We talk to Patricia Parosselló Palmer, a Senior Travel Industry Professional. She has worked in the travel industry for over 20 years and is founder of several companies. She is for instance the founder of Hoppa.com (former Resorthoppa), an online transfer business that was sold to Albion Ventures and the Lowcosttravel Group in 2008. She tells us about how the bankruptcy of Thomas Cooks has changed the whole travel industry.
After the case of Thomas Cook, do we have to think about systemic companies in other industries?
Thomas Cook in my opinion is a clear example of a company where the leaders have not understood the client demand changes, and they have not adapted the business fast enough to the new needs and technologies of the final client. It is a similar example like Kodak in the photography world, a leading company that couldn’t adapt fast enough to the new demand. The new demand and travel providers expect, especially in the travel industry, a digital transformation towards this new era. Thomas Cook lacked clear direction and strategy in the last few decades, it was a company with huge bank debt and despite a great brand name and reputation, it couldn’t adapt fast enough and transform its model.
Is there also a “too big to fail” in the tourism industry?
There is not such a “too big to fail” anymore. The banks and the Aviation Authorities have supported Thomas Cook for many years, despite its negative results. The company was exceeding 1.2Million GBP with bank debt, and with no clear strategy to make a turnaround. The Anglo-Saxon countries tend to leave the free market to determine who can or not survive in business. do not tend to bail companies out but follow a free market sort of approach. After Lehman Brothers in 2008, anything is possible and I would say despite the disruption caused to clients, employees and suppliers, it is the healthiest way to be in the market.
How does Mallorca experience the collapse?
Mallorca and Spain in general will suffer a lot, it was its major destination. The timing of the failure must also be taken into account. Tour Operators tend to pay 60-90 days credit, this is Thomas Cook left pending to pay the high season (July/ August), leaving huge balances outstanding in many hotels, apartments and transport suppliers. All future bookings have also been automatically cancelled, whilst the clients will be refunded the amounts paid for their holidays, the hotel need to sell again those holidays. September is a good month for bookings, and now those bookings have been cancelled. Will those empty rooms be sold again? And if so, at what rate?
As far as the repatriation of the Thomas Cook clients in resort, hoteliers and transport companies are used to repatriations, they work closer with the Aviation Authorities of the origin countries and they agree the payment of those bookings in transit. The European Travel Directive for Package Holidays covers this situation and this is implemented by the Civil Authorities in the origin countries. Clients tend to finish their holidays and they are repatriated at no extra cost, the disruption tend to be minimum, and the bill is picked up by the Governments, not by the clients.
What’s next? How will this meet the classic tour operators?
The failure of Thomas Cook has left behind a lack of confidence in traditional tour operators, but more for suppliers than for clients. Clients are always protected, by the Civil Aviation Authorities due to the European Travel Directive for Package Holidays, their funds are always protected. If they are in resort, all fees will be covered and clients will be successfully repatriated. If they have future bookings, the Civil Authorities will refund the funds back to the client. Furthermore, clients are also protected by their credit cards, as they can do a charge back to VISA for not having enjoyed the goods. The Client never loses money, however, there is a disruption for having to organise the relevant paper work and rebook again a future booking.
The biggest lack of confidence comes from the hoteliers, overseas partners and transport companies. Will they trust again the Tour Operators? I believe the Hoteliers will have tighter controls on their accounts receivable, they will try to ensure their balances with insurers, demand prepayments etc.. The lack of confidence on traditional operators will question the entire model. When a client books in more modern business models such as booking.com, the hotel charges directly the client in resort, so there is full trust from hotelier and client.
Who will win this bankruptcy?
The main winners will be alternative package operators like TUI or Jet2Holidays and then the online tour operators (OTAs) such as booking.com, expedia etc where clients feel protected by a reputable brand and on the other hand, the hoteliers seriously trust this big firms.
Has climate protection aggravated the situation for Cook or the Brexit?
In my view, climate protection and/ or Brexit had little to do in this case. We all have seen for many years how Thomas Cook has been increasing its bank debt year after year due to a clear poor Business Strategy. The lack of vision and the ability to transform the business to the new era of travel have been the key indicators of its failure.
What do you recommend companies from the sector?
I always suggest to all companies to be customer focus, to be on top of the wave as far as customer needs, to embrace change as fast as possible, to digitally transform themselves to this new era of travelling. The costs of the old structure were far too high for Thomas Cook to be competitive in the current lean and agile way to do business.
Are the corporations too big?
You can be big like amazon, facebook etc… and be successful… in my view size was never the issue, just the opposite, size can give you many synergies and economies of scale. Size it is not necessarily a reason of failure, the main reason of failure is to forget to listen what the customer wants and needs for their holidays.
What do you think of the activist Greta Thunberg?
I am fascinated by the strength of Greta! She is so right, though climate change and how to slow it down is such a complex issue at the same time. I am glad she wants us all to be conscientious of where we are and how difficult is to turnaround the spin. Hopefully, we will all from our homes be more conscientious about our actions to protect the globe as well as wake up the Governments to react fast enough to the changes.