On Monday, we read the breaking news that the world’s oldest travel company has collapsed. Thomas Cook was founded in 1841 in England by a carpenter whose vision would eventually grow into an empire. The famous holiday brand was forced into compulsory liquidation as debts, natural and political unrest plagued them. This left 600,000 customers stranded abroad, with about 150,000 of them being British. That’s a lot of people, considering this is the largest repatriation in the UK at a time when the country is not at war.
What Happened?
Reports show that political unrest in Turkey contributed to the collapse of Thomas Cook as the country is one of their top destinations. The heat wave of 2018 throughout Europe also prevented travelers from turning up en masse in the high traffic summer months. Long before these events, Thomas cook was already saddled with piling debt and difficulty in keeping up with the rapidly evolving technology trends of the 21st century.
From the information that’s available to us, these are 5 important lessons to learn from Thomas Cook:
Source: WorldAtlas.Com
- “Everyone can pretend to be an online travel agent.”
This statement was made to the BBC by Simon Calder, a travel expert. According to him, “Now everybody can pretend they are a travel agent. They’ve got access to all the airline seats, hotel beds, car rentals in the world and they can put things together themselves.” Beyond the snark, the statement is true. What’s also true is that perhaps Thomas Cook was late to catch up with the 21st century.
The world is evolving quickly and only those businesses that keep up with the times will survive. The barrier to entry in the travel industry has all but been removed, with exceptions in the aviation and hotel management spaces. With access to online courses, people can learn important tourism skills from the comfort of their bedrooms and build e-agencies in real time. The young, hip and upwardly mobile population of travelers is likely to connect to companies that are Instagram savvy and easy to book online. Companies that want to be successful in the era of #travelgoals will have to evolve just as fast (and sometimes faster) than the transient travel trends that their client base are interested in.
2. No matter how sexy raising money is, making money is still the ultimate measure of success.
The scale of Thomas Cook’s operations is massive. They ran hotels, resorts and airlines serving 19 million travelers a year in 16 countries. In the year 2018 alone, they had 21,000 people under their employment and generated a revenue of 9.6 billion pounds ($12 billion) – a staggering amount until you place it side by side with their debt of almost 1.5 billion pounds. With debt piling up, they reached an agreement to raise 450 million pounds from their top shareholder – the Chinese firm Fosun. In exchange for this, Fosun would claim at least 75% of Thomas Cook’s tour operating business and 25% of the airline. In addition, the banks were willing to convert their additional debt of 450 million pounds to equity. However, they needed to raise one more sum of 200 million pounds in contingency funding; something they were not able to do until their collapse on Monday.
3. Take control of your narrative. Case in point: Andela.
Here’s a general rule of thumb: break your own bad news and let others break your good news for you. By the time Thomas Cook was addressing the world, 600,000 travelers were stranded abroad. Until the last minute, Thomas Cook was scrambling to raise 200 million pounds to see it through the low-season winter months on top of the 1.7 billion pounds of debt it had already piled up. Any chance to control the narrative of what was going on was quickly overshadowed by harrowing news reports.
On the flip side, last week, Andela laid off 400 junior engineers across Kenya, Uganda and Nigeria. When the CEO – Jeremy Johnson made the announcement in an eloquent article, the topic trended across the continent, but for unusual reasons. Johnson explained in enough detail how the company had misread the market for junior engineers and then laid out a plan of action to support the laid off engineers. Much of the tech ecosystem in Africa seemed to agree. You know who else agreed? The engineers. A massive lay-off in Africa’s foremost technology company became great news for companies who wanted to scoop up premium talent.
4. The ATOL protection that covers the stranded tourists is still not available in many countries.
The Civil Aviation Authority (CAA) of the UK runs a financial protection scheme called Air Travel Organiser’s Licence (ATOL). Under this scheme, travelers are protected when they book a holiday with a British travel company. This means that if anything goes awry with the company, travelers do not lose their money and do not become stranded abroad. About 150,000 of the 600,000 travelers stranded abroad are British and are protected by ATOL. So, even though this will likely biggest payout in CAA history and it could take as many as 67 days to earn refunds, British travelers are sure that they will not lose money. Those who have booked future trips with Thomas Cook will also not lose their money. Dreams have been ruined but everyone will be made financially whole again. A similar insurance scheme is available in Germany.
This is a great opportunity to have a conversation about what’s available in other countries. Who takes the hit when an airline or travel company goes under?
5. The future of travel is ‘build-your-own-package’.
People are creatures of habit. Even the most adrenaline-loving, adventure-seeking travelers will usually follow a certain pattern when they travel. There’s an opportunity for modern travel companies to hone AI and rapidly evolving technology to meet custom travel needs, using patterns and trends. More people are travelling internationally and more people want their own unique, customized, #travelgoals, travel experience and the solution is travel technology that’s powered by AI.
What are your thoughts on the unfortunate Thomas Cook collapse and what did you learn?
‘Funmi Oyatogun is a vibrant explorer and travel entrepreneur at TVP Adventures; a company focused on leading people to their dreams by designing creative and meaningful travel experiences within Africa. She is also an experienced travel writer whose stories are focused on breaking through African borders, uncovering the historic stories of her people and places, and presenting first-hand information about tourism and adventure opportunities. She has been featured on the BBC, CNN Africa, Arise TV and many more renowned platforms. Follow her on Twitter (@funmioyatogun).
Very correct Funmi.Revenue is not equivalent to Profit.What are their cost of sales and Opex.But my concern is that it shouldn’t have been this sudden.Such a legendary company should have sought for bailout….my thought!
Wow…. A very beautiful article. Nicely done and very informative.
However, unless I come to know what their running cost was, I’m not sure if I understand how a business that made 9.6 billion pounds and had a 1.5 billion-pound debt still managed to go under. Management problem? Financial misappropriation? I really don’t understand.
9.6b pounds is revenue. Not profit.
Yes, I understand. That’s why I wonder how much of that which makes up their running cost so I can have an idea of how much they made in profit.
Impressive thought. Though I am not in tourism, I believe every business can learn from Thomas Cook. Compact and evolution is the key to growth in this fast-paced world.
That’s so true. Businesses have to evolve or face such fate.
I may say end of an empire, possibly the last generation of the Cook’s had taken some wrong management decisions, not really learning well from previous or second generations whom must have struggled to maintain the lead from the first generations, generational learning is important.