless industries ranging from retailing to financial services to telecommunications to leisure. So what can companies do to avoid it? Fortunately there is much they can do. After all, Starbucks Coffee sells a commodity (coffee) at non-commodity prices with a strong brand message. Apparently there is hope.

Before offering solutions let us consider the business environment that has led us to this point.

Rising expectations
Throughout much of the world, inflation has been tamed and consumers no longer expect price increases on a regular basis. In fact they often expect prices to fall, given the impact of discount retailers and internet selling across many products and services.

People are more price sensitive than ever, often postponing purchases lest they miss a bargain. It is far harder now to convince customers of the value of relatively high prices. Of course there are exceptions. Successful luxury brands such as Orient Express Hotels have convinced affluent customers that premium prices are justified.

Consumers have also grown accustomed to the ever increasing quality of many goods and services. Improvements in the technology of manufacturing, and in service delivery have vastly enhanced the quality of almost all purchases.

As a result consumer expectations have risen sharply. No longer must a price premium be paid in order to obtain good quality. No longer are premium brands the only way to obtain a world class product. However when quality is taken for granted, price becomes an even greater sellingpoint. This leads to the rise of discount retailers, private label products, and no-frills service providers such as low cost airlines and budget hotels trading purely on price.

Switched on consumers
Consumers today have access to vast swathes of information unimaginable just a decade ago. Through the internet they can learn about products and services, read reviews, and compare prices to a degree that enables them to effectively possess full information.

In the tourism and hospitality industry, for example, websites such as Tripadvisor and IgoUgo enable customers to share the experiences and recommendations of other travellers, view their travel photos, and search for the lowest prices.

Such developments undermine the effectiveness of traditional marketing tools. In the past, companies have used mass marketing to inform consumers about brands and their attributes, often attempting to convey impressions that are not necessarily related to the basic facts about the brand.

Traditional marketing is less likely to resonate with today’s wired and inquisitive consumers, who increasingly seek confirmation from their peers. Companies must find new tools to build brand equity. These can involve building or supporting networks of consumers with likeminded interests or life styles. They can also involve inviting consumers to react to products and participate in improvements and innovations.

Avoiding commoditisation
So what can companies do to avoid commoditisation? The fundamental problem with a commodity product is its strong resemblance to the products of its competitors. Avoiding commoditisation means being different.

Leisure services can be differentiated in three ways:

• By product innovation (Starwood Hotels and Resorts iconic Heavenly Bed, Bath & Crib).

• By target consumer (InterContinental Hotels Group’s Indigo aimed at customers with a "style-conscious, tech-savvy mindset", seeking affordable luxury).

• By the manner of service delivery (Lastminute.com’s leveraging of e-commerce and m-commerce distribution to reinforce a brand story focused around spontaneity and life style).

However, it is far harder for companies to differentiate whilst continuing to target a mass audience. Greater differentiation is likely to mean a growing trend towards niche selling, as operators learn to exploit the much discussed ‘long tail‘.

If consumer groups are distributed in a bell shaped curve, the mass market is generally located in the middle. Today, the middle of that bell is often saturated and increasingly commoditised. However, the long tails at either end of the bell may offer significant untapped opportunities.

Within the travel market, for example, most large-scale operators live within the middle of the bell, and they compete vigorously on price with razor-thin margins. The meteoric rise of budget airlines and the emergence of web comparison meta search engines have led to an increasingly commoditised industry with many of the big players focused on the mass market of price sensitive consumers.

But on the long tail of the bell we find the educated, upper income, experience-hungry traveller who is less price sensitive, focused on quality, seeking adventure, discovery and authenticity.

Operators such as First Choice Holidays in the UK are successfully targeting this consumer by moving into lower volume, higher margin areas of business such as longhaul, eco and activity-based travel. The result is higher prices, fatter margins, and greater opportunities for engendering customer loyalty.

This long tail is where future profitable growth opportunities will lie. Consumers will continue to fragment into more narrowly defined groupings, a trend reflected and encouraged by the fragmentation of mass media. Targeting the long tail will involve building relationships with more narrowly defined consumer groups, through new forms of marketing and Client Relationship Management (CRM) activity.

The new challenge
In this environment brand equity becomes critical. In a commoditised world, consumers are increasingly indifferent to brand messages, with the notable exception of luxury goods. The rise of private brands, noname brands, and one-price stores reflects this indifference. The growth of third party, intermediary websites selling travel and hospitality products has also helped to dilute the brand message in the tourism industry. Brands now assume even greater importance to consumer oriented businesses than in the past. Today the challenge is not only to build brand equity. The new challenge is fourfold:

• To create differentiating factors in order to attract a target consumer.

• To use new marketing tools to engage the consumer in a dialogue.

• To use this dialogue to build a brand that conveys the differentiating factors.

• To execute the strategy in order to convince consumers of the reliability of the brand.

This is a tall order for all tourism, hospitality and leisure businesses.

Emerging market consumers
None of the challenges discussed are unique to the developed world. Yet the threat of commoditisation is less worrying in emerging markets for a variety of reasons.

