Thomas Cook's Forgotten Recipe
Airlines & tour operators have an opportunity to re-learn what made Thomas Cook so successful
Bob Branston was baffled. The imaginary aviation entrepreneur had started a new Canadian airline, Vestal Atlantic, by applying advanced computation methods powered by artificial intelligence (AI) and machine learning that spotted opportunities most humans would miss (see article one & article two). But it was not enough.
AI was being commoditised – everyone was doing it. And while the whizzy Vestal Atlantic super-app travel experience marketplace that Bob had built with funding from Ben Levy at Pomodoro Ventures was attracting customers (see article), Air Canada, Jetlines, Air Transat and the rest were all building their own. It looked like Bob needed to innovate even more.
What did Bob do next? Like all good airline revenue specialists he sought inspiration from history. He looked back to travel pioneer Thomas Cook to get some ideas. Read on to find out what Bob learnt…
Thomas Cook – travel pioneer
Thomas Cook was a real visionary. He launched one-day rail excursions from Leicestershire in 1841 and by 1845 was offering commercial trips to Liverpool. He quickly expanded continentally, offering hotels, resorts and cruises. While mass commercial air travel was still more than a century away, Cook pioneered the tour operator model.
He offered low-cost package holidays by train to the beach and, for those with a little more cash, by sea to lands beyond the horizon previously visited only by soldiers, sailors, geographers and the occasional diplomat. One of the keys to Cook’s success was inspiring people to travel by showing them clearly what their options were.
Bob Branston’s left eyebrow raised a fraction of an inch. All his rival airlines were still focused on making offers based on people’s origin and destination. Maybe inspiring them beyond these limits was what he needed to do in the 21st century too.
Thomas Cook was in business for 178 years. It was one of strongest British travel brands with 93 aircraft, 3,170 hotels and 21,000 staff serving 20 million holidaymakers each year.
By the time it stopped operating, low-cost carriers (LCC) and capable on-line travel agents had made it easier and cheaper for travellers to construct their own itineraries without relying on a tour operator.
But, Bob Branston wondered, what if Thomas Cook had been able to maintain everything that made tour operating work well in the 21st century’s commercial environment? Could they have survived? Or even thrived? And what could that mean for Vestal Atlantic?
Cooking the secret sauce
A tour operator packages together everything that people need to have an enjoyable holiday. Flights to the Caribbean, a hotel with beach access, meals, sightseeing and transfers. It is not necessarily a budget experience – at some Sandals resorts the more expensive rooms come with butler service.
Tour operators make things easy. There is no foreign-language public transport or snaking taxi queue to navigate after a long flight. A smiling rep and a clear sign make it clear to arriving passengers what they need to do next, and it can be modernised.
In Thomas Cook’s early days unknown languages, currencies and cultures presented formidable obstacles to people who had not travelled before. For nearly 200 years, Thomas Cook was able to use its buying power to negotiate favourable rates with hospitality and travel providers, offering customers lower prices than they could achieve on their own.
Thomas Cook I.T.
In 1997, Thomas Cook Online was the first retail travel agency to offer customers electronic brochures and buy holidays, including travellers cheques, online. A big commercial success, the web side of the business ultimately led to Thomas Cook’s shareholders being bought out by the British company Carlton Leisure Group and, two years later, German travel player Condor & Neckermann who changed their name to Thomas Cook AG.
A clear mission came to Bob Branston’s mind – he needed to make Vestal Atlantic not the cheapest or the most luxurious or the most high frequency airline. All of those things matter. But not as much as making travel easy for passengers.
Making things easy for their customers was the secret sauce that made Thomas Cook a success and Bob realised that his competitors, today’s airlines, were making things far too complicated with their tedious booking engines, OMS, distribution, NDC, GDS and other impenetrable processes. Bob sensed an opportunity…
TO typology
There are six main types of Tour Operator:
1. Mass market one or two week sun-sand-sea breaks like the UK’s TUI
2. Specialist or group adventures like Australia’s Intrepid
3. Domestic travel like Israel’s Click Tours
4. Fan and supporter tours like the British Gulliver’s Sports Travel
5. Receptive operators, who provide packages to other tour operators, like Canada’s Jonview
6. Ground tour operators, who deliver on-the-ground travel experiences like Iris Holidays of Kerala, a southern Indian state famous for elephants and tropical greenery.
Thomas Cook Airlines operated under several Air Operator Certificates, with aircraft registered in the UK, Belgium, Scandinavian countries and, as Condor, in Germany. Only Condor survives due to being carved out during liquidation. They introduced one of the first premium economy services:
Thomas Cook travel agency shops on the high street were merged with the Co-Op and the Midlands Co-Op to become the largest ever chain of British travel agents by 2013.
It all looked good to Bob Branston. But why had the business then failed? Bob turned to the financial statements…
2015 was the most profitable year ever for airlines according to Statista, a German data company. Yet Thomas Cook’s earnings were marginal at best. The group had in fact been struggling financially since 2001 so it was no wonder that Royal Bank of Scotland turned off the taps and the group collapsed in 2019.
So why did Thomas Cook fail?
Bob Branston dived further into the statistics. He reached the following conclusions:
1. Thomas Cook’s business model catered to an ageing population, not millennials or Gen-Z with tech savvy and disposable income
2. Unlike in the early days, when Thomas Cook showed people what was possible, customers found the choices inflexible, boring and no different to others elsewhere
3. Customers booking Thomas Cook thought they were missing out, but were not sure on exactly what was not offered
4. Offers were not clear and often poorly presented
5. There was little opportunity to build a custom package DIY-style
6. Modern work patterns and static charter holiday dates were not aligned
7. Offer management tech was clunky, often rigid and frequently out of date
8. Too much emphasis was on the air travel component, not what people would do once they had arrived at their holiday destination
9. Falling yields made Thomas Cook’s poor liquidity and debt burden unmanageable
10. LCCs built high frequency, high choice networks much better suited to the DIY travel shoppers were looking for
11. Full service airlines and premium cabin alternatives became more affordable as middle class incomes grew.
Thomas Cook’s business model became “sandwiched” between low-cost carriers and full-service airlines, targeting a market segment that no longer existed. Thomas Cook fundamentally missed the trend towards lifestyle breaks in geographically close but still exotic cities.
The tour operator’s costs were probably too high, but that was not the decisive factor. Cost is less important if you can derive premiums from differentiation. The killer blow to Thomas Cook was that they simply did not offer enough value or a unique selling point to holiday shoppers and accordingly were unable to monetise a booming market.
Bob Branston realised that although anybody can sell travel today, few are in a sweet spot that can scale and only a handful make travel truly easy for consumers.
Bob decided to use Vestal Atlantic to build a new tour operator that would use everything that was good about the old Thomas Cook to capture a strategic highground in the 21st century travel market.
Join us next time to find out what Bob did next…
ricardo DOT pilon AT millavia DOT com (author)
oliver AT ransonpricing DOT com (editor)
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