Thomas Cook Would Be ‘Shocked,’ Biographer Says, to See His Travel Agency’s Fall
The demise of Thomas Cook, Britain’s most venerated travel agency, is shaping up as one of the country’s greatest corporate fiascos.
When the agency went out of business on Monday, it left some 150,000 vacationers stranded on foreign soil. It put about 21,000 jobs at risk. It prompted calls for an investigation of its management and clawback of executive pay.
So what would Thomas Cook, the man, think of what has became of Thomas Cook, the company?
“He would be shocked and appalled,” said Piers Brendon, author of “Thomas Cook: 150 Years of Popular Tourism.” “Greed and incompetence have wrecked a fine company which has a name that resonated for nearly 200 years.”
Not surprisingly, the company has different theories for its collapse. In May, it reported a gargantuan loss of 1.5 billion pounds, about $1.9 billion, for the first half of the year. The heat wave of 2018 had “reduced customer demand for winter sun.” More important, its chief executive, Peter Fankhauser, cited uncertainties surrounding Brexit.
“There is now little doubt that the Brexit process,” Mr. Fankhauser wrote in the report, “has led many U.K. customers to delay their holiday plans for this summer.”
Some observers are, in fact, calling Thomas Cook the first major Brexit casualty. The contemporaneous decline in the pound, widely considered a Brexit side effect, has also made holidays more financially daunting.
But others maintain that the company’s fate was sealed long before the referendum was even put up for a vote. For years, Thomas Cook played a somewhat frantic and fantastically expensive game of catch-up as it tried to pivot into the digital age. In the end, Thomas Cook was groaning under $2.1 billion of debt, according to the company, most of it accumulated in pricey, ill-timed investments made years ago.
The most problematic was a 2007 merger with MyTravel, a major British competitor. The idea was to create a juggernaut, but combining the two companies proved a hugely expensive misstep. By 2010, debt at the newly christened Thomas Cook Group had more than doubled, to the equivalent of $1 billion. As recently as this year, the deal’s aftershocks were still being felt. Most of that £1.5 billion loss announced in May was attributed by the company to the MyTravel merger.
In 2010, Thomas Cook pulled off another deal, this time with the Co-operative Travel, which operated 400 stores located in areas of prime shopping real estate, or what is known in Britain as high streets. Added to Thomas Cook’s 800 shops, the company became the king of brick-and-mortar travel retail just as much of the clientele was headed online.
“The company had a large number of high street locations, and that’s historically where people would book holidays,” said Julie Palmer, a regional managing partner at Begbies Traynor, a corporate restructuring firm. “They’d go in, have a chat, look over some brochures for a couple hours to get some advice. Then they’d come back the next day and book their trip through a travel agent. I can’t remember the last time I booked a holiday like that.”
A cash crunch was underway by 2011, when Thomas Cook asked lenders for an injection worth about $125 million. And in 2012, the folly of the company’s high street strategy was laid bare when the company announced a turnaround plan that included the closing of 200 shops
All of this would not merely exceed the imagination of Mr. Cook, a one-time cabinet maker and lay Baptist preacher, born in 1808. It would have been contrary to his nature, said his biographer, Mr. Brendon. The origins of his company could hardly have been more humble. It started with a kind of anti-booze cruise.
Mr. Cook considered alcohol a singularly malign force in the Victorian era, and at the age of 32, he organized a group of 500 like-minded citizens to go by train to a temperance meeting 12 miles away.
For the next three summers, Mr. Cook’s efforts were break-even civic acts inspired by a zeal for social reform, not profits. He considered travel the best alternative to the demon drink. By 1845, he started making money, first with a trip to Liverpool, then Wales, Scotland and Ireland, and later beyond the United Kingdom — to the United States, Europe and the Middle East.
With railroads transforming travel, his timing was impeccable. The company was soon targeting the wealthiest demographics.
“The company quickly moved upmarket, into the aristocracy, and became known as the travel agents to the British Empire,” Mr. Brendon said. “It was almost like part of the civil service. It was the company that transported all of the most important people to Queen Victoria’s Diamond Jubilee.”
In 1928, the Cook family sold out to a Belgian company, Compagnie Internationale des Wagons-Lits. When Germany occupied Belgium in World War II, the British government nationalized Thomas Cook. Government management was criticized as slow-footed, but the 1950s and ‘60s were boom years for overseas travel.
“There was a huge desire to get away from the gray, from the austerity and rationing of postwar Britain,” said Roger Bray, a writer for Silver Travel Advisor, billed as a website for mature travelers. “People had more money, and they wanted to spend it.”
Thomas Cook went private again in 1972. The business changed radically with the advent of the internet, making a la carte vacations easier to book at home. But packaged holidays — those all-in deals on flights and hotels, which have been the core of Thomas Cook’s business in recent decades — are still popular. The number of United Kingdom travelers who took this kind of holiday stood at 18 million in 2018, up four million from eight years earlier, according to ABTA, an association of travel agents and tour operators.
“If you go back 25, 30 years ago, it’s true that about 90 percent of holidays were packaged tours,” said Sean Tipton, a spokesman for the association. “It’s less than half now, but record numbers of people are taking vacations. So it’s still a strong business.”
The British government is spending £100 million, roughly $125 million, to fly stranded Thomas Cook customers home in what is being called the largest peacetime repatriation in the country’s history. The price tag could go up, but Grant Shapps, the secretary of state for transport, said it was far cheaper than a full bailout of the company.
For those who sank money into Thomas Cook, all that’s left is investor’s remorse.
Neset Kockar, a Turkish businessman, recently took an 8 percent stake in the company, seeking a role in its rescue. After its collapse, he told the website turizmguncel.com, “I didn’t know it was this badly run. You can’t make so many mistakes, one after another.”
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