The story of Thomas Cook is a sad and miserable story – and an annoyance to hundreds of thousands of customers who may be stranded far away from their homes. Regardless of the outcome of the rescue talks that began yesterday, our changing habits and technology means that the Thomas Cook brand will never be the same again.
What happened? Thomas Cook saw at the beginning of the railroad that people needed help to organize the journey. It was in 1841 that he gathered 500 people for a train ride from Leicester to Loughborough to attend a temperance event. Other excursions including one to Scotland followed, but it was his son John who developed the idea of the packing trip to continental Europe, where everything ̵
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It was a business model that has survived to this day, although the largest foreign travel market now is the growing Chinese middle class, eager to get a view of the rest of the world, not Northern Europeans who want a cheap week in the sun.
The fact that the basic model survived enabled Thomas Cook to survive as a business, despite two world wars and multiple change of ownership and leadership. It was nationalized for a while between 1948 and 1972, owned by, among others, Midland Bank, merged and merged with other travel groups. Bits were sold, bits were added. In 2001, what was again sold to a German company C&N Touristic, which was again merged with MyTravel Group in 2007. It is the merged company, called the Thomas Cook Group, which is currently looking for a way to continue.
There is a very brief description of twists and turns. It is probably fair, if unfriendly, to say that this will be studied in business schools as a classic example of management failure: how to wreck a globally recognized brand and one that operates in a large and growing market. Travel and tourism is the world's largest industry, accounting for around 10.5 percent of the world's GDP.
However, there is another side to the story. Travel and tourism can be a huge and growing industry, but the structure is changing very quickly. Three things have weakened tour operators: budget companies, the internet and changing holiday patterns.
Before Ryanair and easyJet revolutionized European flights, charter airlines were the cheapest way to fly. Now some of us can buy a seat, provided we book at the right time and shop around a bit, approximating the price that a tour operator's airline has to charge the parent company for. So the benefit to the tour operator that it can make money on air travel has largely disappeared.
Also has the ability to order cheaper than the regular punter. Yes, they can still block a floor of some hotels at a hefty price, because it may be convenient for the hotel manager to know that it has some guaranteed revenue. But the hotels now have other options. They can sell through online ordering sites and will have their own websites and databases for potential customers. Tour operators' advantage of being able to buy cheaper than anyone else still exists, but is much weaker than it was a decade ago.
The third change is in holiday habits. A tour operator can still offer a package where everything is done: travel, accommodation, transport, tours and so on. It is the same proposition that Thomas Cook made a century and a half ago: you do not have to worry about traveling to a strange and distant land, because we will fix all the details. But now everyone who has access to the internet has similar information as the tour operator, and can find out the details for themselves. There is a loss of convenience, but this is offset by a large increase in flexibility. Many of us are now unable to fix holiday dates months in advance. Work patterns are different, more people are self-employed and family circumstances more complex. We can find the best hotel deals in a few minutes; we don't need Thomas Cook to tell us.
And we certainly don't need Thomas Cook if it's going to leave us stranded in some foreign cities. It is the last sad twist to this sad story. All businesses trade with reputation, but reputation is especially important in a business where you pay money in advance and receive the service months later. In the case of Thomas Cook, a brand that took more than 150 years to build and survived all kinds of battering, this reputation has been ruined in a matter of days. Although the people who worry about how they come home, or what will happen to the holiday they have booked, will be compensated in some way.
Maybe the business will be saved – yes, I hope it will – but I highly doubt many will want to book with Thomas Cook again if that's the case.