Thomas Cook hailed its UK performance in third-quarter results last week. Chief executive Harriet Green spoke to Lucy Huxley
Q. You’ve overseen a transformation in your two years at Thomas Cook. What has been the best part and what the most challenging?
A. We’re back, stronger and more resilient, but we still have much to do. Every business is performing better and we’ve now delivered eight consecutive quarters of increased profit.
We’re focused on putting customers back at the heart of the organisation, expanding our new products to meet changing needs and driving digital innovation and our web presence to ensure customers can reach us through any channel: in stores, through third-party agents, online via our new website, via mobile, social media or our strengthened contact centres.
We’ve taken really tough decisions to stabilise and strengthen the business while building our future – launching and implementing a new strategy for profitable growth, refinancing the business with a £1.6 billion capital injection, increasing the value of the company from £150 million to closer to £2 billion, focusing on our core businesses, exceeding some key targets early, and uniting all our businesses under the new Sunny Heart brand. It’s been a rollercoaster ride.
The best part of the last two years is easy – the great team at Thomas Cook. We’re all working together, sharing best practice and without silos – that is harder to achieve than it sounds.
The team has had to deal with a lot of change, particularly in the UK. Our people at the frontline knew better than anyone what needed to change and they shared it with me – in detail and with great honesty.
It’s hard to single out one thing as most challenging – probably establishing key industry facts and performance measures. There didn’t seem to be many consistent descriptions or metrics across the industry to measure our performance against, so we have clearly defined what we mean so everyone knows what we’re committing to and how we’re doing. The other thing would be the constant worry whether we’re moving fast enough.
Q. You’ve talked of a Wave 2 transformation. Where have the benefits of Wave 1 come?
A. We’ll be providing full updates in November. In the results just announced we delivered a further £51 million of Wave 1 benefits, taking the total so far to £328 million and on track to deliver ahead of £360 million in full year 2014 and at least £460 million by full year 2015.
That is not all cost out – much of it has come through profit improvement. Of the £328 million delivered so far, £119 million is improved gross margin. Wave 2 will focus on long-term transformation and organisational change and reduced duplication across markets – particularly in IT and IT systems.
Q. You’ve criticised an industry tendency to blame difficulties on external events. Yet something like Egypt can’t be ignored, can it?
A. I don’t think events can or should be ignored. However, we need to accept that external pressures – political, economic or environmental – are part of travel, and plan and budget as best we can. The City and our shareholders don’t accept them as excuses. We need to be ready to absorb the impact and move on, as we did with Egypt. Customers trust us to deal with such challenges – our shareholders need to be able to do the same.
Q. The group took almost 38% of bookings online in the first nine months of this financial year. How far can this go?
A. We’ve said we expect to see 50% of sales via the web by full year 2015 and I have no doubt it can go further. It’s cultural and generational. In our Swedish business, more than 70% is via the web. In Germany, it’s much lower.
In the UK we see very few customers use only one channel – they may research on the web and then visit a store to purchase, or visit a store for advice and then, using our DreamCapture tool, go home to share with the family and book online.
The majority of our UK flight-only sales are online. The proportion of sales through tablets and mobiles is growing rapidly. Tour operator bookings are up 73% compared with the same time last year, and mobile conversion has more than doubled on Thomascook.com. Whoever thought we’d be booking holidays on mobiles? I suspect most of those doing so are under 25.
Q. What does this mean for your UK retail operations?
A. Retail is critical to our omni-channel strategy. Customers love the personal touch and very few customers use only one channel. Our high street presence is very important – ensuring we’re there for our customers, however and whenever they want to meet us.
Customers value the expert knowledge of our teams and we’re using tools and technology to help retail teams support customers even better.
We now have six concept stores – the latest opened at Bluewater [Kent] last month – and we’re launching an exciting virtual-reality trial giving customers the chance to see and experience a holiday before buying. These are exciting times for retail.
Q. How would you describe the state of the UK market?
A. Our UK lates market is strong right now despite a 6%-plus increase in [overall] capacity across the UK and Europe.
Our product strategy is also beginning to deliver tangible benefits – particularly city breaks and our Concept hotels. We’ve seen some benefits this year but not enough to compensate for the general overcapacity.
We expect to see a more significant improvement in full year 2015. Initial trading for next winter and summer 2015 supports that view. Our summer 2015 growth includes new routes to New York and Miami from Manchester as we develop a long-haul hub.
Q. How big a proportion of sales do you envisage from unique and Concept hotels?
A. Our new product revenue continues to increase and more customers are booking Concept hotels early, with good repeat bookings. We’ve seen a 7% increase in winter 2014-15 bookings in the UK and we are encouraged by booking and pricing trends for summer 2015.
Based on these and our more flexible and dynamically packaged products, we expect to achieve new product revenue targets
that rise to £1.2 billion in full year 2017.
We plan to have 640 Concept and partnership hotels by full year 2015 and 800 by full year 2017, compared with 475 now.
Q. How important is the UK business to Thomas Cook?
A. The UK is central to Thomas Cook – as I’ve said many times, “fix the UK and we’ll fix Thomas Cook”. The UK business has progressed really well and I’m very proud of the UK team. Peter Fankhauser and his leadership team are making great progress. The good performance is testament to everyone in the UK. Better products, a new website, six concept stores, the beautiful, relevant new multi-channel ‘We love’ campaign and other developments are making a real difference.
Q. How challenging is it to manage expectations in the City and internally?
A. We spend a lot of time talking with our owners – it’s an essential part of our transformation. I believe in open and honest communication and transparent, consistent key performance indicators and performance metrics. Our internal teams and our shareholders see the same performance measures and hear the same messages. Our employees understand we must meet the needs of our customers, shareholders and business partners if we are to succeed.
Q. What could the industry learn from other sectors?
A. I don’t like terms like ‘pax’ – it’s impersonal and treats customers like a commodity. People trust us to deliver memorable experiences for them and their families – they trust us with their money and their time and it’s our responsibility to deliver a personalised experience.
Q. What’ s next for the group?
A. Our teams are focused on our customers and on delivering sustainable, profitable, long-term growth. We want to give our 23 million customers a wonderful experience every time they travel with us, as befits the oldest name in travel
We continue to get stronger. You can feel it in the marketing, through the buzz in our stores and through the energy in every part of our organisation. We are confident, but not complacent.
We all know what we have to do.
• Harriet will lead a team of Thomas Cook Sunner Hearters in the 100-mile Ride London cycling event this weekend to raise £100,000 for the Thomas Cook Children’s Charity and Whizz Kids. To donate: text ‘Suni00’ plus the amount to 70070