Thomas Cook chief executive Peter Fankhauser explains why a renewed focus on customer service and differentiated and own-brand hotels is helping the 175-year-old tour operator ‘walk in the flip flops of its customers’. He spoke to Lee Hayhurst
When describing Thomas Cook’s renewed focus on prioritising customer service, chief executive Peter Fankhauser puts a travel twist on a famous saying about empathy.
The 175-year-old company should, he says, “walk in its customers flip-flops” if it is to stay relevant and build on a brand that remains powerful, despite its troubles of recent years.
Speaking ahead of Cook’s full-year trading announcement, Fankhauser says the change he has overseen since taking the helm in 2014 has been the most transformative he’s witnessed in big business.
“It’s about putting our customers at the heart of our heart,” says Fankhauser referring to the ‘sunny heart’ logo brought in by his predecessor Harriet Green.
“We have to care about the customer. We want to be a total service-oriented business and make sure we have that in every aspect of what we do.”
Fankhauser admits the fallout of the deaths of two children from carbon monoxide poisoning on a Thomas Cook holiday in Corfu in 2006 was a chastening experience.
The operator found itself in the middle of a storm of criticism for the way it handled the tragedy after an inquest in May 2015 accused it of breaching its duty of care.
Fankhauser, who had been in charge for just seven months, took personal responsibility, issuing what was seen as a long-overdue apology on behalf of Cook.
“Corfu was the trigger point for me to say we cannot go on like that,” he says. “If we were to go on like that we have no meaning, we are losing relevance.
“It’s what a tour operator is all about – it has a duty of care. What is important are the ‘soft facts’ – what values and integrity we have behind our customer promises.
“We had to ask ourselves what did our founder Thomas Cook want to achieve and go back to those founding principles.
“We are a holiday company and we have customers who rely on us. That means you have to walk in the shoes of your customers – you have to wear their flip-flops.”
Central to Fankhauser’s vision has been the decision to assess Cook’s performance using Net Promoter Score (NPS), a widely used method of rating customers’ likelihood to recommend brands from one to ten.
Cook has brought in NPS as a core performance metric in all areas of operations, including retail, on its aircraft and in resorts, and staff are being offered bonuses for improved scores.
Fankhauser says NPS is a method to drive improvement rather than benchmarking against competitors or between markets.
“You can’t really compare Holland or Germany with the UK because there is a different mentality. The Dutch are disinclined to ever give you a ten, unlike Brits who can be much more energised,” he says.
Health and safety now has a pivotal role in Cook’s strategy. It is working towards annual audits of core hotels from summer 2017, having doubled its in-house headcount and ramped up activity with Geneva-based specialist SGS “to a different level”.
Cook has also reduced the number of properties it offers and started placing a much greater focus on in-house hotel brands in which it can exert greater control over quality and delivery.
This has seen the operator focus on a core portfolio of 3,400 properties – a figure that will eventually fall to 3,000.
Of those, nearly 200 are own-brand hotels, including the new bohemian-style Casa Cook. Outside of the core, Cook has outsourced contracting to Sun Hotels parent Webjet for what it calls its “complimentary” portfolio of 3,000 hotel contracts.
Fankhauser says the Webjet deal gives Cook more control over quality and health and safety because the deal stipulates any properties that do not meet certain standards are dropped.
An Academy of Excellence has been established to help hoteliers meet required standards from food and housekeeping to reception and even online reputation management.
Fankhauser says the success of these initiatives is based on the expectation that “better customer experience leads to better margins”. He points out that the price elasticity on TripAdvisor for a hotel that improves its rating from three to four stars or from four to five is 10%.
“We expect the consumer to be ready to pay for quality. We are also aware that we have to be competitive on the basic price, but then offer additional services.
“The biggest mistake is to think quality is defined by the number of stars a hotel has. Quality is defined by whether you can deliver what you promise.”
Delivery is the ethos behind Cook’s new Hotel Satisfaction Promise, under which guests in certain properties are guaranteed a resolution to their problems.
This summer, the scheme was available in 160 hotels and to 1.4 million customers, who were entitled to 25% off their holiday if Cook failed to address an issue within 24 hours.
Fankhauser takes great pride in pointing out that just 23 customers sought compensation and that destinations and reps are competing to be quickest to respond.
Most have an average resolution time of 11 hours, he says. “If a customer is on holiday, they don’t want compensation, they want to have a great holiday.”
Cook spent last winter training all staff, including product managers, on the promise. This prompted them to be more careful writing product descriptions and to avoid the temptation to “over-promise”.
Fankhauser says Cook’s scale means it can offer product to suit all budgets, ensuring that if post-Brexit economic conditions impact customers’ disposable income they will still be able to afford to go on holiday.
And because it is increasingly supplying hotels with mixed nationalities from 15 source markets, it has the clout to guarantee filling beds and negotiate exclusivity from hoteliers.
For Cook’s high-street stores and third-party retail partners, price parity with the web, in place since 2013, has been widely welcomed. Other mainstream rivals have not followed suit claiming, in private, that it is not commercially viable in short-haul beach, but Fankhauser disagrees.
“It works because I find this rebate battle pointless. We are suffering, the hotel is suffering and the retailer is suffering,” he says.
“We are not winning by just reducing the price. If you reduce the price, then you do not get the quality and you do not get the additional earnings. That’s why we have price parity. It’s a win win.”
And Fankhauser says experience of the German market has taught him what happens if you start to undervalue third-party distribution.
“You can make mistakes, but you do not make them twice. We want to grow in all channels; that’s why we are happy with all the support from our third-party agents.”