“We have a clear plan to transform our business,” says Thomas Cook chief executive Peter Fankhauser at the launch of Cook’s newest Cook’s Club hotel in Palma.
“Selling our airline, further digitising our business, becoming leaner in our operations, and focusing on our own-brand hotel portfolio to differentiate our offering.”
Sound familiar? That’s because it’s the same plan Fankhauser espoused a month ago when Cook posted its, well, challenging half-year results.
On the surface, Cook’s “underlying” winter loss of £282 million, an increase of £68 million year-on-year, is not altogether incomparable with rival Tui’s €301 million loss for the six months to 31 March – Cook was far from being the only travel firm to feel the effects of a hot summer followed by a tough winter, further beset by the spectre of Brexit.
It’s a point not lost on Fankhauser. “The troubles started when we had an unprecedented hot summer in northern Europe,” he says. “I was very clear last year this was going to impact our margins.”
But it was Cook’s decision last month (16 May) to write off £1.1 billion arising from its 2007 merger with MyTravel that swelled its winter loss to a massive £1.46 billion and saw the operator make headlines for all the wrong reasons, just like it did in 2011.
Four days later, its share price had tumbled to a new low of just 8p after analyst Citigroup said it had “zero equity value”.
It’s hard to tell from Fankhauser’s cool demeanour whether he, or Cook, have all the answers to the questions the operator faces. He strikes a bullish tone when he sits down with TTG in Palma.
“We took the right proactive steps,” he says. “We focused on cash and costs, we reduced capacity, we announced a strategic review of the airline and we quickly entered talks with our banks to take away any question we are running out of money.”
Earlier this year, Cook confirmed it would close a further 21 end-of-lease stores, placing more than 300 jobs at risk. Consultation, meanwhile, is ongoing with another 150 staff at its Peterborough HQ – is this the manifestation of Cook’s focus on “digitisation” and “becoming leaner”?
“We have to follow our customers,” he says. “We have to be where customers want to book. With the shift from offline retail to online, if a shop’s lease is running out, we have to look at its profitability and decide whether to keep it. We haven’t set any targets for this, we’re just following the customer stream.
“We just want to be excellent on the web too. We have to invest in web capability, we have to be on par with online distributors or we lose market share. That’s not in anyone’s interests – travel agents, suppliers or our own.”
Cook’s now 200-strong own-brand hotel proposition is clearly vital to its future. “We have to build a different Thomas Cook to what it was,” says Fankhauser. “That model has hotels at the core. We’re confident the new [hotel] concepts and our digitisation efforts are going to be successful.”
Last year, Cook partnered with Swiss investor LMEY to set up Thomas Cook Hotel Investments, a fund allowing it to make tactical acquisitions to build its burgeoning Casa Cook and Cook’s Club brands as well as its established hotel brands.
“Where we can be really different in our offering, we can attract a new generation of customers,” says Fankhauser, who believes firmly in developing a “unique” proposition that “strengthens” its tour operator. “I’m totally convinced,” he says.
“With Casa Cook, we’ve created something really special – 75% of Casa Cook customers are completely new to us. They have never thought to book with a tour operator like Thomas Cook before. With Cook’s Club, what we tested in Hersonissos last year [site of the first Cook’s Club] was an amazing success.
“Every room here [Cook’s Club Palma Beach] is fully booked tonight [4 June]. That’s remarkable, as it’s only been open since the end of April.”
Interestingly, Fankhauser doesn’t rule out selling own-brand product through other operators. “There are certain hotels that are just too big to take exclusively – if another operator is selling them, brand awareness goes up. I’m not restrictive on that,” he says, although he is keen to retain exclusivity on Casa Cook and Cook’s Club.
Questions remain, though, over Cook’s readiness for what is likely to be another tough winter. It has negotiated a £300 million contingency fund with its lenders, which Fankhauser says is there whether it sells its airline or not, albeit subject to “certain conditions”.
Of course, a strong summer would preclude the need to reach down the back of the sofa. “We have the facility in case we need it,” says Fankhauser.
He adds Cook will only accept “the right deal” for its airline, and gives assurances that existing commercial and sales agreements between the tour operator and carrier will be honoured to maintain airlift for its tour operation.
Cook also looks set to further trim its 2.4 million passenger Atol. “Overcapacity in the market is not good for anyone,” says Fankhauser. “We’re taking a cautious stance into winter because we want to become highly profitable again.”
But can Cook become “highly profitable” again? “If you compare us to our competitors, they face a difficult environment as well,” says Fankhauser. “We’ve done a lot of things excellently in the past. In fact, we were maybe running a little ahead of the time in 2018 and wanted to do too much at once, but I would say what we have created as a new Thomas Cook is still good.
“But I don’t want to sugarcoat it, we are operating in a very difficult market environment, not only in the UK but in Europe. We have a lot to do, and we are taking the right steps to transform Thomas Cook for the future.”
The launch of Cook’s Club Palma Beach is the culmination of a £5 million transformation of what was Palma’s ageing 1970s Smartline Lancaster Hotel.
It is our guide, operations director Thierry Hegenbart (pictured inset), who sums up the Cook’s Club concept best: “It is a place to look good, and be looked at, on Instagram,” he says.
Rooms are offered B&B; everything else is extra. It fits into Majorca’s efforts to steer away from all-inclusive, and Cook’s belief millennial holidaymakers no longer want the 18-30 experience.
Half-board packages include €18 daily credit, which can be spent through a wristband on any of the hotel’s services, including food and drink, and bike hire.
The hotel has been reconfigured, says Hegenbart, to resemble a “playground”; the aim is to ensure guests feel they are at the centre of the festivities, with DJs providing a dawn-till-dusk soundtrack.
Guests of all nationalities mingle in the hotel’s various social spaces. “People from other hotels are welcome too, it’s more of a social club,” says Hegenbart. “We want people to be part of this community and lifestyle. The most important thing for us is offering them choice.”
Other features include a gym, vegetarian and vegan food options, and the potential to turn a small, stepped amphitheatre into a cinema.
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