Under CEO Peter Fankhauser, Thomas Cook has quietly managed to turn itself around. The situation this year has undoubtedly been aided by an improving geopolitical climate but a more focussed, higher-quality product offering has also helped.
Up until recently Thomas Cook was way behind tour operator rival TUI Group in the quality of the hotels it had on offer. It still has some way to go but it is encouraging to see how much emphasis the company now puts on its properties.
Among the changes, in the summer of 2018 Thomas Cook plans to let travelers choose their own hotel rooms before they travel at 300 of its most popular hotels, the company said. The company has already tested the initiative and will now look to roll it out more widely, starting with its own property brands.
The start of the summer is when European tour operators start making their money as customers head south for their holidays.
Although the fourth quarter tends to be the most lucrative, Thomas Cook’s third quarters are a good indication of where it is heading.
Revenue during the period increased by 22.8 percent to £2.3 billion ($3.02 billion) thanks to continued growth in Greece as well as long-haul destinations. The loss before tax was cut by more than half to £31 million ($40.7 million).
Thomas Cook’s outlook for the remainder of the summer is also positive. Bookings are up 11 percent with average selling prices 1 percent higher than last year.
There are two main reasons for Thomas Cook’s improvement: fewer geo-political problems in key destinations and the work that the company has done on its own product offering.
Speaking after the results were released, Fankhauser addressed some of the issues that affected performance.
As Thomas Cook plays catch-up to rival TUI on the hotel front, Thomas Cook recently opened a second Casa Cook—a relatively new brand aimed at the younger, design-conscious demographic. And Thomas Cook is looking at other ways it can convince consumers to book with it.
“We have worked hard to get ourselves into really great shape for the summer season, which is now in full swing. We opened 11 new own brand hotels… including our new Casa Cook in Kos [a Greek island.] I’ve just come back and I have to say it’s wonderful: a beautiful location, the same laid-back design as Rhodes [the company’s other property] and its own spa and beach club. Real affordable chic on the beach,” said Fankhauser.
Thomas Cook is also adding more properties to its 24-hour hotel satisfaction promise, which allows customers to switch hotels, fly home or grab a discount if the place they’re staying isn’t up to scratch.
“We have also expanded our 24-hour satisfaction program for this summer to give 80 percent of customers in our core sun and beach hotels an added level of reassurance. There’s more to come and we continue to look for new ways to innovate in order to make a difference to our customers and make ourselves different from the competition. This includes the option to choose your own hotel room before you travel, which we plan to launch in 300 of our most popular hotels for summer ’18, starting with our own brand properties.”
While the threat of Brexit doesn’t seem to be dampening demand (UK bookings are up 6 percent for summer 2017), the threat to travel companies, especially those with an airline, are real.
The UK’s aviation industry is tightly tied up with the rest of the European Union and there is a worry that as soon as the company officially leaves in March 2019, there will be turmoil.
Fankhauser is one of a a number of chief executives calling for some kind of transition deal, which will give the UK more time to decide what it wants to do, therefore avoiding a cliff-edge scenario.
“Lots has been said in recent weeks and there’s clearly a long way to go but let me just make one plea: a plea for common sense, that politicians on both sides of the Channel agree now to extend the existing agreements for air traffic rights beyond 2019 for as long as it takes to come to a long-term settlement. That has to be in everyone’s best interest,” he said.
Yesterday, the UK Foreign Office decided it was now safe for Britons to travel to Tunisia. The country has effectively been a no-go area for tourists ever since 38 people were killed on a beach in 2015 – the second such attack aimed at tourists that year.
Prior to the attacks the destination had been a popular place to visit and offered a cheap alternative to European Mediterranean destinations.
“That is definitely good news for Tunisia and Tunisian hoteliers and also all the employees who are working in the tourism industry. We got it yesterday from the government so we didn’t expect it,” Fankhauser said.
“Obviously the [Foreign Office] came to the conclusion that it is again safe to travel. We didn’t have any program for the winter so we are now setting up a really good quality offer for Tunisia and this is going to take some time so we are not rushing into it.
“I suppose we are going to start during the winter season but more towards the spring [in 2018.]
Tunisia isn’t the only country affected by a UK travel ban. (European countries make their own decisions when it comes to where people can and can’t go, which makes things doubly difficult for multi-national tour operators like Thomas Cook and TUI Group.)
Flights from the UK to the popular beach resort of Sharm el-Sheikh in Egypt are still banned and although Hurghada is still open, earlier this month two tourists were stabbed to death at a seafront hotel. Nevertheless, Fankhauser said that nothing had changed about Thomas Cook’s approach to Egypt.
“Again we are very clear that we follow the advice of the Foreign Office and we are taking very seriously our responsibility to give our customers the necessary information to make their own minds up but that is what we have massively improved on our website and in our retail shops,” Fankhauser said.
Turkey and Spain
Turkey has had its own problems in recent years with terrorist attacks aimed at tourists and an attempted coup.
It looked like things were getting back to normal but recently Germany warned its citizens about travel to Turkey.
Fankhauser though appeared skeptical about the change in tone, saying that customers don’t react to politics.
Interestingly, Fankhauser revealed that earlier on in the summer Thomas Cook had switched capacity out of Spain, which has become even more popular and expensive, and put it into Turkey
“The real increase [in] competition is really to Spain and there we can’t avoid the market so we have to go along but what we did at the very beginning of the season [was] we were trimming the capacity to Spain and we were redirecting about 10 percent of the capacity out of the UK into Turkey, which was somehow a testament to [the fact] we are way more flexible than were in previous years with our capacity planning and [we are] following the demand [to] where we think our customers are going to have the best holidays,” he said.
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Photo credit: Thomas Cook's Sunprime Miramare Beach hotel in Rhodes, Greece. The company reported an increase in revenue during the third quarter of 2017. Thomas Cook