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What can we learn from the collapse of Thomas Cook?

29th of October 2019 Article by Paul Wonnacott

Paul Wonnacott is managing director of Vectair Systems, which is in its 31st year of trading. He takes a look at the collapse of Thomas Cook - the 178 year old British holiday firm - and how the cleaning industry can learn from its demise.

In the UK and abroad, I think we were all a bit surprised and saddened to hear about the folding of holiday giant Thomas Cook. To lose such a major player in the tourism industry, it seems that no businesses are safe from failure. But what went wrong, and how does it relate to our industry?

Founded in Market Harborough in 1841 by Thomas Cook, a religious man who believed in the abstinence of alcohol, the company organised railway outings for fellow followers of the temperance movement. Some 178 years later, it had grown to a gigantic global travel group, having survived two world wars, the reigns of six British monarchs, and the invention of flight.

Following its first local outing, the business quickly expanded. Four years on Thomas Cook organised its first trip abroad, taking a group over to Calais. This was followed in the 1860s with trips to Italy, Egypt and America. The Cook family sold up in 1928, and the company saw subsequent periods of national and private ownership, including Midland Bank and C&N Touristic AG, one of Germany's largest travel groups. Before its closure, annual sales were £9 billion, it had 19 million customers each year and 22,000 staff operated in 16 countries.

So what happened? I'll take the chance to mention now, that unlike many things, this cannot be solely blamed on Brexit! Thomas Cook had been struggling for a while - eight years ago, the company was teetering on the edge and was saved by an emergency loan from a group of banks. As well as weak trading, the company's big problem in 2011 was too much debt. Brexit has meant that in the last year or two, some people have delayed their summer holiday plans - however, as Thomas Cook's most reliable airline Condor serves the German market, Brexit cannot be blamed for much of the downhill spiral.

Firstly, there is no doubt that the modern business and leisure market has changed, far more rapidly in recent years than in previous decades. With sophisticated websites offering people the chance to compare prices, competition is at an all-time high. In addition, many holidaymakers have become used to putting together their own holidays and not using travel agents.

No longer do people visit high street stores to sit down with a holiday representative and discuss travel options - instead, people already know where they want to go, browsing the internet in search of the best deal. People are choosing to save money by relinquishing check-in luggage on low cost airlines like Ryanair and Easyjet.

New ventures like Airbnb have proved stiff competition for companies like Thomas Cook, and one could say that Thomas Cook never kept up with the times. People had changed but the company hadn't.

The weather, which is of course something out of everyone's control, did affect things and a recent summer heatwave meant people stayed at home instead of travelling abroad. But huge debt and a lack of management control, which included big pay-outs to top staff (even when the company was losing money) finished Thomas Cook off, to the detriment of the poor staff who had virtually no forewarning that their jobs were going to be abruptly snatched away from them.

So what can we learn from this? Firstly, as much as Brexit wasn't the sole cause of Thomas Cook's collapse, it was a contributory factor so we need to get our heads around Brexit and understand the impact, negative or positive, it may have on our businesses. There are seminars and webinars out there, such as the one run by the ISSA, that promise to provide useful information about the potential implications of Brexit on regulation related to chemicals and biocidal products.

Secondly, we need to explore the changing marketplace and keep up-to-date with the latest technologies. Marketing is one area that is really important - lots of people think that in times of trouble, marketing budgets should be reduced. However this is one of the worst mistakes that they can make. Losing awareness of your brand and its connection to its customers can negatively affect its position in the market.

Companies need to stay in the minds of their customers to reassure them of their strong position in the market, and continue to take part in activities like trade shows.

Business culture (or the beliefs and behaviours that govern how people act in an organisation) can decide a company's fate - success or failure. Businesses need to change and define their values and behaviours in line with their vision for the future. Look at your end goal and make sure that everything aligns with that - think about how your staff fit into your strategy, and reward them when they are on the right path. Honesty and accountability grows loyal customers, and you should lead by example - when we work hard, it encourages others to work hard too.

We also need to continually find ways to understand our customers. The customers we had 30 years ago might be the same customers, but they do not have the same needs that they had all that time ago. We need to find new avenues to sell our products and continue to innovate to meet their ever-changing needs. We need to provide materials for people looking to educate themselves on our products and the marketplace in general - this could be by writing blogs, articles or keeping an up-to-date website which people can peruse at a time convenient to them. We were once available from 9 to 5 - now we must be available 24/7 with an impressive but easy to use online presence.

Of course, a successful business has to also fight against factors that are out of their control, like environmental problems impacting stock and raw materials. Exchange rate fluctuations and political unrest are other examples. Compliance is another area where costs can spiral and new legislation is coming in all the time. By trading in different countries, and by having stock coming from different places, risk is spread a little. Planning ahead is crucial, especially from a financial point of view.