What went wrong at Thomas Cook ?

Thomas Cook, Europe’s second largest tour operator, has hit hard times and it needs to ask its banks for a loan to help it through the next few months. Winter is traditionally a time when cash flow for travel companies is at its lowest. There is no doubt that the bad economic uncertainty in the UK and the rest of Europe has hit bookings hard. The media does not help this situation as certain newspapers love a bad news story. If the media reported good news stories and not just the bad ones then there may well be more confidence in the UK economy.

Whilst Thomas Cook have certainly suffered due to the poor economy, along with it has to be said with many other travel companies, their woes go back several years and are also due to other factors.

Firstly, Thomas Cook refused to believe that Easyjet and Ryanair, who offer flexible durations, would be a threat to their traditional business model. Thomas Cook offered weekly charter flights and they worked quite happily with a large number of travel agents. In addition, Thomas Cook failed to react fast enough to the growing trend of people booking direct with hotels and villa owners abroad. It’s at this point that Thomas Cook should have offered a far more flexible product and provided a travel service that customers wanted. For example, it was very difficult if not impossible to book a one way flight with a charter airline and also the airlines didn’t have flights to destinations that people wanted to go to.

Thomas Cook did eventually react to the growing threat of budget airlines by deciding that travel agents were to blame for their declining sales. Thomas Cook decided, therefore, to set up a website to sell online and set out on a strategy of cutting travel agents commission and undercutting them on price. What should have happened is that Thomas Cook should have sat down with its sales outlet partners i.e travel agents and worked out a plan to compete with budget airlines. Most budget airlines had very clever marketing in place in that they advertised one way fares to make people think that the price was low. However, once the return fare was added on together with the extras like baggage, online check-in costs, meals and credit card charges the actual price was much higher. Add into this poor customer service and it’s a crime to think that their competitors allowed it to happen!

Thomas Cook is a strong brand that has lost its direction but don’t under estimate what it can achieve. To get back on track though it needs to work closely with its massive network of travel agents, both in-house and independents and offer the customer good products. This means giving the holidaymaker a good experience with quality hotels and service, at a fair price.

Despite what many people say, the package holiday is not dead. What could be better than booking everything in one go rather than spending hours searching the web for a suitable flight and then spending even more time searching for accommodation. Add to that the ATOL financial protection customers get with a package holiday and its a powerful combination.

Package holidays need to be sold in a far more flexible way based on quality and a fair price. However, with not enough customers and too many players wanting to sell us all a holiday or flight it’s not going to be easy for Thomas Cook.

With airlines going bust on a regular basis it’s difficult to know why many customers don’t understand that a package holiday is a safer financial bet that booking a separate flight and hotel. This is another area where the message could be stronger.

It’s not too late for Thomas Cook but time is not on their side and the next 9 months will be crucial.

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