Wednesday, 23 November 2011

Thomas Cook - Where next?

The travel business is an ever changing beast and after hearing about Thomas Cook's financial woes I thought I'd spend some time considering what it all means.  Both for Thomas Cook as well as travellers and tourists (I'm not going to get into a debate on what the difference is, let's just say mostly people see themselves as travellers and other people as tourists).  

Firstly, what is the problem that Thomas Cook has? Simply put Thomas Cook appear to owe 1 billion pounds to the banks and based on their current share price they are only valued at about 100 million pounds.  The company also needs to convince their bankers that the company's management can handle the companies existing problems.  So all in all then, quite far up a creek it might be fair to say.

As pundits and commentators have quite rightly observed the effects of the Arab Spring in Egypt and Tunisia as well as the floods in Thailand, have hit Thomas cook hard as these three countries are key markets for them.  Combined with the world's financial insecurity and the knock on effects of the ongoing "Euro-Zone Crisis" But I think there's more to Thomas Cook's current set of woes.  The business model of Thomas Cook is still based on the founding principles of "packaging".  Creating a "packaged holiday", at a time when we are all becoming aware of how less packaging is best.  Almost everyone in the UK will know the meaning of that term "package holiday" meaning a holiday or vacation, where you buy the travel, the accommodation, insurance etc at one price.  And basically you're whole holiday is sorted out for you, a business model that is starting to look a bit out of date after 170 years.  The peak of package holidays from the UK was the 1960's to the 1980's, people often going abroad for the first time, on affordable holidays to places like Spain, Portugal and Greece.  But now people can go anywhere and moreover the internet means they can do it all themselves and they don't need anyone to hold their hand any more.  Travel Trends point not just to people booking their holidays online, which in someways shouldn't hurt Thomas Cook too much as they have a huge online presence.  But having shops is certainly an outdated concept for most people looking for a holiday, it is also that people are more and more confident about making own their arrangements.  

The shift the world has undergone certainly in the post-industrial information age (thanks for that term sociologists) is people are far more used to travel generally.  When the Thomas Cook, the founding father of the company arranged for a group of temperance (tee-totallers to you and I) to go to a rally in Loughborough in the 19th Century it was all a completely new proposition, a travel "agent" sorting it all out for you.  Subsequently the emphasis was in taking the stress out of travelling, and allowing you to enjoy your time away, without having to think much about arrangements other than making the initial departure point.  So even if the advertising has changed a little and we now see the "done-well couple from next door" namely Harry and Louise Reknapp, who need a break from their busy schedule advertising the Nintendo Wii, and need to look photogenic on a beach in front of a sunset.  We don't see Thomas Cook as reflecting our needs, perhaps for the young family, not for the young couple who are more likely to look to  

Social media sites like TripAdvisor have helped to chip away at Thomas Cook, because people enjoy reading peoples reviews and like to think more closely about where they holiday than they did in the past.  (Leaving aside that some unscrupulous souls seem to be actively holding hoteliers to ransom,even when there have been no problems with their stay as well as some postings are by hotels themselves and a system which is wide open to abuse, which seems to be on the rise, right, enough I'll park this tangent).  

Also the travel market has broken into many different markets and the mass market has become harder to define as well as market to.  People want more, they more for less and they also know far more about what they should expect.  The time of people accepting what they are given and making do is long gone.  

Obviously some people will be looking for a beach, a pool and a hotel with restaurant and bar, a package firm will be perfect for them.  But these days, more and more people want more for their money and that means experiences, in the way people love to cook far more than they did a few years ago.  They are far more willing to be more adventurous with their travel.  In a time when the word "Lifestyle" actually means something to so many people, they see their travel needs as reflecting the image that they have for their own lifestyle.  

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