Thomas Cook boss: ‘We were a broken mess’

Thomas Cook was a ‘broken business’ three years ago which failed to properly serve its customers and lacked any kind of strategy, according to its current UK chief executive Manny Fontenla-Novoa.

 

Speaking at the Institute of Travel & Tourism conference in Barbados, Fontenla-Novoa outlined how he turned the business around from one that lost £50 million in 2001. It is on target to report profits of £100 million next year.

 

Fontenla-Novoa was at pains to point out that he did not want to criticise the previous management under Alan Stewart, but added that radical changes were needed when he took over.

 

“We had strong brands, but they didn’t complement each other,” he said. “We underperformed, we didn’t have a strategy, even though we said we did, and we were a broken business.

 

“Our delivery overseas was terrible, the worst in the business. People said we were an institution, not a business. When (former MyTravel chairman) David Crossland gave a talk about his competitors, he didn’t even mention us because he saw us as irrelevant, which we probably were then.”

 

Fontenla-Novoa said some members of his team wanted to try to recover by following MyTravel’s aggressive discounting policy while others wanted Thomas Cook to follow First Choice and specialise.

 

But he said he felt the company was in a unique position because of the strength of the Thomas Cook brand and decided to make the most of that.

 

“We started to leverage the brand across all businesses. We knew we had to be hungrier and make difficult decisions, take costs and capacity out of the market,” he said.

 

“We’re now within touching distance of becoming the most successful travel business in the UK. You know that you’re doing something right when people start to copy you and we were the first to relocate out of London, the first to take out layers of management, to use the brand across all products and outsource our back office.”

 

Fontenla-Novoa crunched three separate management teams into one, matched supply with demand by getting rid of 500 properties abroad and also reduced its commitment on self-catering units in Spain to £30 million from £120 million.

 

He claimed he managed to get staff to back his strategy despite cutting the salaries of all staff earning over £10,000 per year and making redundancies.

 

Fontenla-Novoa said Thomas Cook still had a long way to go. He said it planned to capture a bigger slice of the independent market and use the brand in other areas, such as financial services.

 

TUI Northern Europe chief executive Peter Rothwell, speaking in the same session, said the decision to axe the Lunn Poly brand had enabled it to save half its marketing budget as it was now only pushing one name to customers.

 

Similarly, the decision to relocate its headquarters provided huge benefits as the Luton office cost less than a third of its old base in central London.

 

He claimed the mix of business sold through Thomson was the same as through Lunn Poly, which showed that people were aware the shops sold the products of lots of different companies.

 

He said he agreed with Fontenla-Novoa that it was sensible to reduce your commitments abroad but added it was still important to have assets.

 

“You have to keep hold of your best properties, otherwise you have nothing to sell,” he said.

 

Rothwell admitted Thomson’s decision to buy Coventry airport was bizarre, but said the plan had paid off.

 

“Buying Coventry airport was vertical integration gone mad, but we needed to do it to improve the running of it and it’s now looking like one of our most profitable investments.”

 

Report by Jeremy Skidmore