The price of omni-channel success at Thomas Cook is job cuts

The news this morning that travel operator Thomas Cook is to close 50 of its offline stores between now and next March might come as no surprise to many in an age when the traditional travel agent’s role has been disintermediated by online direct-to-consumer services.

That said, this year nearly half (47%) of Thomas Cook holidays were actually booked in store, so maybe it’s not that obvious! Personally I can’t imagine setting foot in a travel agents to book a holiday, but clearly a lot of people still do.

But the direction of travel is clear with online sales up 27% year-on-year, with CEO Peter Fankhauser saying last month that 46% of its holidays are now booked online and committing the firm to "follow the customer and be where they expect it to be.

And it’s that omni-channel thinking that is being used to justify the latest store closure program. Thomas Cook UK’s Director of Retail and Customer Experience Kathryn Darbandi says:

We continually review our network of stores across the UK to make sure we’re offering customers the best of Thomas Cook, and it is clear that to succeed we have to operate as a truly omni-channel business.  We’re one Thomas Cook to our customers and we will offer them a world-class service whichever channel they chose to book, be that retail or online.

Long history

Founded in 1841, Thomas Cook Group is one of the world’s leading leisure travel groups, operating out of 15 countries. It boasts sales of over £8.5 billion, more than 22 million customers and 22,000 employees. Its corporate vision is said to be:

to deliver trusted, personalised holiday experiences through our high-tech, high-touch strategy. We will be there for our customers wherever, whenever and however they want to connect with us.

In its latest annual report, the group was upbeat about its progress in delivering on that:

2017 has been a year of considerable strategic progress, as we transform Thomas Cook into a modern, streamlined travel company.  Customer satisfaction levels have further improved following the actions we have taken to improve quality and service. We have grown bookings across our business, especially to higher-margin own-brand hotels, where we have strengthened our offering with several new openings in key destinations. We have also agreed several new partnerships which expand our opportunity for future growth, while at the same time improving operational efficiency through the business.

Our customer focus also includes carefully managing the way we contact and interact with our customers, in order to build strong relationships, increase loyalty and offer value-added services for a personalised holiday experience.

We continued to enrich customers’ online experience during the year by adding over 110,000 images, 1,200 room plans and 520 hotel videos to our websites. This helped to grow web bookings across the Group by 18%, including growth in the UK of 27% and in Germany of 22%.  Overall, web bookings now account for 46% of Group bookings, up three percentage points on last year.

At the same time we have continued to reshape our retail store network in order to meet the changing needs of our customers. In the UK, we closed 101 smaller stores in FY17 and launched nine larger stores in high-volume retail areas. In total, we’ve rationalised the size of our retail network in the UK by 45% in the last five years, ending September with 692 stores.

Today's announcement is set to take that last number down somewhat...

My take

As we’ve seen time and again this year, getting that omni-channel balance right between offline and online is a challenge that so many business sectors are having to face up to. It’s not easy and it comes often with a high price tag, in this case potentially 400 people looking at losing their jobs.