Thomas Cook – Tech lessons for small travel businesses from the fall of a giant
Phocuswire – Opinion – George Dumitru, CEO wbe.travel
wbe.travel’s CEO shared his opinion on one of the most discussed subjects in the last past days – the fallout of a giant travel business. Apart from a honest opinion on the matter George Dumitru pointed out some of the opportunities that travel SMEs can benefit from.
SMEs (small- and medium-sized enterprises) in travel can learn a lot from the collapse of Thomas Cook, even if you are not a massive pan-European player with 200 years of brand equity, 21,000 employees and carry millions of passengers a year.
Coverage in the trade and national press moved from the “human interest” angle – thousands lose their jobs, hundreds of thousands have their trips ruined, taxpayers foot the bill – to “corporate governance” or, how did the co-op merger get signed off, how was debt allowed to build, who approved the exec pay and bonus packages?
Hays Travel’s announcement last week – that it has bought 555 retail units from the receiver – has shifted the coverage back to the jobs saved, the high street lives on, angle.
The reasons for Thomas Cook’s collapse will become clearer over time, but for now here are some of its issues which should provide SMEs with some talking points for the boardroom and water cooler alike.
Thomas Cook was a European offline retailer, a charter and scheduled airline, a tour operator, a hotelier and a (wannabe) online travel agency.
The term “vertically integrated tour operator” was often used to describe it, but as the number of verticals increased and deepened, the integration part of the definition started to fall away.
SMEs do not have the scale to take this “all things to all people” approach but should still have an idea about what sort of business they want to be.
Hays, in contrast to Thomas Cook, knows what it is – a U.K.-only independent high street travel agent.
Our experience is that the most effective SMEs are the ones who identify a specific source market and customer base, a specific destination, a specific type of travel.
Today’s tech landscape – with APIs, open systems and partnerships – means that SMEs have access to same inventory as Thomas Cook had.
The smart and successful SMEs we talk to can curate and package inventory to create on-brand product, presented to the traveler in an on-brand way.
A strong identity can also be an internal benefit. Employees need to know what sort of travel company they are working for. SMEs can foster this identity directly with staff rather than through mission statements on the corporate intranet.
The corporate structure of Thomas Cook was defined to an extent by it being a public company, with all the complexity that comes with it.
SMEs, by definition, do not have 20,000 employees.
Some coverage of the collapse talked about departmental silos, about internal conflicts between the retail (shops) and e-commerce (web) teams.
Silos are inefficient whatever the size of the business – and when you’re as big as Thomas Cook the negative impact of silos is severe.
But silos can also be a problem within SMEs. Executives should still engage the entire business in any
The finance director might sign it off, but the IT team will need to know how to install it and the agents need to know how it fits into their workflow.
Everyone’s opinion needs to be heard.
The former CEOs of Thomas Cook are in the firing line, as CEOs should be when their company collapses.
At a travel SME, the CEO can get closer to the front-line workers and explain his or her vision more directly and, hopefully, get a stronger staff buy-in to that vision.
How involved were Thomas Cook front-line staff – the agents in the shops and call centers, the pilots and cabin crew, hoteliers and reps – with the big decisions made by, and signed off, by the board?
Thomas Cook’s decision to merge with Co-Op Travel in 2010 – adding another 400 retail shops to the 800 it already had – is widely seen as symbolic of a business which was out of touch with how consumers were changing their shopping habits.
And it was not as if the signs weren’t there. The high street generally was struggling, shops were empty, footfall was in decline.
Shopping patterns were changing in part but not totally because of the web.
In travel, the shift towards online was gathering momentum. Mobile phones were becoming smart, adding another option for consumers to search, shop and book their own travel.
The lesson for SMEs here is quite obvious: Watch the trends that will directly impact your business.
These could be travel specific – “I am a ski specialist, what new destinations do my clients want?” It could be source market specific – “When 5G rolls out do I need to re-architect my apps?”
It could be macro-economic – “Is a recession coming and what do I need to do to prepare my business?”
Ignoring trends, or thinking that your business can be the exception to the rule, is a luxury most SMEs do not have.
Thomas Cook’s bold assertion in 2010 that it wanted to rival Expedia as an OTA is often cited as a sign that the business was looking at tech through the wrong lens.
It is something we often see when talking to prospects – everyone wants to be a successful as Expedia, without realizing that Expedia’s success is built on billions of dollars of technology investment and billions of dollars spent on Google advertising.
Expedia was not limited by legacy systems in the same way that Thomas Cook was. It is unclear whether Thomas Cook was developing its own platform or using someone else’s.
And there was also big questions about how the OTA back-end would connect to the in-house system used by agents and call centers. Or how the OTA would compete with or cannibalize existing business.
SMEs are in a strong position to decide their tech strategy because their business has, or should have, a strong identity and purpose. Having an identity means that any tech decisions need to align with this identity.
Thomas Cook’s issues around tech were related to issues about its identity – if you don’t know what sort of business you are then how will you know what tech you need and which partners to work with.
Hays is likely to have a more coherent tech strategy because it has a clearer identity.
SMEs can also reverse the process and use technology can create the identity. If I want to build a brand that only sells outbound travel to Chinese millennials in tier-two cities through WeChat Messenger, the tech is there to support it.
Thomas Cook struggled for some time with its identity, its leadership team, trends in the market and its tech strategy.
None of these in isolation is responsible for the demise, though each had a role to play.
Thomas Cook will not be the last big travel company to fail in today’s hyper-competitive travel industry, and the market will watch how the Hays takeover of the shops pans out.
But SMEs with a strong leadership team, a brand identity, an awareness of trends and understanding of enterprise technology are in a great position to find a successful niche.
Read the full article on Phocuswire HERE.
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