The failure of Thomas Cook brought down the curtain on 178 years of travel and tourism history. We discuss what happens next, with the help of Dr. Dimitrios Diamantis, our Dean of Graduate Studies, and industry analyst (and Les Roches alumnus) Pavlos Papadimitriou.
The stranded holidaymakers have now been airlifted home, but the fallout from the collapse of Thomas Cook is still very much playing out, not least among the company’s 21,000 unfortunate employees spread across the world.
Many articles have tried to analyze why a company that basically invented the package holiday should fail so spectacularly (most pointing to the company’s unsustainable £1.7 billion debt pile).
We wanted to discuss the wider impact on the industry and the holiday destinations served by Thomas Cook. We also felt it was only right to try to pick the rival businesses (and travel booking models) which are best placed to take advantage of this newly-created market opportunity.
When thinking about the industry impact, it’s worth keeping in mind just how big Thomas Cook was. With 19 million customers and annual sales approaching £20 billion, it was a giant of the travel industry.
Naturally, this immense size meant Thomas Cook had an oversized share of the market in many popular package holiday destinations, including the Greek Islands and mainland resorts. Pavlos Papadimitriou, Director of HVS in Athens, spoke to us shortly after returning from the holiday island of Skiathos, where 40% of inbound tourists were controlled by Thomas Cook.
“The island is in shock,” says Pavlos. “Hoteliers are facing a double blow of lost future bookings alongside an immediate cashflow crisis. The cashflow problem is because the bills for their Thomas Cook guests throughout the summer months are not going to get paid, even though Thomas Cook has taken the money from those customers. It’s very unfair that these small hoteliers have to sit in the queue behind the company’s lenders – livelihoods are at stake.”
If there is any positive side to this crisis, Pavlos believes it might finally be the catalyst for the popular holiday areas to become more professional with their destination marketing organizations (DMOs).
“In the short term, the islands in particular need to secure new inbound airlines to replace the Thomas Cook flights, because accessibility is everything. But after this, the government and the local authorities in these destinations need to sit down with the industry to put proper destination management strategies together.
“Maybe there was a bit of complacency while they had ’big brother’ Thomas Cook flying in thousands of holidaymakers each week. But now these resorts need to ensure that they have more diversification in their inbound tourist market.”
Dr. Dimitrios Diamantis has been involved with the travel business all his professional life, having worked extensively in the hospitality sector as well as lecturing on tourism & hospitality for the past 20 years. He thinks the collapse will have a number of impacts on how travel is bought and sold in future.
“I don’t believe we’ll see a travel business on the scale of Thomas Cook emerging again,” he explains. “But a large proportion of its former customer base is very comfortable with the all-inclusive package concept, so that market is not going away. I think we’ll see airlines like Ryanair and EasyJet – which already have holiday businesses – offering more of the package holiday ‘all-inclusive’ elements under the umbrella of their flights.”
The online travel agents (OTAs) must also be licking their lips at the opportunity. Dimitrios recalls an MBA program study trip to Chicago, where the students got to spend time with one of the major players in this segment: booking.com.
“We discovered that they were already extending their business model to include more ‘package holiday’ amenities, such as attractions and excursions, as a differentiator in the market. The big brands such as booking.com, Expedia and Trivago have the customer base to do this. And then there’s Google, which has just launched new travel-related apps and which the industry has to take very seriously.”
Make it personal
For Pavlos, if the big hole left by Thomas Cook is filled by the OTAs and other tech-enabled specialist players, then we could be stepping into a new era of greater personalization.
“The concept of the package holiday is not going away. The question is more what sort of format this packaging takes. Using metasearch and big data, could an online travel agent simply take the dates you want to travel, where you want to go and your budget, then create the ‘perfect’ package for you, including all the extras such as airport transfers and so on?
“It’s basically bringing the tour operator fully online, but enhancing it by adding all the extra services and experiences that make for a great holiday,” he says.
For Dimitrios, the elephant in the room in this regard could be Amazon. He says, “One thing we’ve learned is that brands can easily stretch across markets and sectors these days. Amazon offers a great consumer experience – could it carry this through into travel? It must be a tempting proposition.”
Such is the ‘creative destruction’ of capitalism. And in no way wishing to gloss over the immense pain and hardship that Thomas Cook’s collapse has led to, in an industry as dynamic as hospitality the market is already in the process of moving on and finding its balance.