Analogue Travel Giant Thomas Cook Fails Miserably In The Digital World

1

October

2019

5/5 (1)

Thomas Cook’s bankruptcy was all over the news in the last week of September. The travel giant employing 22.000 people worldwide (BBC, 2019a) failed to keep up with the digitalization of its industry and had to cease operations. New entrants, such as Booking.com, Airbnb and Expedia disrupted the travel industry with digital platform solutions. Thomas Cook is the first analogue giant we see to fail but probably not the last one.

The 178 years old conglomerate started off in 1841 by organizing railway outings for the members of the temperance movement in Market Harborough (BBC, 2019b). The company’s core competence remained the same ever since. Thomas Cook was organizing journeys for the public taking care of every little detail. The package tour concept required a vertically integrated firm managing flight, hotel and restaurant bookings and arranging activities for the traveling customers. As BBC (2019b) notes, the company diversified in the early 2000s’ and started to operate its own airline managing a fleet of 34 aircrafts as of 2019.

Financial markets have been signalling the potential catastrophe of the firm. Their stock price has been sharply decreasing from 136 GBP in May 2018 to zero by September 2019 (yahoo! finance, 2019). The firm has been struggling with restructuring itself while analysts were worried about the frequent exceptional one-off items on the P&L accounts which is always a red flag (BBC, 2019b). Thomas Cook accumulated £1.7bn debt and announced the need to secure £200m of extra funds to prevent bankruptcy (Bailey, 2019). Financiers have lost faith and refrained from further investments.

What were the root causes of the flop of this established British giant with a strong brand and huge customer base? The travel bookings business has moved online at a glance, but Cook’s business remained offline, operating 600 physical stores (Sims, 2019). In the pre-online era Cook’s business model was based on filling the information asymmetry between travellers and destinations. The rise of internet penetration and online platforms dramatically cut search costs for the end users. Thomas Cook also functioned as a platform. A platform far behind its online competitors in efficiency and scalability. Providing trustworthiness also ceased to differentiate the company from competitors as people rely on online review sites such as Yelp or Tripadvisor nowadays.

Besides missing the digital transformation of its industry, Thomas Cook also failed to recognize that changing consumer tastes made their package tour proposition less and less appealing. Millennials admire freedom and prefer to plan their trips themselves. Online competitors decoupled Cook’s business model and youngsters prefer to put their itinerary together using multiple service providers. No doubt that it is hard to imagine a group of teenagers sitting in a Neckerman office flicking through a magazine before consulting with their designated travel agent on which flight to chose for the weekend’s trip.

References

Bailey (2019) Thomas Cook Goes Bankrupt Leaving 600,000 Passengers Stranded https://simpleflying.com/thomas-cook-goes-bankrupt/

BBC (2019a)  Thomas Cook collapses as last-ditch rescue talks fail https://www.bbc.com/news/business-49791249

BBC (2019b) Thomas Cook: What went wrong at the holiday firm? https://www.bbc.com/news/business-46452374

Sims (2019) How Could Travel Giant Thomas Cook Fail? https://www.nytimes.com/2019/09/23/travel/why-thomas-cook-travel-collapsed.html

yahoo! finance (2019) Thomas Cook Group plc (TCG.L) https://uk.finance.yahoo.com/quote/TCG.L

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Technology of the Week – Electronic Market & Travel Industry

6

October

2016

5/5 (1)

Link video group 78: https://www.youtube.com/watch?v=tXX7Ly2r0NY

 

Thomas Cook was was a baptist preacher who lived in the 19th century. In 1841 he made a deal with the Midland Railway to organize a trip for his society. After that, Thomas cook organized a lot of other transportation trips. He became the first recorded travel agent. Without making use of any technology, Thomas Cook organized travels for 165,000 people a year.

Nowadays, we can’t imagine the travel industry without technology. Firms just like Booking and TripAdvisor are online travel agents. Because of these firms, people don’t have to go to a physical store anymore.

TripAdvisor.com

TripAdvisor was founded in 2000. It started as a portal for professional reviews and by now it’s the biggest travel website. They search the cheapest trip for you. You can also write about your experience about a hotel, flight, restaurant, etc. and view comments from others. In this way you will be sure about your choice.

Besides their website, TripAdvisor also have different applications. They have TripAdvisor for both mobile and tablet and three application where you can see different  information about flights, weather and restaurants.

 The biggest strength of TripAdvisor is that they has a strong international presence with 300 million (unique) monthly visitors. Point that are less good are the controversies regarding the validity of the reviews and the chance of theft of email addresses.

Booking.com

Booking is an online accommodation booking website started as a small start-up in 1996 at Amsterdam. Now it has become the world’s number one online booking website. Booking has a similar but different value proposition to TripAdvisor: Booking is mainly focused on the hotels.

In contrast to TripAdvisor, Booking have their own online booking system, where people can directly pay on booking.com. As the biggest online booking website, they’re also able to connect the hotels around the world which is supported by rich resources and information.

Prediction

Because people prefer the cheapest price, the biggest success factor in the future is to build consumer habits and expectations that they will find the cheapest hotels at the right price when using the review sites.

Using the hype cycle, we believe companies like TripAdvisor and Booking.com are ‘at the peak’ and that the services are at the end of ‘at the peak’. The service will reach the stages where negative press begins. Media hype is currently building and with the brand expansion, supplier proliferation is increasing.

The review sites aim to handle users regardless whether they visit through its apps, or desktop. According to TripAdvisor’s CEO Steve Kaufer, people prefer Apps. The future for the online travel review industry is one with a greater emphasis on the helpful button as well as the ability to achieve higher overall expertise levels.

The future of creating an online community should encourage the forum posts, destination experts, seeing where your friends have been, giving the chance to directly ask other users about their reviews, and more overall social interaction.

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