52°F
weather icon Clear

Perfect storm of change, $2B in debt and Brexit sank Thomas Cook

Updated September 23, 2019 - 12:16 pm

FRANKFURT, Germany — British tour operator Thomas Cook fell victim to multiple setbacks including shifting travel habits, the rise of online booking sites, the sinking pound and even unusually hot weather that encouraged fewer Northern Europeans to travel.

Specific problems of its own, like a 1.6 billion-pound ($2 billion) debt pile, made it less able to react to change.

It all added up to a perfect storm that led the 178-year-old company to cease operations early Monday, stranding hundreds of thousands of travelers.

Analysts said Thomas Cook, which rode a package holiday boom that started in the mid-1980s, was too slow to react as consumers moved away from buying trips at bricks-and-mortar stores.

Comparison shopping a factor

It has been overtaken by online services like Airbnb and internet travel companies who may separate or combine hotel, rental car and flight offerings, which puts pressure on prices through comparison shopping.

“The company has struggled to adapt to a changing travel and retail environment,” said Michael Hewson, chief market analyst at CMC Markets UK.

The company did push into online business, with 48% of its bookings from the internet as of last year. But not fast enough. Online rivals, meanwhile, didn’t have to bear the costs of owning 200 hotels, 500 travel agency shops and 105 airline jets, but acted as middlemen.

Thomas Cook Group PLC isn’t alone in facing such pressures. Competitor TUI Group AG, based in Hannover, Germany, has shifted its focus from tour operators to its own cruises and hotels.

But other factors laid into the British travel company.

Brexit uncertainty factor

Company officials have cited uncertainty over Brexit, both from consumers worried about its impact on their finances and from the timing, given that one unfulfilled deadline for Britain to leave the EU fell on March 31, just days before the heavy European Easter holiday travel season this year. Travel agents had to issue guidance on what would happen in case of a no-deal Brexit. Brexit has meanwhile sent the pound lower, given British travelers less purchasing power.

After 2010, the Arab Spring revolts discouraged travel to previous U.K. favorites such as Egypt and Tunisia. Travel companies shifted their focus to the Western Mediterranean, such as Spain’s Canary Islands, only to see demand for some of those locations then dwindle.

The company’s reputation suffered after the 2006 deaths of two customers in Corfu, Greece, from carbon monoxide poisoning. The case dragged out for years and Thomas Cook would end up being told by a coroner it “breached its duty of care.”

Warm summer of 2018

As the company struggled to reshape its business in the new environment and cut costs it was hit with an unusually warm summer in 2018, which it said led travelers from the U.K. and Scandinavia to put off plans to head for warmer destinations. When they did decide at the last minute, the sector of the market that focuses on late decision makers turned out to be fiercely competitive on price.

“The group, like its peers, has suffered from a perfect storm of turbulence, from political unrest and terrorism at some of its most popular destinations, to unusual weather patterns seeing travelers taking ‘staycations’ and the ever present Brexit uncertainty devaluing the pound and putting consumers off from booking holidays,” said Helal Miah, investment research analyst at The Share Centre.

Big debt a major factor

Heavy debts gave the company less breathing room to maneuver.

“While other travel groups have suffered from these factors, Thomas Cook’s pile of debt is the differentiating factor,” said Miah.

