Global
WHITONOMICS ISSUE 8
According to Patrick Collinson of the Guardian, T‘he 178-year-old tour operator was always going to struggle given the change in the way people take (and book) holidays”. This is because many consumers now book their holidays online. Such examples include Ryanair, EasyJet and AerLingus, with all of their customers booking online. According to the Guardian, ‘only one in seven pop into a high street to buy a holiday’.
Turbulence ahead The fall of Thomas Cook serves as a warning to unchecked ambition Sairan Uthayakumar
Travel agent Thomas Cook, the world’s oldest travel group has recently declared bankruptcy which had triggered a ‘bitter blame game’ over who was to be held responsible (according to Alice Hancock and Daniel Thomas from the Financial Times). The main culprits for the company’s fall were the company’s banks, its managers and bondholders, and most importantly, Thomas Cook’s largest shareholder China’s Fosun. Thomas Cook opened in 1841 where it organised 500 people to be taken from Leicestershire to an important company meeting in Loughborough. Only 4 years later, they officially entered the tourist business, allowing customers to move from A to B quicker and cheaper than they ever had before to counties such as Nottingham, Derby and Liverpool. Business was going better than expected and the company was making a lot of profit. A century later, in 1948 the company was bought by the owners of Orient Express and
immediately the travel agency became nationalised – it was transferred from private to state ownership, however it was privatised again in 1972. In 1972, Thomas Cook was sold to a series of companies such as Germany’s national airline called Lufthansa. Quoting directly from The Telegraph, the writers claim the ‘seeds of the company’s downfall directly comes from the decision to merge with a rival agency called myTravel in 2007’. MyTravel Group was a package holiday company based in the United Kingdom. It was founded in 1972 and ceased operations in 2007 – coincidently at the same time as merging alliances with Thomas Cook. Following the news that the travel agency had acclaimed £47 million in deficit since 2007, the current UK Prime minister, Boris Johnson complained whether the people in charge of finances and the company’s banks were ‘properly incentivised to sort these matters out’. 4
However according to The Economist, the number of Britons going abroad on holiday is increasing by the year – as in 2010, the number of Britons going on ‘inclusive holidays’ was 14.3 million, compared to in 2018, where the number had skyrocketed to 18.2 million, in just 4 years. There is a simple explanation for this huge increase – the cost of travelling abroad has decreased due to costs of flying for airlines (increased availability of oil for fuel). Furthermore, relating to this point, the Guardian adds, ‘it is still cheaper to buy a family holiday as a package than to book the components individually.’ Then why have sales fallen as the whole concept of Thomas Cook (and their main rivals TUI, who are also witnessing plummeting sales year by year) is selling holiday packages, whereas individual airline sites don’t offer family holiday packages. Additionally, the popularity of TV showbiz such as ‘Love Island’ has boosted the number of holiday makers to cheap locations such as the Canary Islands and Mallorca. In fact, the sponsor airline of the most popular reality television
