Own goal for Thomas Cook

Global tourism giant Thomas Cook collapsed in spectacular style this week, largely because of a debt of £1.7-billion and bad management and in part because of it cumbersome business model. But industry sources say South Africa’s tourism companies do not face a similar risk.

Tshifhiwa Tshivhengwa, chief executive of the Tourism Business Council of South Africa, said the country’s tourist companies are agile and serve different tourism segments.

He added that the demise of Thomas Cook has more to do with the company itself and its mismanagement of its finances, but its collapse did not mean tourism in general was in trouble.

The world’s oldest travel firm entered into compulsory liquidation after it failed to attain a $1.1-billion loan from its creditors, leaving 600 000 holidaymakers, including more than 150 000 British citizens, stranded abroad.

The company, which was started in the 1840s by Thomas Cook when he began running train trips through the English Midlands, is seen to have had a bloated structure, made far too little use of the internet in its business and to unnecessarily own infrastructure, including retail outlets, airlines, resorts and hotels.

The threat of a no-deal Brexit also saw much of its largest market — British holidaymakers — decide to take their holidays locally.

The company collapsed after it failed to put a rescue package together. China Fosun Tourism Group was willing to finance half of the $1.1-billion Thomas Cook needed to stay in business, in return for control of its tour-operator arm and a stake in its airline.

The remainder of the finance was going to come from banks and noteholders, but at the last minute creditor lenders demanded that the travel company find an extra $246.9-million to keep it operating through the winter, which it was unable to do.

Tshivhengwa said Thomas Cook’s demise will affect South African travel companies that worked with it.
Its business with South Africa was seasonal, mostly in the summer, and had a dedicated plane to bring in tourists. Local companies would facilitate their stay by organising tours or booking hotels.

Tshivhengwa said travellers already in South Africa will complete their trips, which is an agreement that local travel companies have in place. He says those who have booked to visit South Africa but are yet to come can claim back their money back through their insurance. They can also rebook through other companies, but the dates they were due to travel might be affected because they may not get their claims back in time.

The UK government has asked the Civil Aviation Authority (CAA) there to work with it to support Thomas Cook customers due to fly back between September 23 and October 6. The CAA has launched a website, thomascook.caa.co.uk, to facilitate the return of stranded holidaymakers to Britain. This will, depending on location, be either on CAA-operated flights or by using existing flights with other airlines.

Nathalie Schooling, chief executive of specialist customer experience improvement company, nlighten, said similar to a lot of big brands, Thomas Cook “traded on its legacy” instead of embracing the changing times.

She said the change of consumer’s behaviour from retail bookings in favour of those made online had affected Cook’s customer retention rate.

Schooling says online booking “could be considered savvier when it comes to getting a good deal”, and customers could be willing to abandon the first or the biggest in the market when there is a similar, cheaper offer from a lesser known rival.

[Thomas Cook’s] “operating costs were also way too high”, she added. The company had almost $2.47 billion of debt as of March this year, according to Bloomberg.

Schooling says Thomas Cook’s business model, which was to have significant high street retail outlets, fleets of aircraft and hotels, was “outdated”.

“It’s great to have a physical presence so customers can ‘touch/feel’ the product if they want, but you don’t need massive retail presence, for essentially what is nowan online business,” she said.

Tshegofatso Mathe is an Adamela Trust business reporter at the M&G

Tshegofatso Mathe

Client Media Releases

NWU hosts successful press club networking forum
Five ways to use Mobi-gram
MTN gears up for Black Friday sale promotion