Surviving Thomas Cook: Damage to hotel ecosystem shows distribution mix is vital anywhere

It’s a story that has been in hundreds of news outlets over the last few weeks.

Sadly, Thomas Cook, one of the oldest tour operators in the world, collapsed on September 22.

There have been many attention-grabbing headlines about hundreds of hotels in Spain now facing closure, and markets such as Turkey and Tunisia have also been very badly affected.

And yes, for some hotels this will be the death knell to their operations. But for many this is a wake up call, a moment for rapidly changing tack and embracing new opportunities.

Travel agents and tour operators have long played a pivotal role in the fortunes of hotels.

However, the emergence of online travel agents, booking engines, channel managers and metasearch has led to many hotels diversifying their business mix.

For those hotels now in the eye of the Thomas Cook storm, better days could lie ahead if they get more strategic with their channel distribution.

Palladium Hotel Group has been actively diversifying distribution at a number of its key properties.

Sergio Zertuche, chief sales and marketing officer for Palladium, explained to us how its five-star Ushuaia Ibiza Beach Hotel had originally been a three-star property with a high proportion of tour operator exclusivities.

“At that time, 90% of the distribution of that hotel used to be with the tour operators. In peak season, we used to have €50 per person per night,” Zertuche says.

“We changed the asset. We put our brand Ushuaia on it, and today that same asset, with this reconversion, is able to make €500 per person per night. And, today, 90% of the distribution of that hotel is yieldable - either e-commerce, OTAs, or mainly our webpage.”

This is a model Palladium has replicated across its portfolio: upgrading an asset physically and diversifying its distribution digitally.

Diego Fernández, corporate revenue director at Palladium says: “One of the keys to success in the hospitality industry is to have everything in balance. We say that we don't like to have all our eggs in the same basket.” 

“It's because, if one day this basket breaks, all your eggs are out. We are trying to do the same with our distribution strategy; if one market is suffering, we can replace this market with another one.”

If you are one of the many hoteliers affected by the aftermath of the Thomas Cook collapse then adopting a diversified distribution mix should be one of the key recovery strategies to urgently consider.

Four things you can do right now

Know your channels

Hotels that are already running a diversified distribution mix will be in a much stronger position than those who relied heavily on contracted business from Thomas Cook.

We’ve heard reports of hotels for whom Thomas Cook controlled 100% of their inventory. That really is an ‘eggs in one basket’ situation.

If you have a good channel mix then now is the time to start analysing which channels create the best returns and for what segments. Get strategic with offers at the right price and aimed at the right segments.

Resist temptation to discount

It’s already happening. Flight prices have soared due to Thomas Cook Airlines no longer operating, and room rates have plummeted.

In the Canary Islands, where high season is starting, hotels are struggling as a big percentage of their on-the-books (OTB) business is gone.

Resist the temptation to drop prices for a quick win, or to enter into another tour operator agreement that could put a strangle-hold on your business.

Hotels that had already made the digital transition in distribution will find themselves in a good position, as they already have the infrastructure and relationships in place.

They also, potentially, are in a better position in terms of OTB business. For those who haven’t built out their distribution strategy, they have a very limited period of time to restructure.

The clock is ticking.

Value loyalty

If you have a loyalty programme now might be the time to reach out to members with carefully crafted offers that present both value to your loyal customers and profit for you.

Work on your segments, take time to create personalized packages, forge upsell opportunities, and find ways to boost ancillary spend once they arrive on property.

Get planning for 2021 and beyond

Tour operator contracts are negotiated 12-18 months in advance, which means that many markets will continue to feel the impact of the Thomas Cook fall throughout 2020.

Use this as a time to consider what you want to achieve in 2021, start renegotiating your tour operator contracts, and start working on that new channel mix. But be prepared – 2020 could be a tough year. You need to diversify and get creative if you want to get ahead.

Thomas Cook is not the first to fall – LateRooms and SuperBreak both collapsed in August, and Amoma ceased trading in September.

With European market uncertainty around Brexit and economists mumbling about recession in the U.S., hoteliers need to get savvy.

A multi-layered revenue strategy built on data and analytics will help hoteliers steer through whatever comes next. The question is: are you prepared? Stop reading – get strategizing!

About the author...
Douglas Green is vice president for EMEA at Duetto.