Thomas Cook(ed). What’s the takeaway?

The news a few weeks ago that Thomas Cook had ceased trading rocked, but certainly didn’t surprise, the travel industry. What did surprise some people though was that over 600,000 people were on Thomas Cook holidays at that point in time alone (and it wasn’t even a school holiday) and, now, perhaps even more surprising, that Hays Travel has agreed to take over the Thomas Cook stores (great news for many of the staff of course).

Now, no one wants to see companies go bust but there is a reason Thomas Cook was the most shorted stock on the FTSE.  Although it was the leverage that finally put them under a number of factors led to their demise – not least a business model that was appropriate for the 90’s. As demonstrated, they had plenty of customers, but the cost of the large store network combined with the low margin (and heavily discounted) package holidays just didn’t stack up. On top of that, the last few years has no doubt been a tough time for the travel industry in general – oil price fluctuations, the £’s steady decline, political unrest in key destinations and, of course, Brexit. On top of all this, Thomas Cook made a number of questionable acquisitions over the previous decade including My Travel and The Co-operative Travel – not only did these add to their store network but increased the debt in the company.

Looking on the bright side…what can be learnt from this and where is the opportunity? 

There will be an increased focus and awareness on consumer protection from travellers.  With 360,000 people in the UK now due an ATOL refund, more people will be aware of what these protections do (and, more importantly, don’t) offer in the future and that is probably a good thing.

The Civil Aviation Authority (CAA) may well revise their contingency planning too – this situation led to the greatest peace time repatriation of people to the UK and the CAA, during the build up to Thomas Cooks liquidation, built up their own airline with over 100 planes (during a cloak and dagger style operation called “Operation Matterhorn”) in anticipation of this happening. Meanwhile Thomas Cooks own planes were all stranded on the tarmac…doesn’t make sense to me.

The opportunity? There are millions of customers out there who no longer have a home. Perhaps that is Hays’ strategy to mop those up (although I note that Hays is quadrupling its High St presence with this deal to take over 555 shops and it is a business which only made £10m profit last year

In general, it highlights the need for travel operators to adapt to the market and have a clear proposition to their customers. The sector is resilient and growing – travel is a luxury, yet it remains one of the last items of spending people are willing to let go off whatever the economic climate.  There is a lot of opportunity and personally I think operators that do some of the following will do well:

• Forget the High St and spend on targeted digital marketing and customer experience instead.
• Offer a clear niche or specialism that either targets customer who don’t want to do it themselves or is difficult for customers to replicate at home.
• Take advantage of the weak £ and the UK staycation trend.
• Serve groups or audiences that need specialist attention, whether that’s schools, specialist industries or overseas visitors to the UK.

If you are an owner of an SME business which fits any of these criteria and looking to exit, please get in touch.