Peter Fankhauser needs to act speedily to bolster Thomas Cook Group's resilience in the face of tumult in the packaged holiday segment. But the CEO is persuasive in arguing that he has a winning plan that's begun to show results.
Last year was a challenging one for the European leisure travel industry. But Peter Fankhauser, CEO of Thomas Cook Group, acknowledges that his company needs to become nimbler if it wants to adapt well to future challenges.
Thomas Cook, which took 22 million people on vacations last year, has struggled financially of late. Hiccups have included Brexit uncertainty and unseasonably hot European weather. The nearly 200-year-old company has reportedly drawn some interest recently from potential buyers.
Fankhauser said Thomas Cook had taken steps to become more agile to adapt to changing market conditions. While speaking at Skift Forum Europe in London on Tuesday, Fankhauser highlighted the opening of new hotel brands to appeal to a new generation of customer and the exploration of a possible sale of its airline, Condor.
“We have to de-leverage our balance sheet and pay back our debts,” said Fankhauser. “The pre-tax loss from last year is real, but we operated at a unit-level profit.” When the group has to pay millions in interest each year, it can’t invest back in the business in the way he wants, he said.
Fankhauser declined to signal clearly whether the UK tour operator might sell some or all of its business. “As a CEO of a public company, I know what I can say and what I can’t say, and I can’t say anything,” he said.
Possible suitors include China’s tourism powerhouse Fosun — which already owns a minority stake.
Thomas Cook’s joint venture in China with Fosun boosted demand from 20,000 guests in its first year to 160,000 guests last year. Fankhauser predicted that the China market would match one of its big existing Western markets in size “in the medium term.”
New Hotel Brands
Fankhauser talked up the launch of new Thomas Cook hotel brands Casa Cook and Cook’s Club, which focus on amenities and aesthetics intended to appeal to millennial-aged packaged-travel buyers. He said a majority of the guests at these properties — which he said strive for “Instagrammability” in their photogenic design —
are new to Thomas Cook Group.
Fankhauser also spoke about his effort to bring a customer-centric focus back to the company, including customer initiatives such as a recently introduced guarantee of hotel satisfaction. The company promises to take action within 24 hours of a guest’s arrival if there’s a problem.
Fankhauser had early career success in turning around the UK business as CEO for UK and Continental Europe. Since that time, the company has shed about half of its retail shops.
Airline for Sale
Earlier this year, Thomas Cook revealed it had begun a strategic review of its airline, and Lufthansa revealed its interest in buying it. The German airline group’s customers often overlap with those who fly Condor, which it had partly owned with Thomas Cook until 2009. Fankhauser said the company is in no rush to sell and that talks are ongoing.
Looking ahead, almost half of Thomas Cook package bookings for this summer are to destinations outside of countries using the euro as currency. That fact may partly reflect the global tastes of many Europeans. It may also be, practically speaking, a good thing because Europe faces another summer of airline delays and cancellations.
Photo credit: Peter Fankhauser, CEO of Thomas Cook, acknowledged on stage at Skift Forum Europe with Skift Europe Editor Patrick Whyte that 2018 was a tough year for the European leisure travel industry. But he's optimistic about the coming year. Russell Harper / Skift