Don't miss the big stories. Like us on Facebook.
Business Videos
Binion's debuts a spinning bar overlooking Fremont Street Experience
Binion's debuted its spinning bar inside the Whiskey Licker Up Saloon. The Rotating bar only goes at one full rotation per 15 minutes overlooking the Fremont Street Experience. (James Schaeffer/Las Vegas Review-Journal)
Southern Nevada could set a new resale-price record in coming months.
The median sales price of previously owned single-family homes – the bulk of the market – was $310,000 in September. Before the economy crashed last decade, prices peaked in June 2006 at $315,000, according to the Greater Las Vegas Association of Realtors.(Bizuayehu Tesfaye/Las Vegas Review-Journal) @bizutesfaye
Walmart container park in Henderson - VIDEO
Henderson could be home to a container park associated with a Walmart Inc. initiative. (Las Vegas Review-Journal)
Recession lessons could help Las Vegas face next slump - VIDEO
While the last economic downturn had a dramatic impact on local casinos, most experts expect the industry will be better able to weather the storm during the next recession. (Mat Luschek / Las Vegas Review-Journal)
MGM and victims of Oct. 1 reach settlement agreement - VIDEO
MGM Resorts International and lawyers representing potentially thousands of victims of the Oct. 1, 2017, mass shooting on the Las Vegas Strip have reached a tentative settlement of between $735 million and $800 million. (Mat Luschek /Las Vegas Review-Journal)
Live music and EDM dominate the night on day 2 of A’Le’Innstock
After sunset bands rocked the crowds at A’Le’Innstock in Rachel, Nevada on the second night of the event.
iPhone 11 Release
Local Las Vegas long time Apple product consumer shares her excitement for the new iPhone 11 release Downtown Summerlin. (Elizabeth Page Brumley/Las Vegas Review-Journal)
Lihi Levin talks about a mobil app Dropit - VIDEO
Lihi Levin, regional manager at Dropit Shopping, talks about a mobil app Dropit. The app lets customers leave their shopping bags at a store then have them delivered the same day to their home or hotel so they can shop without carrying multiple bags all day. (Bizuayehu Tesfaye Las Vegas Review-Journal) @bizutesfaye
North Las Vegas company prepares for Mars - VIDEO
Robert Bigelow and his Bigelow Aerospace manufacturing facility played host to eight NASA astronauts and 60 engineers this week getting to know the company’s B330 autonomous, expandable space station. (Elizabeth Brumley/Las Vegas Review-Journal)
Las Vegas developer talks about a new apartment complex called “the yoU”
Frank Marretti lll, founder of G2 Capital Development, talks about his new apartment complex called “the yoU” near UNLV. (Bizuayehu Tesfaye/Las Vegas Review-Journal) @bizutesfaye
Steel cables will hoist roof at Allegiant Stadium - VIDEO
Stainless steel cables are being put into place at Allegiant Stadium to begin the process of putting the roof on the 65,000-seat stadium in Las Vegas. Stadium Chief Operating Officer Don Webb explains how the cables will be used to get the roof put on the future home of the Raiders and UNLV football. (Heidi Fang/Las Vegas Review-Journal)
The last remaining Sigma Derby game in Las Vegas
Derek Stevens, owner of the D Las Vegas, talks about the last remaining Sigma Derby horse racing game in Las Vegas inside his casino floor. (Erik Verduzco/Las Vegas Review-Journal)
Popeyes Spicy Chicken Sandwich Review
Janine Blake of Las Vegas gives her review of the new Popeyes Spicy Chicken Sandwich at the restaurant’s location on west Bonanza Road on Thursday, Aug. 22, 2019,
SuperZoo 2019 takes over Mandalay Bay in Las Vegas
SuperZoo 2019 show for pet retailers brought pet products of all description to the Mandalay Bay Convention Center in Las Vegas. (Heidi Knapp Rinella/Las Vegas Review-Journal)
MSG Sphere at The Venetian to cost $1.2B plus
Scheduled to open in 2021, it is expected to be busier than Madison Square Garden in New York. (Michael Quine/Las Vegas Review-Journal)
Favorite products from SuperZoo 2019
Some of the fun and interesting pet products on display at the SuperZoo in Las Vegas at the Mandalay Bay Convention Center. (L.E. Baskow/Las Vegas Review-Journal)
MAGIC Convention Day 3
The fashion trade show MAGIC, held Monday through Wednesday at the Las Vegas Convention Center. (Elizabeth Brumley/Las Vegas Review-Journal)
MAGIC Las Vegas - Day One
The biannual MAGIC convention show opened Monday at the Las Vegas Convention Center. (Elizabeth Brumley/Las Vegas Review-Journal)
Allegiant celebrates naming deal with tailgate party
Allegiant Air employees celebrate with a tailgate party after the company’s naming deal with the Raiders for the new Las Vegas stadium.
Nevada's sportsbook operators welcome competition
Sportsbook operators from near and far are looking to get into in the established Nevada market, experts say. (Las Vegas Review-Journal)
Get a first look of MSG Sphere construction in Las Vegas
Representatives of The Madison Square Garden Company give the first glimpse of progress Tuesday of the under-construction MSG Sphere — a first-of-its-kind performance venue with high-tech audio and visual capabilities.
THE LATEST
China’s growth hits 26-year low, slowing global economy

The world’s second-largest economy expanded by 6 percent in the three months ending in September, down from the previous quarter’s 6.2 percent, data showed Friday.