Lessons from the Thomas Cook collapse

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The collapse of a giant like Thomas Cook should represent a wake up call for companies in the Mauritian tourism, hospitality and travel sector, especially those which are stuck in their traditional business model (hugely dependent on traditional tour operators) and are unable or reluctant to embrace a digital strategy. Thomas Cook started as a British travel agency in July 1841 offering day trips to commuters between Leicester and some other central parts of England before evolving into a leading modern global package-holiday firm.

After the world’s oldest tour operator collapsed this week, we are seeing perhaps the biggest peacetime commercial repatriation ever. As a matter of fact, civil aviation authorities of several countries continue to mobilise planes to get Thomas Cook’s customers home – with thousands of holidaymakers still abroad at the time of writing.

In United Kingdom, Boris Johnson, who is already in trouble with the Supreme Court and Parliament on the Brexit issue, is also facing criticism after refusing to help Thomas Cook through a financial lifeline. The writings were on the walls since the world started becoming more than ever digitized. Technology affects how companies interact or transact with stakeholders (customers, staff, investors, intermediaries) at all levels. The tourism, hospitality and travel sector could not stand an exception and be spared by this disruptive wave. The sector’s normal business used to be mainly offline but had to shift to sell online via the Internet. However, companies that do not heed the digitization signals and continue to embrace the status quo and old business models are already becoming victims of digital disruption.

Tourists board a Thomas Cook plane at the airport of Heraclion, Crete island, on September 24, 2019.

With the extensive use of smart phones by billions of consumers, the shift to mobile has impacted managed travel programs in general, with nearly 55% of bookins going to online travel agencies (OTAs). As a result, there has been a huge reduction in the number of retail travel agents and the demise of non-specialist independent retailers due to the role of the internet in distributing travel products. OTAs are consequently reshaping the travel and tourism landscape on an unprecedent scale. While there are some specifics, like the role of travel agents and tour operators in Germany with nearly 55% of all trips to all destinations abroad being organised by the traditional travel trade, i.e tour operators and their partners, the world trend is towards online.

Surpass competitors

Research has recently unveiled that side by side with inclusive tour packages, winners of the future will be destinations and suppliers that develop userfriendly websites allowing for direct bookings and dynamic packaging. Dynamic packaging is a relatively new type of package holiday that enables consumers to build their own package of flights, accommodation, car rental, etc. It is different from a pre-defined set of services as in “traditional” package holidays.

Dynamic packaging allows tourists to build their own package and purchase it on a single website; with the continuing changes in technology, this new type of packaging is growing in popularity. The sharing economy era has also taken the best of online, mobile and social networks, to create new products and allow alternative accommodation and transportation.

The huge challenge of Destination Mauritius and of our tourism sector for the near future is getting digital transformation right and should be a major concern for many businesses and our tourism promotion agency. It is a lot more than just implementing a new technology platform or hiring digital expertise. The pressure is on hoteliers and others to use digital transformation to better meet customer needs and keep up with, or surpass, competitors.

A good example is that of an iconic hotel (not part of a big group) in a friendly neighbour country where only 20% of its bookings come from traditional tour operators like Thomas Cook; 15% are generated from its website and 65% from online platforms such as Booking.com, Expedia, Agoda, etc. This means that this hotel’s digital strategy is extremely successful since 80% of its business are generated online and that the hotel establishment is only marginally dependent on tour operators.

At a time when total tourism earnings for Mauritius are down by Rs 2,4 billion for the first semester of 2019 compared to the same period of 2018 (Rs 31,0 billion and Rs 33,4 billion respectively) and per tourist spend is plummeting from Rs 51,700 in 2018 to Rs 47,700 in 2019 and when many hotels and even some big groups are not doing well, is it not high time for both Destination Mauritius and our tourism sector to engage in a global rethinking as we suggested in a previous article? The winners will be those who remain attuned to changes in market trends and consumer demands like differentiation, environmentalism and individualism amongst others.

Can our tourism business leaders as well as our policy makers take stock of the profound changes that are happening, the tip of the iceberg being Thomas Cook’s collapse and then turn around our tourism sector’s woes?

Hopefully, we will be able to say: YES WE CAN.

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