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The real reasons why Thomas Cook won't 'take off' again

8 min read

23 September 2019

Features Editor, Real Business

Thomas Cook, the 175-year-old holiday provider has fallen into administration with dramatic effect. But had the writing been on the wall for a while?

Like many iconic and long-running companies who turn from industry legend to insolvent, 175-year-old tour operator Thomas Cook’s fall from grace was swift, sudden and shocking. Or was it?

Changes in the retail climate

In this brave new retail climate, where technological innovation has driven forth a ‘customer-first’ user experience, it’s the ‘old favourite’ bricks and mortar businesses, think Debenhams, think British Home Stores (BHS), and more recently, Thomas Cook, who are the sacrificial lambs to the more innovative (and online) businesses that simply serve their customers better and save them money to boot.

A swift and brutal ‘death’

Thomas Cook will no longer be taking customers on holiday. Source: chroniclelive.com

Thomas Cook collapsed yesterday, (Sunday 22 September 2019), after last-minute attempts at securing a £250m government bailout failed with claims that Ministers thought the rescue attempt would only keep the company alive for a ‘matter of weeks.’

The firm’s collapse leaves as many as 22,000 jobs at risk globally, including 9,000 in the UK.

Not only this, according to the UK Civil Aviation Authority (CAA), the tour operator had “ceased trading with immediate effect,” meaning that as many as 150,000 UK customers are stranded in its various holiday locations.

Thomas Cook is unable to bring customers ‘home’

The firm’s sudden compulsory liquidation has triggered what is being called “the biggest ever peacetime repatriation” where government bodies are facing the mammoth task of bringing home stranded customers via chartered flights.

With customers less likely to venture to the high street to buy clothes, they’re even less likely to visit a Thomas Cook branch to book a holiday when they are spoilt for choice with limitless and often cheaper options online.

So, what brought on this swift and brutal execution of this once iconic and well-established travel business? Moreover, how did things get so bad that Thomas Cook bosses couldn’t even plan for an organised administration process that wouldn’t leave their customers in the lurch?

A slippery slope to liquidation

Was Thomas Cook fated to fail?

A sudden ‘crash and burn’ of a once iconic and successful brand doesn’t come out of a void. If we look closer at the Thomas Cook story, and especially at the shorter-term factors that affected its health in recent years, we can see exactly how this business arrived at such a desperate point.

As The Guardian’s Patrick Collinson pointed out in a recent article about the firm’s collapse, its failure to secure the bailout money is merely “the immediate answer” to why it’s no longer in existence. There are other reasons lingering below the surface of this story.

1. A bad merger

The company’s ill-fated decision to merge with travel brand MyTravel in 2007 set the firm on the long road to liquidation. Despite the move promising to save Thomas Cook money as well as increase its reach into Europe by becoming part of a ‘giant’ travel brand, it was merging with a company that hadn’t actually made a profit more than once in six years. So, the result of this merger for Thomas Cook was the acquisition of debt and lots of it.

2. ‘Online’ is killing traditional travel agents

Holidaymakers are looking for flexibility, easier user experience and low prices when booking their holidays.

Like many areas of retail, customers are increasingly taking to the internet to purchase goods and services. The likes of Booking.com easyJet and Airbnb are benefitting from the online customer revolution, where the likes of Thomas Cook, with their less flexible package deals and high-street stores (and not to mention high business rates), just can’t keep up.

With customers less likely to venture to the high street to buy clothes, they’re even less likely to visit a Thomas Cook branch to book a holiday when they are spoilt for choice with limitless and often cheaper options online.

Older customers prefer travel agents

There is also a generational element to Thomas Cook’s high street decline, according to travel agent trade body ABTA, only one in seven customers now book a holiday through a high street travel agency, with as many as 86% of customers booking their holidays online.

Not only do consumer trends point to the rise in ‘holidays at home’, UK holiday businesses can also target the ‘silver pound’ market, ie) over 65s who enjoy heading to the high street to book holidays under the guidance of a professional.

However, over 65s are more likely to stick with what they know and head to the high street to book their holidays, says ABTA. So, there’s some ‘silver lining’ for more agile travel operators on British high streets.

3. Brexit and climate change

UK venture capital Brexit

Is Brexit really to blame for the collapse of Thomas Cook?

Brexit concerns and sudden changes in weather, (including more frequent Europe wide heatwaves) have meant that customers are more prone to delay their holiday plans, and are increasingly considering ‘staycations‘ as a result.

But what this customer indecision really means is that when they do decide to book a holiday, they’ll prefer to head to the limitless and flexible (and often cheaper) offerings of online booking sites rather than the pre-packaged holiday options offered by the likes of Thomas Cook.

What can SMEs operating in this sector do to survive?

Despite Thomas Cook’s almost predictable decline, all is not lost for SMEs operating in this industry. Whilst they’re not going to be able to compete with the online giants that can offer customers the lowest prices at all times. What they can do is, like independent high street retailers, offer a more bespoke and curated service to customers that their online counterparts can’t.

There’s still space to grow…

Not only do consumer trends point to the rise in ‘holidays at home’, where UK based holiday businesses can capitalise on this shift, they can also target the ‘silver pound’ market, ie) over 65s who enjoy heading to the high street to book holidays under the guidance of a professional.

Moreover, smaller travel or holiday businesses can target the luxury market where customers demand the personal touch and expertise of travel and hospitality professionals, a service which can only be delivered, you guessed it, in person.