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As Thomas Cook's CEO disembarks, what's the tour operator's digital destination now?

Stuart Lauchlan Profile picture for user slauchlan December 2, 2014
Summary:
Tour operator Thomas Cook started life in 1841, but in the face of online competition has struggled to compete with digital pureplays. Now it's biggest digital champion has le

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Harriet Green

Earlier this week travel giant Thomas Cook unexpectedly parted company with the CEO who preached “spiritualising digitisation” for the troubled firm.

Harriet Green had been hired back in 2011 to run the firm, which dates back to 1841, and to turn around the tour operator which has struggled to compete in a world of online travel.

The firm in fact was the first major travel agency in the UK to offer online bookings. It’s corporate messaging boasts of a “high tech, high touch approach” and states that:

Ever since that day, we have strived to be an industry leader, helping our customers with the latest innovations and technologies.

Nonetheless, in a world of Expedia, Trivago, LastMinute.com et al, Thomas Cook’s heritage and offline footprint have struggled to keep up with the digital pureplays.

Green’s focus was very much on digital. She drove and chaired the firm’s Digital Advisory Board (DAB) which was set up, in the firm’s own words, to:

advise and inform the Group’s Board on leading-edge trends for online businesses and their digital transformations as well as being the conduit to identify and attract the brightest and best digital talent to the Group.

The DAB is made up of both internal and external digital experts, with some impressive names, such as Dr Nicola Millard, Customer Experience Futurologist at BT, on board.

Green herself said:

Harnessing digital technology as part of ongoing transformation and developing applications like Holiday’s to go! – @TCOffers, and Destination Discovery is central to helping our customers get information about our latest holiday destinations and offers within seconds, wherever, whenever, and however they choose. A strong Digital Advisory Board is instrumental in driving innovation at Thomas Cook.

All change

But earlier this week, Green’s departure was abruptly announced on the day that the firm turned in its full year results, sending the share price plummeting by 17%. Officially Green said that her work at the firm was done, but sector analysts suspected behind the scenes tensions that couldn’t be resolved.

Certainly it’s interesting that her immediate replacement is a 13-year veteran of the travel industry, former COO Peter Fankhauser, whereas Green came in to the business with no travel sector experience.

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The original Thomas Cook

But what does all this mean for Thomas Cook’s digital transformation? Has the trip now been cancelled. Or delayed? Or is departure time on schedule as before? Fankhauser describes the work done to date as creating “a firm foundation for future profitable growth” - which is a little different to ‘job done’. He states:

Our omni-channel strategy enables our customer to access our services via the Web, the store, the contact center and at their holiday destination or a combination of all of these in a fully integrated seamless manner. The rollout of this strategy is a key step towards the digitalization of the business facilitating the move towards greater online usage. These result in an enhanced customer service provided at a lower cost.

2014 has been about building the foundation for digital growth. For example, we have successfully launched our new One Web platform in the U.K. and we are about to roll this out in the Netherlands and Germany in 2015. Recognizing that mobile is a key vehicle for innovation, we have introduced mobile responsive sites across the Group. In addition, virtually all of our UK stores are equipped with tablets and in all our in-destination reps will be using tablets by the end of 2015.

We are also focusing on improving our IP infrastructure. We continue to consolidate the multiple Web platforms that we inherited having already reduced this from 17 to 7 today. Over the last 24 months we have invested heavily in our digital capabilities. We have completely transformed the Thomas Cook Web and IT function. We are also embedding digital couches throughout the organization with various digital learning initiatives enhanced by recruitment from leading digital and technology companies.

But is it working? Fankhauser insists that there are encouraging signs with digital investment in key areas of the business delivering double-digit growth:

For example, we achieved 14% growth in customers booking on thomascook.com in just three months since launching One Web. In Germany where we focus on improving the online customer experience, we have seen an increase of 12% in the year and in Northern Europe where we have introduced dynamically packaged products, we are seeing further increases in Web and operation up from 71% last year to 73% this year. And our mobile first strategy is performing well with customers booking via mobile and tablet on our main Web sites across the Group increasing by 58%.

But he added:

There is still a lot more to do to achieve our stretching 50% Web penetration for the Group, but the foundation has been laid. As we develop our digital business through the rollout of One Web market-by-market we expect our Web growth to accelerate, but this will take time.

Wave 2

All of the work to date has been part of what the firm refers to as Wave 1, which has focused a lot on rationalization and consolidation. Wave 2 is a change program for delivery between 2016 and 2018 with the aim of leveraging scale and by greater sharing of resources, including digital:

In our Nordic operation, we have already made the journey to a truly digital business where we communicate and engage with our customers throughout the year before, during and after their holiday. We use integrated CRM capabilities to personalize our communication resulting in higher customer engagement and satisfaction as well as significant sales of high margin and service products. These generate in excess of £15 per customer more margin than ancillary sales in our other market. We are implementing the Nordic CRM solution to realize this opportunity in the U.K. and continental Europe.

Given market differences, we do not expect to achieve the same conversion as in the Nordics, but even at lower conversion we see a £60 million to £80 million opportunity here. Digital is the channel [that] is the lowest cost to serve. In the UK, we estimate that the cost advantage is approximately £50 per customer. As the UK increases its online distribution, the estimate of cost benefit is of £30 million to £50 million in the UK tour operator alone, based on serving an additional 15% to 25% of our customers online.

Thomas Cook jobs
But it’s not all about the money, he insists:

It’s also about serving our customers in a truly omni-channel way interacting with them whenever and however they wish.

We significantly improved the quality and relevance of our online content produced efficiently through a central team. This will provide benefits through natural search and increased customer engagement and conversion.

Our technology solutions in destinations enabled us to connect with our customers whenever they want providing information to enhance their holiday experience and resolve any concerns real-time.

My take

A lot of the success of digital transformation programs depends on the determination and the commitment of the person most charged with driving through the necessary change. Green was clearly such a person and took tough decisions, including axing 2500 jobs, closing 370 shops and selling off non-core businesses. She was without doubt a digital convert.

It may be that Fankhauser’s regime will have the same digital zeal. Certainly the message coming across this week is ‘business as usual, straight on ahead with existing plans’. Only time will tell.

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