The Sad Demise of Thomas Cook

business travel

The sad news of the collapse of Thomas Cook this morning, after 178 years of trading, has filled the front page of nearly every UK broadsheet, tabloid and online news portal. Holidays have been cancelled and a mass repatriation is under way. The firm’s debt had reached £1.6 billion according to what the newspapers are telling us and now 22,000 jobs around the world are at risk, including 9,000 in the UK.

Dr Neil Robinson, travel and tourism expert from the University of Salford Business School, has issued a comment on what he believes are the reasons behind the demise of the company. As we emphasise often at Spend Matters, lack of focus on the latest technologies to transform business processes really can lead to a firm being left behind. This is one of the issues that Dr Robinson highlights: “… Their price, promotion and how people actually booked Thomas Cook holidays did not keep pace with changing technology and demand …”

He also points to two catalysts: Arab spring back in 2010 was the start of problems for the company and product mix did not align with customer expectations. Here is his comment in full:

“The events of the last 24 hours shows us the vulnerability of the aviation/travel sectors.

Mr Cook would be turning in his grave. A lad from Derbyshire who went on to create one of the world’s most recognisable travel brands, which now lies in financial ruin.

These are very sad times and my heart goes out to employees and customers alike.

So where did it all go wrong? The downturn in bookings post the Arab spring back in 2010, saw profits drop as people were reluctant to buy travel product associated with this region and the seeds of change for Thomas Cook and the wider travel sector were already being sown.

Fast forward a few years and the sector has come under many pressures associated with very slim profit margins for each travel product sold, a possibility of too many players in an already saturated market and one might argue that the product mix on offer at Thomas Cook did not align with what its customers really wanted. Their price, promotion and how people actually booked Thomas Cook holidays did not keep pace with changing technology and demand, for example they still had a lot of high street outlets, which incur rental and other costs.

Thomas Cook's financial strength has not looked good over recent months, with share prices falling, senior managers leaving and would-be bail out loans not materialising, all adding to the creation of a perfect storm.

Are other companies set to follow? One hopes not, if in doubt make sure your travel provider has ABTA/ATOL protection, pay with a credit card and keep your fingers crossed, this sorry saga is not over yet. In the meantime let us pay homage to the once great travel provider that provided many of us with our first taste of the jet set & holidays overseas.”

Spend Matters Europe GM, Jenny Draper added:

“I’ve commented on a couple of company failures or bail outs in recent months which is bleak in itself.  Coincidentally, the CPO of Thomas Cook, Nikolaus Kirner, gave a great presentation last Wednesday at Digital Procurement World on ‘Empowering Procurement through Digitization’. Again we’ll have a supply chain grappling to pick up the pieces of a considerable client going bust.  If being in a saturated market is one of the issues here, it’s to be hoped that other providers will pick up fall-out business from this and any positive effect will flow through the supply chain.”

We'd be interested to hear readers' thoughts on the reasons for the failure, comments box is below.

 

First Voice

  1. Dan:

    A lot is due to the 2007 merger with MyTravel, a fellow package holiday provider. It was supposed to create a giant, but in the end it was a millstone around the neck of Thomas Cook, and is the main reason they had so much debt. They were ‘doubling down’ on package holidays at a time when customers were booking their own flights, hotels etc.

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