Shireen Zulparquear explores the successes of beloved travel company Thomas Cook and analyses what could have caused such a dramatic downward spiral.
Approximately 150,000 British vacationers were whisked away from their holiday destinations last week and brought home by the government in a mammoth repatriation mission coined Operation Matterhorn. Yet, rather than being saved from a disastrous hurricane or typhoon, holidaymakers were being rescued from a different sort of catastrophe altogether. In the early hours of Monday 23rd September, their tour operator and high street staple Thomas Cook collapsed. How exactly did the beloved travel titan fall? What have been the consequences? In this article, we share all you need to know about the downfall of Thomas Cook.
The Thomas Cook Group originally began as a one-man tour operator run by its namesake, Thomas Cook. In 1841, the Leicester native began organising short rail trips for holidaymakers between regional cities in the UK. As word spread about the tours, so too did the distance they crossed. Cook opened his first commercial office in 1865 and soon began offering more exotic holiday packages for travellers using Europe’s extensive rail network.
The travel company grew to be a trailblazer in the holiday industry, creating both the first package vacations taken by plane and the first with hotel fees included. By the end of the Second World War, Thomas Cook had cemented itself so firmly in the British economy that it was eventually nationalised in 1948. It remained in the hands of the state before being privatised once more in 1977, going on to launch its own airline in 2003 and merge with package holiday company MyTravel Group in 2007.
It was at this point of the tour operator’s story that the golden era of Thomas Cook’s success began to tarnish. Though its merger with MyTravel Group to form Thomas Cook Group was intended to boost its presence as a leading holiday provider in the UK, the low turnover of MyTravel meant the company was left with huge levels of debt to pay off. A second merger with Co-operative Travel in 2010 only succeeded in further damaging the company. At a time where customers were starting to realise the advantages of online flight vendors, the maintenance of Co-operative Travel’s hundreds of physical high street offices proved to be more of a financial burden for Thomas Cook Group than an asset. By 2011, the tour operator was revealed to have accumulated almost one billion pounds of debt.
The downfall of Thomas Cook is an undeniably sad tale of the consequences of poor strategic decisions, political turbulence, climate change and the ever-changing nature of consumer habits.
Unfavourable cultural, political and even meteorological conditions caused the company to haemorrhage even more money. The stratospheric rise in popularity of user-friendly travel websites such as Airbnb drew consumers’ eyes (and pockets) away from the windows of physical high street travel agencies, casting offices like those of Thomas Cook into a slow process of obsolescence. Brexit’s delay also majorly dented British consumer confidence and many consumers began to pull back from purchasing expensive holidays abroad. Finally, the UK’s summer heatwaves offered such an abundance of local sunshine and warm weather to residents that many refrained from booking a trip overseas at all. All of these factors contributed to the Thomas Cook Group shouldering an increasingly unmanageable level of debt.
For a brief moment in July 2019, the company appeared to have found its knight in shining armour in the form of Fosun, a Chinese multinational and major shareholder in the group. In need of raising £900 million in capital to stay afloat after having accumulated a total debt of £1.7 billion, Thomas Cook drew up a deal whereby half of the money would be supplied by Fosun and the other half by its remaining investors. However, later investigation would prove that even with this enormous amount of refinancing, the tour operator would still require an extra £200 million to remain operational. Although the company managed to secure an investor to fund this amount, it later dropped out of the deal and left Thomas Cook scrambling to procure the money elsewhere. After a full day of negotiation last Sunday, the tour operator was eventually forced to admit defeat and fall into administration.
As a result of the folding, the travel company’s customers must now worry about how they will pay for their holidays. Though the ATOL financial security scheme traditionally covers the costs of British tourists’ hotel bills in the event of their tour operator failing to do so, travellers who booked accommodation past the insolvency date of Thomas Cook last Monday will have to find funding elsewhere. Given that tour operators typically do not pay for their customers’ rooms until several months after their arrival, hotels worldwide are also now panicking over how they will retrieve the money still owed to them by Thomas Cook for past guests. Finally, the company’s 21,000 employees are now all at risk of unemployment, with several airlines now attempting to recruit said workers instead.
When any giant of the high street falls, the impact of its collapse ripples across the economy, disrupting the lives of its customers and staff and permanently altering the sector it once conquered. The downfall of Thomas Cook is an undeniably sad tale of the consequences of poor strategic decisions, political turbulence, climate change and the ever-changing nature of consumer habits. However, its success in providing millions of British consumers with trips around the UK and beyond for almost 200 years and its integral role in shaping the travel industry means it leaves a commendable legacy behind it. How the industry will transform following the loss of one of its major players is yet to be seen, but its continual evolution in the heart of an era of customer channel digitalisation is a fascinating one to observe.