Did The Internet Kill Thomas Cook ?

Britain Thomas Cook

Thomas Cook (the man) is seen by many as the inventor of modern tourism, with his first paid railroad excursion in 1845. Like today’s low-cost airlines, Cook and the company named for him brought travel to the average person, whether venturing to Scotland by train or to Egypt by paddle steamer. How ironic that a company built on the revolutionary idea of group excursions would be undone by current innovations fueling do-it-yourself travel, like the internet, online booking, smartphone travel apps and the “sharing economy.”

The magnitude of the collapse of Thomas Cook, the 178-year-old British travel group named for its eponymous founder, is only starting to become clear. When the company declared bankruptcy Monday, as many as 600,00 people were left stranded. The effect on destinations of cancellations and unpaid bills will be painful as well.

According to the BBC, the British government chartered 45 jets to fly its citizens home as part of a rescue effort called Operation Matterhorn. (This would be an ideal time to create a charter fleet of 500-seat A380 jets, if only there was a used market for the Airbus jumbo.)

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As Giovanni Manzella, Director of British-based TBG Travel Guru. puts it, “The failure has triggered the largest peacetime repatriation with over 150,000 UK holidaymakers currently overseas.” The rescue effort is expected to take two weeks, and with limited seats, there are already reports of travelers being “offered” sky-high return fares.

Those people need to be rescued, of course, before a proper autopsy of the Thomas Cook company can be done. Nonetheless, it’s clear that the fingerprints of the Internet are all over this one. Even the oldest and largest companies today have a stark choice: adapt or die.

For Thomas Cook, a long period of decline ended quickly when no lender, including the government, could be found to extend additional funds. “Thomas Cook entered into liquidation due to failing to produce a funding lifeline. All flight and bookings were cancelled with immediate effect of the announcement,” says Manzella.

How immediate? On a Las Vegas to Manchester flight, said to be the last Thomas Cook flight ever, passengers passed the hat to raise 6000 pounds for the flight crew, who essentially lost their jobs in mid-air.

Manzella’s company, TBG, helped people stranded by the collapse of Primera Air and WOW airlines. TBG provides its members, who typically book do-it-yourself vacations directly with airlines, hotels and other providers, expert help on a 24/7 basis via WhatsApp and email.

Manzella says they will help Thomas Cook customers as well. “We have made the decision to discount our advice service down to the bare minimum of £2.00 for unlimited use until the stranded customers are home,” he says. Anyone affected can head to www.thebackgalley.co.uk to get more information or email [email protected] for help.

As for Thomas Cook, how did this proud company, with a nine-generation history, fail so quickly and completely?

In May, a spokesman claimed a key reason for the company’s a £1.5bn loss was from people staying home because of political unrest from BREXIT. The uncertain uncoupling from the European Union put pressure on the British pound and made international travel expensive for UK citizens. The company also claimed that the heat wave that bathed Europe last year cut demand for an escape to the winter Spanish sun. Another tourism killer: instability in once-popular destinations like Turkey and Egypt.

An intriguing theory postulates that tastes changed, from the beachy packaged vacation that Thomas Cook excelled in providing to a more urban experience, which it did not. “In 2019, the average Briton is far more likely to be found wandering around Barcelona or Amsterdam than sunbathing on the beaches of Spain’s Costa Del Sol,” notes Citylab. And while 60% of Britons took a holiday abroad in 2018, just one in seven bought a package at a “brick and mortar” travel agency.

But most outside the company point at Thomas Cook’s overwhelming debt, questionable mergers and particularly, at consumers predilection for book-it-yourself vacations. Such factors eventually proved too much for the company, despite 2018 revenues of $11.8 billion.

Just as it was video that killed the radio star, it was probably the Internet, and its current accomplice, the sharing economy, that did in Thomas Cook. The rise of online travel agencies like Expedia and search engines like Google Flights have prompted millions of consumers to become do-it-yourselfers. Creating their own itinerary might include a low-cost airline like Ryanair rather than a Thomas Cook charter, with a stay in an Airbnb rather than a Thomas Cook hotel.

As the Guardian put it, “An old business model, with expensive to run high-street branches, could not compete in the age of the internet, when customers try to find their own holidays online.”

And in the age of the sharing economy, Thomas Cook owned a lot of things, including 550 travel agency shops, 200 hotels with 40,000 rooms, and 105 aircraft. Even the Thomas Cook-branded currency-exchange shops at airports (now closed as well) became increasingly less relevant, as many travelers changed less cash and used convenient, foreign transaction fee-free credit cards.

The Internet economy has relentlessly targeted “middlemen” and travel agencies and agents are hardly immune. In the United States, the number of travel agents dropped from a high of 124,000 in 2000 to 78,800 in 2018, a decline of more than 35%, according to the Bureau of Labor Statistics.

As the BLS put it, “The ability of travelers to use the Internet to research vacations and book their own trips is expected to continue to suppress demand for travel agents. Job prospects should be best for travel agents who specialize in specific destinations or particular types of travelers.”

That’s a key reason American Society of Travel Agents changed its name to the American Society of Travel Advisors (ASTA) in 2018, as fellow Forbes.com contributor Christopher Elliott wrote. The advisor’s value comes from their knowledge and experience, rather than being simply transactional.

Travel advisers that succeed today often do so by specializing. That could mean focusing on travel to a particular area (say South America), working with a particular clientele (GLBT travel is an obvious example) or offering a particular type of experience (how about a destination wedding?) Such advisers can and do charge fees for their knowledge, attention to detail and concierge-level service. In addition, cruise lines, tour operators, car rental companies and hotels also (reluctantly) still pay travel agent commissions of around 10% on many bookings.

So while there is still a path to success in the travel agency business the original Thomas Cook helped to create, it’s based on expertise, not brick-and-mortar. Thomas Cook, the company, ultimately got mired in debt, ownership of shops, planes, and hotel rooms, and a traditional but declining way of doing business. The challenge, even for a travel industry pioneer with a strong brand like Thomas Cook, is to continue innovating and adding value.