Thomas Cooked — the collapse of the oldest company in travel

Last September, the world’s oldest travel company, Thomas Cook Group PLC, closed its doors after operating since 1841. This 178-year old company with revenues at £9.6 billion GBP ($12.3 billion USD), was once known as one of Europe’s top leisure-focused no-hassle travel companies. Beginning on September 23, 2019, after announcing voluntary admission into administration (a form of bankruptcy reorganization under U.K. law), the company left 600,000 stranded customers across the globe. Of the 600,000 stranded, 155,000 of them were from the United Kingdom, triggering Operation Matterhorn — the largest peacetime repatriation effort in U.K. history led by the Civil Aviation Authority (CAA), a public corporation under control of Department for Transport.

This blog is going to explain how years of poor leadership and communications strategy, financial mismanagement, and a bloated business model unable to keep up with rapidly changing market trends were the primary factors that led to this enormous collapse.

A Brief History of Thomas Cook

To understand the true scope of the Thomas Cook fiasco, it’s important to first understand who it was as a company and the massive scale at which it operated.

At its collapse, Thomas Cook was known throughout Europe as one of the top low-cost, leisure-specific travel companies operating tours on just about every continent. Along with operating tours, Thomas Cook had owned 550 brick-and-mortar travel agencies, 200+ hotels and resorts under dozens of brands, and 105 aircraft flying to 82 destinations. It was a behemoth in the Europen travel sector and the airline was the crown jewel.

What catapulted Thomas Cook to stardom was a popular ad campaign in the mid-1980s where it solidified its brand identity through the slogan, “Don’t just book it, Thomas Cook it.” In recent years, this tagline, as synonymous with the brand as their name, masked the company’s failures to make the jump into the digital age.

Throughout the early 2000s, numerous low-cost airlines flooded the European market. With the rise of easyJet, RyanAir, Norwegian, Vueling, and Eurowings, the competition was intense. All carried lower overhead costs, focusing on one or two travel sectors, in contrast, Thomas Cook had high fixed costs and a business model that focused on multiple travel and hospitality sectors. In Germany, Thomas Cook’s sister-company, Condor focused on the large central-European market, leaving Thomas Cook to focus on western-Europe. This strategy was an attempt to challenge TUI Group, another leisure-specific, travel-bundle company that dominated the German and central-European market.

On another front, the internet offered more targeted travel experiences. For the first time in history, the 2000s offered consumers the flexibility of booking cheap vacations from the comfort of their own homes. Companies including Airbnb, TripAdvisor, Kayak, and Hostelworld began to chip away at Thomas Cook’s travel store business. Many times these competitors offered cheaper deals through multiple airline carriers and hospitality groups, undercutting Thomas Cook by totally eliminating in-store travel agents, again exposing Thomas Cook’s high fixed costs. Partnerships between online travel booking companies and low-cost airlines also increased, leaving Thomas Cook and its ventures out of the equation.

As the 2000s moved into the 2010s, travelers of all ages gained increasing confidence using new online platforms. With a large number of options when it came to booking inexpensive flights, guided tours, and accommodations, Thomas Cook needed to pivot. The demand for a traditional all-inclusive, package style vacation was fading. The need for a physical travel agency had also changed. Consumer demand was focused on low pricing and convenience. Furthermore, changes in travel attitudes and apprehension surrounding terrorism and Brexit led to the gaining of popularity of staycations and less-expensive regional travel. Londoners were content traveling to the Amalfi Coast, French Riviera, or Mallorca. There just wasn’t the same demand for Capetown, Cairo, or the Cayman Islands.

For many Europeans, particularly Britons, travel became cheaper, more frequent, less extravagant, and shorter in duration. Younger travelers could book inexpensive last-minute flights and lodging accommodations in a matter of minutes. Older travelers could book private tours via high-speed rail and stay in luxurious condos for half the price. All these factors lead to less interest in an all-inclusive tour-based travel company like Thomas Cook.

Strategic Communications Challenges

So what did the leadership at Thomas Cook do to recognize these changes and set the company up for many more years of success? The truth is not much. On the surface, Thomas Cook did make some changes. They rebranded themselves with a new logo and branding package, invested in making their travel office storefronts more modern, and doubled-down on targeting families with their advertising. Much of their advertising spend was still focused on TV, with just a portion of the marketing budget spent on digital. Due to this, their communication didn’t change much. Aside from a facelift, the core of their messaging was the same. Again, not realizing that communication was changing and that their key brand messaging was failing to make an impact.

Numerous internal and external groups petitioned company leadership, voicing concerns surrounding changing attitudes in travel. For the most part, their calls were ignored. This eventually culminated in 2011 with a near-collapse of the business as stocks plummeted 75%, caused by reports being leaked that Thomas Cook’s leadership was seeking a £100 million GBP ($129 million USD) loan to prop up the failing business.

After securing the loan, stakeholders inside and outside the organization once again voiced their opinions, this time demanding a split in the company. They called for a separation of the more profitable airline from portions of the business that were experiencing slowdowns, including the hospitality and package tour operations. Thomas Cook’s leadership responded to these calls by slashing the number of travel stores from over 3,000 to just 550, admittedly, a significant decision. However, further calls from stakeholders to split up the business and bring the company fully into the digital age by developing a strategy to compete with major online competitors were repeatedly rejected.

Instead of changing their focus and looking outward at what consumers wanted, Thomas Cook continued their inward focus, placing major importance on what they believed defined them: tours and travel agencies. Sadly, their audience had changed and came to expect something different and something that Thomas Cook’s leadership wasn’t understanding or refusing to embrace. Times had changed and instead of changing their business model, they held onto the past.

The Failures of Being Internally Focused

Referencing The Page Principles, Thomas Cook’s leadership violated multiple public relations ethical standards in the handling of the business and the eventual collapse. To start with, they didn’t listen to stakeholders. As mentioned above, stakeholders inside and outside the organization called for drastic changes to their business model. At first, this was met with some response. However, in the long-run, Thomas Cook’s leadership failed to restructure the company and develop a long-term strategy that addressed competition from online competitors.

This failure to listen to stakeholders naturally led to another ethical violation: failing to manage for tomorrow. By ignoring stakeholders, Thomas Cook’s leadership exhausted public and private goodwill and ended up creating even larger problems for stakeholders as the company collapsed, stranding hundreds of thousands of passengers and leaving tens of thousands of employees jobless, including pilots and flight attendants learning they were out of a job from passengers who reacted to the news while accessing the internet in-flight.

The final and most important ethical failure of Thomas Cook’s leadership was their inability to conduct public relations as if the whole enterprise depended on it. As the Arthur W. Page society states on its website, “No strategy should be implemented without considering its impact on stakeholders. As a management and policymaking function, public relations should encourage the enterprise’s decision making, policies, and actions to consider its stakeholders’ diverse range of views, values, experience, expectations, and aspirations.”

Future-Proofing Your Business

What sets apart a truly future-proofed company is their ability to authentically embrace and pivot. Many times, businesses and organizations fail to communicate successfully not because the message is flawed or because the medium being used is outdated, but because they fail to embrace changes and pivot to meet new expectations. For some businesses, this can be tied to sustainability and a commitment to diversity. For others, it can be a suffocating internal focus, a form of tunnel-vision where companies refuse to see the present world for what it is. If we can learn anything from the demise of Thomas Cook, it’s that all companies have the opportunity to succeed when facing a changing marketplace. All it has to do is embrace and pivot.