Consumer markets in the emerging world are growing very rapidly, especially in China and India. It is easier to latch onto a growing market than to build market share in a stagnant one.

Emerging market consumers are relatively more brand conscious, not yet jaded by the excellent levels of service taken for granted by their counterparts in developed markets. A truly better brand is more recognisable to an emerging market consumer.

The mass market still exists in emerging economies. Mass communication remains fairly effective, and the ‘middle of the bell’ still holds great potential for travel and leisure operators.

Emerging market consumers still lack the full information to which the developed world has become accustomed. This makes it easier to convince consumers about the strength of a product or brand.

Lucrative targets
Emerging markets offer disproportionate growth opportunities for global consumer oriented businesses in the years ahead, and the range of opportunities is expanding. Until recently, companies focused on relatively upmarket customers in countries like China and India. This is now changing as lower to middle income consumers are seen as legitimate and potentially lucrative targets.

This process can be seen in the hospitality industry where global chains seeking to invest in China initially concentrated on the upscale, luxury hotel end of the market. Opportunities are now beginning to open up in the mid-range and budget segments, where a growing number of Chinese business travellers are poorly served by a largely unbranded and low quality domestic hotel industry.

Part of the passion
The tourism, hospitality and leisure consumers of the future will be hard to define because they will be so varied. Their purchasing patterns will run the gamut and they will not be easy to reach through traditional mass communications. Yet there will be some common features.

They will use technology to search for knowledge prior to purchasing. They will be well informed, averse to clever gimmicks, but amenable to intelligent discourse. They will be price focused, but will be willing to pay a premium for a better product or a better and more enjoyable experience.

Future consumers will be loyal to companies who treat them with respect, and will enjoy being part of a community of like-minded individuals who are passionate about a particular experience or life style. Tourism, hospitality and leisure operators who become part of that passion will be the winners.

Ira Kalish
Director of Global Economics and Consumer

Lynx or Imperial Leather? The Body Shop or Estee Lauder? Starbucks Coffee or Caffé Nero? Pret a Manger or Marks & Spencer? Bacardi or Stella Artois? Silentnight or Slumberland? Durex or Mates?

Whether we opt for one of these pairings, or indeed an alternative, our brand choices are important to us, even helping to shape our identities in subtle ways, by reflecting how we see ourselves, our tastes and preferences.

Above all, brands help us by simplifying the decision-making process. Today’s consumer can receive an estimated 3,000 marketing messages during the course of a typical day in our media-saturated society. In the face of such information overload, evidence suggests that consumers are switching off and traditional advertising is becoming less and less effective.

A powerful brand can cut like a blade through this tangled thicket of everyday purchasing dilemmas. Brands reduce the complexity of consumer choice, to perhaps a handful of options, sometimes even less.

The importance of brand
The importance of brand is nothing new. Indeed, attempts to brand consumer products go back at least two centuries. During the current decade however, we are seeing a shift towards what is sometimes termed the ‘experience economy.‘

The experience economy represents a deepening of the idea of service into the creation of an emotional engagement between company and consumer. The most powerful mechanism for engaging customers on this level is undoubtedly the brand.

A strong brand is a highly efficient piece of coded information which instantly conveys a range of desirable qualities, stories and promises to the consumer. But how do companies create such an intangible and elusive entity?

The Fantastic Four
The strength of a brand depends on four critical success factors: differentiation, unique look and feel, consistency and innovation. We call these the ‘Fantastic Four‘, a name which underlines the superhero qualities of these factors and the dramatic impact they can have on any business. Let us examine each of our brand superheroes in turn.

Perhaps the single most important attribute of a strong brand is differentiation. What does a company do that is different from its competitors? Has it managed to communicate this difference to its customers? What makes it stand out in the crowd of 3,000 voices clamouring for our attention each day? Differentiation is the x-factor which separates the strong brand from its weaker rivals in the minds of consumers. For tourism, hospitality and leisure operators the key differentiating factor today revolves around experience. This can simply be a unique kind of experience that is hard to obtain anywhere else in the market. For example, a travel operator who specialises in a specific, perhaps unusual destination or niche type of holiday.

However, in an ever more crowded and competitive marketplace it is not always easy to identify a unique proposition. Differentiation may mean offering similar core services to competitors, while giving a fresh spin to the familiar by focusing on the non-core elements of the experience. For instance, an airline may offer unexpected on-board experiences such as a massage therapist and bar area, or a casino may focus more heavily on its restaurant and entertainment facilities than its gaming tables.

Strong clear voice
Differentiation is closely linked to the second attribute of a strong brand: unique look and feel. This factor is the vehicle which conveys the central brand message to customers, and lets them know instinctively which organisation they are dealing with. This means developing a marketing approach which embraces all channels of communication, both offline and online, across all contact points with the customer.

All of the words and images a business uses to describe itself should be unique to that business, and not be open to confusion with those of its competitors. As well as look and feel, it is also about creating a strong, clear voice in the marketplace. This voice says who a company is, what they do and how they do it, all rolled into one.

