Cents For Sense Blog | What Can Tourism Management Learn from the Collapse of Thomas Cook? | Talkmarkets

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What Can Tourism Management Learn from the Collapse of Thomas Cook?

Date: Thursday, March 26, 2020 6:08 PM EDT

When you run any type of business, there’s a level of risk involved. This is especially true when it comes to running an airline. The collapse of Thomas Cook proved even well-established airlines can fall victim to the challenges presented in the industry. 

Here, we’ll look at what tourism management can learn from the collapse of Thomas Cook and how to overcome the risks involved.

What led to Thomas Cook’s collapse?

Thomas Cook was known as the leader of package holidays. It was the oldest airline operator in the world, with a total of 178 years’ experience. So, how did such a successful and well-established airline collapse?

The main reason was the $2.1 billion debt the company had racked up. This left it unable to compete with its cheaper, online rivals. The debt was accumulated over a period of ten years and caused by a number of bad deals. It would have needed an additional £200 million on top of the £900 million rescue package it had agreed upon. The request for additional cash caused the agreed rescue deal to fail, leaving it with no alternative but to go into liquidation.

Understanding the risks in hospitality and leisure

Although the travel and hospitality sectors have never been more popular, they also face a large number of risks. These primarily include:

  • Economic downturn
  • ​Terrorism
  • War
  • Civil unrest
  • Natural disasters

While war and terrorism are thankfully rare, they still pose a risk, along with civil unrest. Thomas Cook itself was impacted by issues in Turkey in 2016 after a spate of terrorist attacks in the country. When terrorist events and natural disasters occur, flights will obviously no longer be available to the countries involved. This can lead to significant profit losses.

Other risks include the digital competition faced today. There are hundreds of operators, allowing consumers to find the cheapest possible holiday deals. All of these risks can significantly impact an airline and its ability to keep operating.

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