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Analysis and Summary

Background and Challenges in the TTL Sector

The Travel, Transport, and Logistics (TTL) sector faces significant challenges, including capital intensity, difficult cost management (due to unionized staff and powerful suppliers), and structural shifts driven by digital transformation and the rise of low-cost operators. Average returns on capital employed (ROCE) in the sector are low at 13%, compared to higher returns in sectors like Consumer Goods and Retail.

These challenges are exacerbated by:

• Asset owners typically achieving a third lower ROCE than upstream suppliers.
• Traditional operators underperforming low-cost competitors by 6–10 percentage points.
• Online aggregators, such as booking platforms, capturing a significant portion of customer interaction and profits.

Successful Strategies: The TTL Playbook

Insights from the analysis reveal that some companies have successfully addressed these challenges through a set of strategies termed the "TTL Playbook." These include:

• Targeting specific customer groups: Focusing on specific segments, such as B2B or non-airport rentals, while maintaining economies of scale.
• Cost re-engineering: Eliminating unnecessary expenses, upgrading outdated IT systems, and optimizing operational costs without sacrificing quality.
• Leveraging local entrepreneurialism: Partnering with local franchisees to increase efficiency and focus on local sales, as seen in pallet logistics and car rental businesses.
• Controlling propositions: Identifying which elements of their services matter most to customers and focusing investments there.
• Responding to online distribution: Re-engineering business models to thrive in indirect online channels or utilizing smart collaborations with distribution intermediaries.
• Building underlying infrastructure: Creating efficient systems to serve specific target segments, such as healthcare delivery networks.

Case Studies

• Premier Inn: Avoided online distribution channels to retain control over the guest experience, enabling premium investments and sustained growth.
• Citysprint: Positioned itself in niche markets (e.g., same-day healthcare delivery), customizing services while leveraging economies of scale.
• Car Rentals: Franchising local offices and focusing on customer segments not served by price comparison sites.
• Pallet Networks: Harnessing local entrepreneurialism through franchising to achieve high productivity and scale at lower costs.

Call to Action

The management teams of large TTL companies are urged to consider five key questions:

1. Can we better target specific customer groups without sacrificing scale?
2. How can we leverage local entrepreneurialism without losing control?
3. How can we collaborate effectively with online distribution channels?
4. Are we taking bold action to radically reduce our cost base?
5. How can we reclaim profits currently flowing to suppliers or intermediaries?

Addressing these challenges can unlock significant value—potentially €70 billion in extra global profits—and improve returns to sustainable levels.