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We are featuring regular reports several times per month from Beijing, Singapore, and Cape Town, and look for us to add other cities soon. Gateway Singapore, for example, signifies that the reporter is writing from that city although her coverage of the business of travel will meander to other locales in the region. Read about the series here, and check out all the stories in the series here.
Overnight, in one fell swoop, Thomas Cook India has become a multinational player with a global network of destination management companies, including Allied TPro U.S., Asian Trails, Australian Tours Management, Desert Adventures/Gulf Dunes Middle East and Private Safaris Africa.
Swedish private equity group EQT which now owns Kuoni, is handing this platter to Thomas Cook India Group, completing the end of travel-service provider Kuoni as a mighty business-to-business travel player. The other main piece, GTA, is going to Hotelbeds Group as announced a few weeks ago.
Destination management companies serve as tour operators for meetings, and some also have leisure departments.
EQT still owns VFS Global, the highly lucrative visa and passport facilitation service, which sources say was why EQT bought Kuoni in 2016.
With its acquisition of Kuoni’s destination management company network, “Thomas Cook India is finally a multinational company, given we now have a global footprint,” said its chairman and managing director Madhavan Menon in a phone interview.
Nothing To Do With Thomas Cook UK
Thomas Cook India has nothing to do with Thomas Cook UK. Fairfax Financial Holdings, based in Canada, owns Thomas Cook India. Indian billionnaire Prem Watsa founded Fairfax in 1985 and serves as chairman and CEO.
Menon said each of the Kuoni destination management companies is profitable while the price of buying the whole network was “competitive.” Most importantly, they are run by “people we know, like Luzi Matzig and Laurent Kuenzle at Asian Trails, who we are comfortable with, and who rank up there as among the best resources,” Menon added.
Menon is especially pleased with Thomas Cook India’s new footprint elsewhere in Asia through Asian Trails.
“I strongly believe the Europe and North American markets are re-emerging from where they have been in the last several years and Asia will be the destination of choice. As Singapore Airlines, Qantas and other carriers start operating longhaul aircraft – nonstop from Asia to North America, from Australia to Europe – these tourists will find it easier to come to Asia, unlike today where it involves a stop through say Emirates or Qatar in the Middle East.
“But the minute nonstop begins, more Europeans and North Americans will come to Asia. We’re talking about the niche, higher-end segment, not the mass market. The Chinese, Indians, Indonesians etc., they will all come but they are a shorthaul, price-sensitive market. Therefore, I believe we have an opportunity through Asian Trails to harvest that demand.”
Will destination management companies be cut out?
With the rise of online travel agencies, airline and hotel direct-to-consumer efforts, peer-to-peer home shares and trips, it remains debatable how long traditional tour operators can sustain themselves.
Menon disagrees, saying longhaul visitors, whether they are going to Indonesia or Africa, need the assistance of destination management companies, particularly because they usually travel multi-point in a longhaul journey.
Thomas Cook India and sister company SOTC, which Thomas Cook India earlier bought from Kuoni, are two of the largest outbound travel brands in India, They both will be able to leverage the new destination marketing company network, which has presence in a 17 countries. These include the U.S., Canada, South Africa, Kenya, Namibia, the U.A.E., Jordan, Oman, China, Malaysia, Thailand, Cambodia, Laos, Myanmar, Vietnam, Indonesia and Australia.
“We currently use various DMCs; it’s more of old relationships. Now that we have teams on the ground, it gives us the opportunity to consolidate this area,” says Menon.
Former Kuoni CEO Hans Lerch, who bought Private Safaris in 1989, Allied Tours in 2000 and TPro in 2003, says in an email interview that he believes destination marketing companies remain “a decent business.”
“A lot are getting disintermediated but good ground-handlers are good ground-handlers and their service will not just disappear. It needs innovation and risk-taking but this business remains a decent business,” says Lerch, who is now executive vice chairman of Abercrombie & Kent.
Lerch believes the latest acquisition is “logical” for Thomas Cook India.
“Prem Watsa, having made his fortune in insurance, bought Thomas Cook, probably more for its financial services, then added TCI, then SITA. And with SITA being a carbon copy of what they bought now, it’s a logical move. It adds $250 million to their top line and if they let their people work, coordinate a bit on the sales side, make sure they all sit on decent IT systems, (Thomas Cook India can add) $15 million to their earnings in four years.”
Lerch adds: “All these companies (the destination management company network) are now free of the Kuoni shackles where everything during the last few years was ‘compliance’ and nothing was ‘business.’ This is now different. They can work properly again and is the reason why they will probably all recover and hence be good acquisitions for Fairfax.”
AlliedTPro CEO, Mark Morello, is excited. “They (Thomas Cook India) embrace an entrepreneurial spirit which we believe is critical for a DMC to be successful in today’s market.
“One of the most exciting aspects of this acquisition is that in addition to being a part of a large global network, each DMC will be in a position to reach its full potential by being in charge of its own destiny. In addition, we look forward to expanding our client base in India, a market with enormous potential, where we already have a longstanding relationship with SOTC,” he says in an email.
How Kuoni lost the plot
With GTA and the Kuoni’s destination marketing companies in new hands, Kuoni’s disintegration is virtually complete, a process that started over two years ago. This pains many of its former leaders and employees who witnessed a more than 100-year-old brand that is as recognizable as Nestle crumble piecemeal before their eyes.
They have scathing words for how Kuoni lost the plot.
Contacted by email for a comment on the latest sale of the network, Peter Diethelm, former Kuoni UK head honcho, says: “The individual businesses may well be in a better home today as the Kuoni board during the last decade from 2006 to 2016 neither understood how to run them, nor had any vision to bring them back to their former glory. It all started with the disastrous sale for a song of the tour operation over two years ago.
“This highlighted the weakness of the European supervisory board structure where incompetent men in gray suites made strategic decisions without experience, vision or even basic understanding of the business, which they ultimately ruined, whilst at the same time paying themselves ever increasing fees and success bonuses for failing both the company and its employees.”
Asian Trails’ chairman Luzi Matzig says something similar. “Kuoni went down the drain for many reasons but two main ones were firstly, the top management was too removed from the ground to comprehend what was happening, what was needed and often too scared to take responsibility and make decisions. Management by consensus is not the way to succeed in today’s fast-moving business environment.
“Secondly, Kuoni involved far too many chiefs and few Indians to actually do the work. They needed to consult lawyers, HR, consultants and IT gurus and the board etc., and paid too high salaries and bonuses to the top 50 or so managers. This resulted in excessive costs which they charged on to the operating divisions, causing unnecessary financial burdens.
“I am convinced that the people at Fairfax and Thomas Cook India will not make the same mistakes.”
Asian Trails’ CEO Laurent Kuenzle sums up the feeling that Kuoni’s fate turned into “a sad story.”
“An international tourism focused company with one of the best brands in the world destroyed by breaking it up into pieces, causing suffering to countless employees in an incomprehensible drive to an objective that nobody understands,” he says. “Our industry is an industry of people. They make companies or they break them. Companies are not broken by computers or wrong standard operations procedures. They are destroyed by people.”
But Kuenzle says he’s not looking back but forward with new ownership under Thomas Cook India. “Their drive for internationalism will continue within their long-term entrepreneurial strategic plan. I believe that the key to their success is the empowerment of management, continued (or regained) independence of each company they acquire, long-term strategic growth planning including investments, and a good nose for where the next pot of gold is,” he says.
As with everything, only time will tell. But for Kuoni destination management companies, it’s already better than being stuck in the mire.