Achieving consistency
The third critical success factor is consistency. This is the bedrock of a strong brand. Do all of a company’s customers receive the same quality of experience all of the time? If the answer is yes, that company is able to generate trust, security and confidence in its services.

Consistency requires constant vigilance and attention to detail. This can be a major challenge for many leisure and hospitality operators whose business may include a very large number of customer touch points. A stay in an upscale hotel, for example, can involve the customer in a multitude of interactions with hotel employees. Such complexity can make it harder for companies to deliver a consistent experience.

Achieving consistency is becoming ever more important in the age of blogging and online customer reviews. In the offline world of the past, one disgruntled customer might complain to a small group of friends or colleagues. Today’s wired consumer is able to spread bad news to thousands of potential customers in a matter of minutes.

Continual innovation
The Fantastic Four is completed by innovation. A strong brand must constantly seek to improve the customer experience. This means the willingness to invest in the development of new ideas, products, services and technologies. Customers in the experience economy are more easily bored, or jaded with the uninspiring and unpredictable. The most successful brands are not simply satisfying existing demand. Through continual innovation they are anticipating and even creating new demand which did not previously exist. Understanding the Fantastic Four enables any consumer-facing company, regardless of sector, to grow their business by attracting and retaining customers, increasing customer referral rates both off and online, and by raising their level of market penetration. The creation of a strong brand is also the key to commanding a price premium.

Ultimate payoff
Properly managed, a strong brand can help to create a sense of pride amongst those employees who are central to its successful and consistent delivery. The ultimate payoff is the building of strong, lasting relationships with customers, and the formation of real personal loyalty which impacts directly on the bottom line. Differentiation, unique look and feel, consistency and innovation. What business in today’s world can afford to ignore them? Consider their opposite numbers. Similarity, uniformity, inconsistency and stagnation. We could call this unappealing quartet the ‘Feckless Four!‘ No successful brand would be seen dead in their company.

Mike Tansey
Director, Deloitte

To help companies with the process discussed in this article, Deloitte has designed a set of tools known as the Brand Strength Assessment. These tools can be applied quickly and effectively to both evaluate and improve the brand strength of any customer-facing business.

Deloitte’s Brand Strength Assessment can be successfully applied to businesses of all sizes from global corporations to small, localised operations.

Travel Counsellors began life with turnover of around half a million pounds in 1993. Since then it has grown to become one of the UK’s largest independent travel companies, with current sales of over £175 million. The company now employs over 120 head office staff and has 665 selfemployed homeworkers in the UK & Ireland. It has also expanded into the United States and the Netherlands, soon to be joined by Germany.

Differentiation
The brand is constructed around a unique selling point: providing customers with expert travel advice, and selling them tailormade holidays in the comfort of their own homes, via telephone, email or home visit. The other key differentiator is the independence of the brand – the company is not tied to any specific tour operator.

Faced with the decline of the high street travel agent, and the rise of Do-It-Yourself Internet travel booking, Travel Counsellors bucked the trend to focus on high quality personal service. Consultants work from home and have an unusually high average of 18 years travel industry experience.

Unique look and feel
Travel Counsellors has a distinctive logo, and a marketing message which conveys an image of personalisation and friendly professionalism.

However, we believe that the group can improve further in this area. A customer who walks into Starbucks would know instantly they were in a Starbucks from the look and feel of the place, even if they did not see the brand logo. Travel Counsellors has not yet achieved this high benchmark of unique identification.

Consistency
Travel Counsellors places a heavy emphasis on high quality service across its entire customer base. A committed workforce is seen as critical in delivering this consistency, and the group seeks consultants "who believe in going the extra mile for their customers each and every time." Travel Counsellors’ figures indicate that their (commission-based) agents are earning "substantially more on average than homebased agents working for other companies." The level of consistency achieved across the company’s workforce is demonstrated by very high rates of repeat business – an average of around 60% per counsellor.

Innovation
Travel Counsellors constantly seeks to improve both the experience of its customers and its employees, often focusing on technological innovation. The company has recently launched e-tc, a customer e-zine featuring clickable webcasts on travel topics and destination news, as well as features by respected travel journalists.

The company has also introduced TCTV, a weekly webcast unique in the UK travel sector, broadcast from its head office, which allows the management team to motivate and train agents remotely.

The introduction of the Customer Contact Centre in early 2006 allows all counsellors to manage and market to their personal customer database.

The next phase of development will mean that if an existing customer phones an individual counsellor, their personal details and previous booking information will automatically appear on the screen before the call is even answered.

Measuring success
In October 2006 the group was nominated Best UK Travel Agent in the prestigious Guardian/Observer Travel Awards voted for by over 15,000 readers. On quality of service, Travel Counsellors scored an impressive 99.29%, the highest total score of any company in the awards.

Travel Counsellors was the winner of the Queen’s Award for Enterprise in 2003, and the winner of the technology in business category of the 2005 Confederation of British Industry (CBI) Growing Business Awards.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.