The sobering demise of the world’s oldest travel firm
 
The sobering demise of the world’s oldest travel firm
23 SEPTEMBER 2019 8:26 AM

Founded in 1841, Thomas Cook is the world’s oldest tourism company. It’s sad to see it go, and sobering to analyze the current trading conditions and behavior of fickle British consumers.

Trouble has been brewing for some time for British travel company Thomas Cook, but it has in this last week stood at the brink of collapse.

And then today it fell. The world’s oldest travel company—if you discount the Knights Templar guaranteeing, by strong-arm methods, medieval pilgrims in the 12th and 13th centuries—is no more.

It is a sobering thought. No company has a right to last forever, but if a vacation company goes under—with the fortnight-long vacation being almost a British right—that does not hold up well for anything else in these uncertain times of Brexit and what we are told are the last days of austerity.

According to news reports from the last few days, Thomas Cook was hours from bankruptcy, but most people believed it might be saved at the 11th hour.

After all, bankruptcy nowadays is considered to be an admirable, strategic business move.

Bankruptcy used to be the wrong side of the exit door of a last-chance saloon that would bring shame on everyone concerned. Bankruptcy also led to debtors’ jail, where prisoners had to cancel said debts to be released and also pay for their food and board while incarcerated.

Among its many businesses, Thomas Cook has an in-house hotel brand, Casa Cook, which has been expanding at a steady if not electric rate, and it has an airline, also named Thomas Cook. Its majority owner is Chinese company Fosun.

A “bankruptcy” plan reputedly was close to finalization that would have allowed Fosun to pump in even more cash, although creditors demanded that Thomas Cook itself raise £200 million ($248.5 million). This seems to have been the knife on which the firm fell.

The pleas to the U.K. government to bail the company out appear to have been ignored. This is a tourism company, after all, not a bank.

In May, Thomas Cook announced a £1.45-billion ($1.8 billion) loss before tax for the first two quarters of 2019.

Last week, commentators estimated a liquidation would have stranded up to 600,000 tourists and cost British taxpayers billions to get them home.

That would be the most expensive tourism repatriation exercise ever, but latest reports—mainly as many holidaymakers panicked and booked other flights—suggest 150,000 vacationers will need to be repatriated, the majority back to the United Kingdom.

On Friday, the firm’s share price dropped 18% or so to between three or four pence (three or four cents) each; in early 2018, one share would have cost around £75 ($93). That is an incredible drop if those 2018 shares did not go through some epic process of stock splitting.

A news release on that same day from Thomas Cook issued via the London Stock Exchange read chillingly for stakeholders, with one line stating that any “recapitalization is expected to result in existing shareholders’ interests being significantly diluted, with significant risk of no recovery.”

Brexit has been blamed, apparently due to consumers delaying booking. Also to blame are political tensions in mass-vacation destinations and even that the U.K. has enjoyed a couple of nice summers, allowing Brits to enjoy staycations.

Brexit is always blamed.

This is all important as maybe this perfect storm of blame might translate to other companies.

Thomas Cook, the founder, is the granddaddy of British and global travel. My favorite piece of trivia is that he set up his company to transport a group of people by train 16 miles from Leicester to Loughborough to attend a temperance rally, which seems quite at odds with what it does now in its main part.

In 1841, the first Thomas Cook-managed vacation package consisted of a chartered train for 500, perhaps with a souvenir postcard to mark the occasion.

In 1868, Cook set up a system of hotel coupons for his customers so that rates remained the same at his selected hotels. My goodness, the man invented rate parity.

In 1869, he organized his first international trip, which was to Egypt.

Today, not even Fosun seemingly has the economic clout to save the company. You would have thought Fosun would have sufficient consumers and loyalty—in China and elsewhere—to make any newly structured company a success.

Apparently, not so.

Another question I need to work out—apart from the future of Casa Cook—is whether Marriott International’s recent agreement with Expedia (to allow the latter to be the exclusive seller of the former’s wholesale and promotional rates) would have affected a firm such as Thomas Cook, or whether there are two types of distribution here?

Some commentators have suggested that Thomas Cook has not moved sufficiently into the new era, with that sluggishness being largely responsible for its end.

Email Terence Baker or find him on Twitter.

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