The brand underestimated the consequences of digital and allowed its heritage to blur its vision of the future, says Nucleus founder and chief executive Peter Matthews
Thomas Cook was the UK’s first travolutionary. The brand was born in 1841 with a train charter to take 500 passengers from Leicester to neighbouring Loughborough. Cook organised the trip to attend a Temperance meeting, although for many of his customers this was really an opportunity to travel on a train for the first time. Rail tourism was born.
A decade on and Cook had expanded into international travel, starting with trips to Paris with a revolutionary travel model we still recognise today, offering complete holiday packages that included rail and cross-channel travel, accommodation and meals. With its founder a serial innovator, how ironic it is that his brand died because it lost its spirit of innovation.
Thomas Cook went on to become not only the UK’s biggest tour operator and travel agent (for a while), but the world’s leading foreign exchange retailer. It exited this business in 2001, just as digital financial services were taking off, selling its Global Financial Services division to Travelex.
Travelex is now the leader in its field and valued at around £2bn. Instead, Thomas Cook, under the leadership of Manny Fontela-Novoa acquired MyTravel in 2007 and Co-op’s travel business a couple of years later, expanding its retail presence to over 1200 bricks and mortar shops, just when online travel had really clicked with consumers. Worse still the business was already struggling under a mountain of debt raised to fund the acquisitions.
Thomas Cook stuck with conventional retail travel agencies, printed more brochures, became its own airline to compete with easyJet and Ryanair, re-branded twice and fiddled with the legacy tour operator/agency model, and spent too little to make the vital digital transformation.
Yet the real sadness is they had scale and many market leader opportunities. My own insight goes back to 2001, when the Thomas Cook board commissioned Nucleus to define a digital strategy which could have catapulted them ahead of the online travel agent start-ups that were soon to follow, but digital seemed too challenging and the recommendations were literally shelved and never implemented. That didn’t stop Thomas Cook spending on consultants, however, with £180m disclosed in their annual reports for 2013 and 2014 alone.
As with other brands that did not keep pace with changes, Thomas Cook appear to have allowed its heritage to blur its vision of the future. This is a salutary lesson for the travel sector and beyond and adds to the list of Blockbuster, HMV, Kodak, Toys R Us and many others who underestimated the consequences of digital.
But it didn’t have to be this way.
When a business spends £180m on consulting fees in 24 months, you expect someone to have spotted digital as a priority. The value of a strategic review is that you are supposed to look outside your box to identify opportunities and threats and inside to evaluate the reality of resources, capabilities and practices. One wonders whether Thomas Cook or any of these failed brands actioned any of the findings and recommendations the consultants proposed? Perhaps the change recommendations were too challenging and the reports were added to the shelf labelled ‘executive tidiness’.
The Thomas Cook brand
It’s also interesting to me that Thomas Cook rebranded every decade since the 1990s, apparently without really transforming its model. Rebranding is really, really useful if it signals a clear new purpose or a transformed value proposition, but if it only signifies a change of owner or panders to a new CEO’s ego, it’s a waste of money.
I’ve read that the ThomasCook.com domain name is still worth a fortune and also that Fosun might want to buy the brand name. What will its customers stranded around the world think about booking another trip of a lifetime on a new Thomas Cook website?
While brands can be recovered, brand reputation is much more challenging and expensive to put right than might first appear. Don’t just think customers, think about trade creditors and Governments as well. If one was to resurrect the Thomas Cook brand, a domain name is not worth much without the trade mark portfolio to protect it across its international markets, and Thomas Cook operated in quite a few.
To put life into a Phoenix you’d need to combine both and then rebrand (again) to show that this is a new Thomas Cook with a fresh business model. That would require considerable investment in a best-of-breed digital platform to deliver competitive advantage and a full brand recovery and re-positioning.
As potential acquirers pick over the bones of the Thomas Cook businesses, and the banks and bondholders write off their £1.8bn losses, I wonder whether this is the last we’ve seen of the 178 year-old Thomas Cook brand?