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Euro Crisis Hits Southern Europe Hard

France, Italy and Spain – Market Region South Division

The Southern Europe unit covers France, Italy and Spain. In 2010, Spain and Italy in particular continued to feel the effects of the negative economic situation, while France, in contrast, experienced a recovery in demand. Overall, Southern Europe generated turnover for the year of CHF 355 million (2009: CHF 374 million), but operating earnings (EBIT) were negative at CHF – 4.4 million (2009: CHF 6.1 million). Underlying EBIT stood at CHF – 2.5 million. This decline is attributable to lower turnover and greater pressure on margins.

France: increased demand in a difficult economic environment

Kuoni France generated turnover of CHF 245 million in 2010 (2009: CHF 245 million). The French market posted higher turnover in local currency terms. The increased demand was mainly for tours and “à la carte” products, as well as for the high-end holidays provided under the “Emotions” brand. However, the volcano in Iceland and economic difficulties in France hurt turnover at Scanditours, which specialises in holidays to Northern Europe, and reduced revenue from business travel in the Group and Incentives unit. Meanwhile, margin pressure in a highly competitive market environment full of price-sensitive consumers had a negative impact on earnings. The cost reductions achieved as a result of Kuoni Group’s reorganisation could not compensate fully for the negative performance. However, Kuoni France still managed to post a profit for the year.

Kuoni France runs four of its own retail outlets. The travel agency on Rue St Petersbourg in Paris was completely refurbished during the year under review and adapted to match the modern image of Kuoni travel agencies.

The most popular destinations for French customers in 2010 were the Maldives followed by the USA and Egypt. Mauritius and India both posted impressive growth of around 30 %.

Italy: client focus at own travel agencies

Kuoni Italy reported turnover of CHF 92 million in 2010 (2009: CHF 105 million). Despite the difficult economic conditions, turnover remained at the previous year’s level in local currency terms. Premium products sold under the Emozioni brand and the “soft adventure” holidays offered by the Discovery programme enjoyed greater demand, but key destinations in North America and the South Pacific suffered from price and margin pressure. Kuoni Italy’s first Flagship Store, opened in Milan in mid– 2009, achieved a good result during the year despite the difficult market situation. Operating costs were cut significantly in Italy too in 2010.
The 2010 financial year was dominated by the refocusing of sales strategy. Kuoni Italy now aims to significantly strengthen direct customer contact at its own travel agencies. Four existing travel agencies in Turin, Pavia, La Spezia and Genoa were taken over as part of this plan during the year under review and converted into Kuoni outlets. In addition, Milan-based tour operator Best Tours S.p.A. was acquired in 2010. This firm specialises in beach holidays and premium historical and cultural trips. It complements Kuoni Italy’s existing product portfolio.

Following the restructuring of business activities in the country, Kuoni Italy’s head office was moved from Genoa to Milan.

Spain: building up direct customer contact

Spain is one of the European markets that continued to suffer greatly from the difficult economic situation during the year. The euro crisis, negative consumer confidence and the persistent unemployment and property crisis all contributed to a substantial fall in demand at Kuoni Spain. In addition, these influences resulted in a price war between competing providers at the same time as travel agency commissions rose. Turnover fell significantly during the year to CHF 18 million (2009: CHF 25 million), Despite lower costs, the savings were not sufficient to compensate fully for the loss of income.

In an attempt to counter the negative developments affecting the industry, Kuoni Spain built up its direct-to-customer sales channels. The Kuoni Flagship Store in Madrid was reopened in a better location. Together with internet activities, direct sales have already enjoyed an improvement.

The most popular holiday destinations for Spaniards in 2010 were China, the USA and the Maldives. Dubai experienced particularly good growth, while demand for Thailand fell owing to the political unrest in that country.