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Post Collapse of Thomas Cook; Thousands Stranded Abroad
Created by John Eipper on 09/26/19 4:02 AM

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Collapse of Thomas Cook; Thousands Stranded Abroad (José Ignacio Soler, Venezuela, 09/26/19 4:02 am)

The bankruptcy of the British travel agency Thomas Cook has taken many travelers by surprise in the middle of their vacations. Hundred thousands of people, 600,000 if estimates are correct, are now in the process of rescheduling their travels and calling the British government for emergency measures to take them back to the UK. Many hotels and other tourist business under contract by the agency are asking now who is going to pay the bills.

What led to the collapse of this gigantic agency, with more than 20,000 employees around the world?

According to the news, several causes are to be blamed. First, it had an archaic business model, based on high volumes of cheap travel with low margins and high costs. People nowadays use Internet resources for self-reservations, low-cost airlines, hotel and rental car arrangements, self-organized tours and cruises and so forth. This shift led to progressive and continuous losses for Thomas Cook, more than US$3.5 billion/year, difficult to support by its stakeholders and its financial partners. Second, the recent devaluation of the British Pound and the uncertainty caused by Brexit also caused a significant reduction in customers that triggered the collapse.

Whatever the reasons, the bankruptcy will have a high impact on countries that are dependent on tourism, particularly Spain, such as the Canaries and Mallorca, which receive thousands of British tourists each year. The economic effect is going to be hard. Apart from this indirect effect, it seems reasonable to speculate that this bankruptcy is likely related to the impending Brexit.

JE comments:  Reports speak of the biggest evacuation since WWII, but there were "only" 338,000 at Dunkirk.  Granted, grouchy tourists are less dangerous (barely) than the Luftwaffe.

Thomas Cook is as venerable an institution as American Express.  Does its demise suggest the end of the "travel agency" as we know it?  How can you compete with the 'Net when you have to maintain 500 retail outlets in expensive, touristy areas?

And who actually uses a travel agency these days?  The only people I can think of are immigrants sending packages and remittances to their home countries, but TC wasn't in that kind of business.

I image too that the devalued pound made it impossible for TC to pay its euro-linked bills.


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