There is no shortage of expert opinions as to why Thomas Cook last month came to the end of its 178 year long journey.
The popular view is that the company had been fatally disrupted by the internet; that the business model hadn’t really shifted from the time of Mr Cook himself, and that in 2019 people were not only capable of holiday planning on-line, they actually quite enjoyed it.
Yes, it’s true: on-line shopping of every type has become more mainstream in every sector and price comparison search engines are trusted sources of decision making. And it's also true that Thomas Cook owning and operating all aspects of its bundled offer, the exact thing that made it successful for a century and a half, had become an increasingly costly liability.
But what of the figures? The company was selling 9 billion pounds of travel to 19 million customers a year. Surely this wasn’t a business in trouble? Only it was; the problem was eroding margins. Competition hadn’t only announced itself on the internet, it was also there every day on the runways in the colours of Easyjet and Ryanair, stripped down low- cost airlines, made for the DIY travel age. And with a high street presence in 16 countries plus 22000 employees, costs could only go one way. Lesson #1: it's not enough to be aware of what's going on, you also need to take decisive and timely action.
Thomas Cook wasn’t unaware of disruption and competition, but their response to it was very last century. A merger with MyTravel in 2007 couldn’t provide any new operating edge. “Scale” here was really just adding more of the same. Lesson #2 – in tough times only merge or collaborate with companies that add clear value to what you do.
For Thomas Cook, the real killer was debt. It is possible for any company, particularly a company with massive goodwill, to change direction for the better, given some time and sound thinking. But not when you owe 3 billion pounds. As debt grows, so decision making over your future gets taken away. In the end, a much publicised rescue deal with China’s Fosun International had the plug pulled on it by anxious creditors. Lesson #3: if you don’t manage debt meticulously, you’re risking your business.
So was there anything that could add to this perfect storm? Ironically, yes – the British weather. One of the hottest summers on record had droves of locals choosing to spend their time in the sun not in Bermuda and Marrakesh but in Brighton and Margate. Lesson #4: some things are just not in your control, move on.
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