Co-Operative Executive Interview – Mike Greenacre

Climate change looms large for Mike Greenacre. The managing director of The Co-operative Travel Group does not conceal his disgust at the government decision to expand Heathrow by allowing a third runway. “We are angry,” he says, referring to the group of more than 400 high-street shops, 600 home workers, call centres, corporate travel operation and…

Climate change looms large for Mike Greenacre. The managing director of The Co-operative Travel Group does not conceal his disgust at the government decision to expand Heathrow by allowing a third runway.

“We are angry,” he says, referring to the group of more than 400 high-street shops, 600 home workers, call centres, corporate travel operation and cruise business he heads. “Why do we need a third runway at Heathrow when the air traffic around Heathrow is so inefficient?”

When the government made its announcement in January, Greenacre labelled the justifications “laughable” and “absurd” – strong language from a board member of ABTA, given that the association supports Heathrow expansion.

Greenacre does not expect a speedy change in ABTA policy, but he does not foresee Heathrow expanding either. “I do not think a third runway will be built,” he says. “The political landscape will change at the next election.”

However, he blames the commitment to a third runway for the apparent consumer reluctance to embrace carbon offsetting and attempts to make tourism more sustainable. Greenacre points out ministers have set a target of cutting UK carbon-dioxide emissions by 80% by 2050 while also expanding Heathrow. “You cannot do both,” he says. “The government shows no consistency.”

That inconsistency is reflected in holidaymakers’ behaviour, he says, explaining that take up of voluntary carbon offsets among clients at The Co-operative Travel – offered on flights since last year – remains “under 5%”. Customer donations to sustainable tourism charity the Travel Foundation are higher at 15% and “growing significantly”, but it is clear Greenacre would like to see a higher take up.

“We are considering how we manage it,” says Greenacre, a Travel Foundation trustee. “Everyone thinks action on climate change is a good idea, but people are not in the mood to embrace significant additional costs – and why should they when the government supports a third runway at Heathrow?

“I have grandchildren aged seven and three. What will their lives be like in 50 years if we do nothing? A lot of coastal areas will be under water then, and what will the climate be like?

The government has a responsibility, but there is no proper strategy.”

He adds: “There should be different priorities. The people in control of London’s airports have invested in shops and pubs to deliver profits for [airport operator] BAA and dividends to shareholders when there should have been investment in airport and air-traffic technology. The industry and the airlines have a responsibility.”

Greenacre makes clear he does not share the common industry view that travel and its contribution to climate change draw unfair media attention.

“We have a conflict of interest in the industry,” he argues. “It is all very well to talk about aviation being responsible for 2% of emissions, but at 30,000 feet you are talking about much more – and aviation is the biggest growth area in emissions.”

Far from major travel and tourism companies playing a leading role in addressing the issue, Greenacre is critical of the industry response. “In general, big business, listed companies, airlines feel they do not need to address the issue at this time because consumers do not pressure them,” he says.

“The industry has to stand up and take a lead in this regard. There have been some very good initiatives, particularly by First Choice [now part of TUI Travel]. But ABTA is probably best placed to take a lead in the industry and it needs to do a lot more work strategically. It could do far more.

“Someone in the industry has to drive things forward – on aircraft design, on fuel, on technology, on airport technology. If it is not dealt with, the travel industry will continue to have a negative impact on climate change.”

Given the Co-operative movement’s emphasis on social values and ethical practice, does he see a role for The Cooperative Travel in winning the industry to a more sustainable model?

“That is our goal,” he says. “We have a clear position at The Cooperative Travel – the right position. How much influence we can have depends on what proportion of consumers embrace the issues.” And how does he see that consumer embrace developing?
“There are some frightening statistics on climate change. There will be a constant drip, drip of people talking about climate change. It will percolate through – I just do not know when.”

In the meantime, Greenacre is looking forward to a strong late-bookings market this summer despite rising UK unemployment. “I believe it will be very positive in the late market. There should be good demand and good late capacity,” he says.

“The real issue for the mass market is job security. People are not booking forward like last year because there is no certainty about employment. Who would want to commit £1,000 on a booking when they are not certain they will have a job? People are leaving it later [to book] – until four or five weeks before they plan to go – and then saying, ‘OK I’m still in a job’.”

Greenacre reports The Co-operative Travel group trading well ahead of the market so far this year. “The package-holiday market is probably down 12% in revenue [on this time last year] and if you include dynamic packaging, cruise and everything, the overall market is probably down 8%,” he says. “We are 2% down on revenue overall.”

Passenger numbers are down more – Greenacre estimates package-holiday numbers down by 15%. But average selling prices are higher than a year ago, he says. “Things have been gradually improving through February and March. At The Co-operative Travel, we have gone from being 15% down on revenue in the shops in January to -2% now.”

Greenacre attributes much of the resilience on price and expectation of healthy late bookings to the capacity reductions by TUI UK and Thomas Cook. “It demonstrates how much overcapacity there was in the market,” he says.

“The big boys hold the key to it continuing. They have found it difficult to resist putting on capacity in the past.” But he believes this time will be different. “Now there are only two of them, both are listed companies and they will be cautious.”

Aside from rising unemployment, the currency exchange rate may be the biggest factor determining demand.
“A lot depends on the euro,” says Greenacre. “The pound is probably at its lowest point and there are predictions of the rate recovering to euro 1.20-1.28 to the pound for July. That would really help.” For now, he says: “People are looking for value for money.”

A shift towards all-inclusive and half-board bookings, reported by The Co-operative Travel in March, has continued. Greenacre reports the group’s all-inclusive sales up by about 10% year on year and half-board bookings more than 35% up.

The group is about to launch its own tour operation Co-operative Holidays – in partnership with Cosmos. But Greenacre is determined to keep details of the first brochure, for summer 2010, under wraps. He declines to say anything about the programme or capacity other than that the former will be predominantly a mix of short and medium-haul destinations and the latter “very cautious”.

What he will say is: “It is a partnership built around financial stability.” He insists: “We have no intention of creating a high-volume, low-price product. We will not set out to be the cheapest – we are not interested. It will be a quality product. We will have a good range that is all-round good value for money, with some differentiation around Co-operative social values and ethical policies.”

Greenacre is looking to offer customers Fairtrade products – food and drinks, suntan lotions and other items.
But we will not see the programme until the major tour operators launch their own for summer 2010, probably in July. “In the market we are in, it is sensible to wait and concentrate on selling summer 2009,” he says.

“There will be a significant gap in the amount of business we transact between April and July, but we believe we will make it up.”