Tour operators and other suppliers who sold through Thomas Cook retail are getting a “nasty shock” after it emerged the travel giant was taking full customer payments early and not passing them on.
Head of travel and leisure at White Hart Associates, Chris Photi, said the impact on tour operators has been “far higher than they budgeted”.
He said full balances should have been collected around 13 weeks before departure, as per their agency agreements, but Cook was offering customers a discount in return for full monies up front.
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In some instances, Cook was failing to pass on customer cash to operators even after departure.
Speaking at Travel Weekly’s Future of Travel Selling event last week, Photi said: “Who loses out of the failure? The operators that sold through the Thomas Cook retail estate.
“All of them, to have the privilege of doing business with Cook, had to give credit terms. For over 12 months you could not get any kind of trade insurance against Thomas Cook retail.”
He said even though the companies were Abta members, retail pipeline money protection was not valid because credit had been given.
“You’ve given Thomas Cook credit, and then Cook is supposed to, in line with their agency agreements with the tour operator, collect deposits and remit those to the operators.
“They should collect balances about 13 weeks before departure. A well-run agency would go along to its customers about 16 weeks before and you would expect them to get money in advance.
“(But) operators have been getting a nasty shock. Thomas Cook retail has been taking advance revenues well in advance of that 13-week cycle and how have they been doing it? They have been incentive discounting. They get a commission of 15-16% on most transactions, they’ve been saying ‘5% off if you pay now in full’.”
“So in August and September they have been collecting balances for departures in April and May,” Photi said.
“The hits for tour operators have been far higher than they budgeted.”
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A former Thomas Cook shop manager confirmed to Travel Weekly this had been a policy for between three to four years every September when Thomas Cook filed its year end accounts.
Photi said he himself had suffered a small loss as a shareholder in a small shore excursion business.
“It’s not a huge issue but it’s not nice and it’s straight off the bottom line.”
Photi hit out at regulators and trade associations for allowing Thomas Cook to “window dress” its balance sheet each year in September.
“Thomas Cook retail simply did not pay operators in September each year. It wasn’t a secret, people knew this. Long in the tooth tour operators just shrugged their shoulders and said ‘that’s what you have to do to trade with this organisation’.”
Photi said he knew of one tour operator who complained to Abta and the CAA before confronting the chief executive of Cook and asked them why he was not being paid on what he was due in September.
“The following day, Thomas Cook was no longer racking his holidays,” Photi said.
“They took him back and he is now facing a substantial hit.”