He lives and breathes Kuoni, which he joined 17 years ago. Now, as CEO of the group’s biggest business unit following the GTA integration, Schafroth is raring to see Kuoni transform further. Raini Hamdi checks out his game plan
Rolf Schafroth, CEO, Kuoni Global Travel Services
Going by Kuoni’s recently released annual report 2012, Global Travel Services* has now overtaken traditional Outbound Europe as the biggest business unit in terms of turnover.
It’s just that this business has better growth prospects than the traditional tour operating business which we know well and is indeed the rationale why Kuoni acquired GTA in the first place.
Look at the FIT business – the prospects are bigger in Asia, though it is still big in Europe. We are looking to cater not only to Asian customers but Asian destinations – so Asia to Asia, Asia to Middle East, Asia to Americas. You don’t see these growth rates in the tour operating world.
(*Global Travel Services covers the FIT business through GTA, group business through a new brand called Global Travel Experts and MICE through Kuoni Destination Management.)
Is the tour operating model dead?
Hah! There is no straight answer because the tour operating business is not just one model. The committed business, charter airlines, works differently from the a la carte specialist model.
But I think if it’s just single components which consumers can buy everywhere – that model is under pressure because of the way it’s produced: way in advance, you print brochures, etc, when the consumer today can just go to the Internet and buy.
Would you say the Kuoni Group business model has changed?
If you look at Kuoni Group just five years ago, and Peter Rothwell (Kuoni Group CEO) has mentioned this too, majority of the business was tour operating. Today, Kuoni Group has gone through a transition; we have six to eight different business portfolios – specialist business, groups, FIT, VFS (Visa Facilitation Services*), etc.
Yes, we do have businesses that are under pressure, that’s why we announced last year the release of some businesses where there was no value-add to the customer (these divestments included Ski Verbier UK, operations in the Netherlands, Spain and Russia, Italy, Belgium, France and B2C online hotel platform Octopustravel).
This is never finished. There was so much change in the last five years and the next five will bring even bigger changes. But we are in a better position to try and grow with change.
Bottomline is, you can’t expect to grow a business which in itself does not grow. But that does not mean you give up. You say, okay, if you can continue doing it, do it, but at the same time try and build the future of the company in different areas.
(*VFS Global snapped its biggest contract to date, in volume and scope of services, last August, to process visa applications for Saudi Arabia. At the end of 2012, VFS provided external consular services for 42 governments in 88 countries through 802 visa application centres. Around 14.6 million visa applications were handled during the year, 27 per cent more than in 2011.)
What sort of pressure comes with being the ‘star’ business unit in Kuoni Group?
We understand the responsibility we have for the growth of Kuoni Group; it’s not about being a big division, or being so important and all that.
We have gone through a successful 18-month GTA integration, so what’s next is to grow. This cannot be the end, certainly not in a market that offers growth and opportunities.
I’ve been with Kuoni now for 17 years. I remember when we were the small incoming unit; we should be substantially bigger now. I have big plans and put high targets on myself, I must say. The other parts of Kuoni also have to grow.
“You can’t expect to grow a business which in itself does not grow. But that does not mean you give up. You say, okay, if you can continue doing it, do it, but at the same time try and build the future of the company in different areas.”
What’s your game plan to grow?
(Long pause) I don’t want to reveal too much, but suffice to say, through the integration, we achieved a lot of synergies and efficiencies that put us in a position to grow the FIT and group business, so we’re not looking to go out and buy, say, another online wholesaler. But we don’t mind buying another business if it is something we don’t have and can add to the division; I’m thinking of the MICE business, for instance, which we do but don’t make a big fuss of, yet it has so much potential.
Divisions can build new businesses.
What were the biggest synergies?
One was the profitability, sometimes just by putting things together, for instance, bringing together the customer base of GTA and Kuoni Connect (which has been axed, its content merged into GTA). Another was infrastructure savings – we don’t need two FIT systems, for example.
Did the integration turn out as expected?
The integration was a success. You read that 50-60 per cent of integrations fail and, frankly, knowing what I know now, or what could have gone wrong, it’s scary.
Before the acquisition, I was a little afraid because we had been competing with GTA head-on for 30 years and people always talked about ‘cultural’ differences. But during the integration, I realised these (GTA and Kuoni) are global companies, even though they might operate differently in some geographical areas. Plus, they are also realistic people.
As well, the GTA people knew Kuoni was serious about the business, i.e. it wanted to build and invest in it, not take it apart. So the integration was not about moving units together then slashing costs, but about how to make the organisation fit for further growth. The concern among people thus was more about what would be changing than whether they would lose their jobs. Of course there were some organisational adjustments, but it was not because we needed fewer people, but because we moved some of the businesses to a different place.
What was your biggest fear when integrating?
My biggest fear when we started integrating was the sheer amount of work we had to go through and how it would affect the BAU (business as usual).
When you merge, the benefit is not immediate and it does not give me one additional customer. So how could we still achieve growth while going through a big transition was my concern.
In the end, the transition did not stop us from growing. I think it’s because we tried not to paralyse the organisation. There were a lot of people involved with the integration, but we did not involve people who should not be involved. They carried on doing the business and had the support of central integration teams.
What did you learn from this experience?
I learned that integration can be a success if you know why you are doing it, are clear about what you want to achieve and set ambitious but realistic targets and expectations.
Planning is also important, especially when it comes to systems and organisations – you can’t just take the approach of ‘we’ll find out as we integrate’.
Beyond these technical stuff, communication is important. When you change something, you have to go in-market and take people through change and celebrate the success stories so that they feel something is happening and understand why they have to go through it.
As well, execution. There will be people who will tell you a million ways why it will fail, but if you believe in it, you just have to push through and execute; don’t back off.
This article was first published in TTG Asia, May 3 – 16, 2013 issue, on page 7. To read more, please view our digital edition or click here to subscribe.
