Bankruptcy of Thomas Cook: an Overview of the Situation

Location: Global – Europe Middle East and Africa Thailand Spain – 15 countries

Name: Thomas Cook, Casa Cook, Cook’s Club and other brands

No. of Keys: 200 hotels – 35,250 keys

The Scenario: After 178 years of existence, the first tour operator’s adventure is coming to an end. A look back at the reasons that led to this situation as well as the hotels that will soon be put into liquidation.

While the era of mass tourism is in decline and a more urban and individual form of tourism is emerging, the tour operator was unable to adapt its business model to the new needs of tourists. Complicated political and economic circumstances (Brexit) that led to the fall of the pound combined with a business model based on the use of a single type of multi-purpose aircraft (for business and leisure segments in major and also secondary airports) to cut costs to bring about the bankruptcy of Thomas Cook. Finally, the surge in oil prices dealt the final blow to the company, which mainly owned particularly energy-intensive, ageing aircraft.

From a micro perspective, the first factor in the decline is the high operating costs due to the maintenance of a large network of brick and mortar shops to date. These stores incur a significant cost through payroll and costs for renting commercial premises. The company has incurred significant debt, particularly following a merger and acquisition transaction at high cost before the crisis (write-off of £1 billion out of £1.5 billion last semester from the acquisition of MyTravel in 2007, a digital player that had almost never been profitable).

A critical situation on the one hand, and a good hotel portfolio on the other. The cessation of activity took effect on Monday, September 23 as a result of negotiations during the weekend of September 21-22 that failed to provide an additional £200 million for the recapitalisation of the company.

As a result, 600,000 tourists are grounded in their destination, including 10,000 French and 150,000 British. As for French nationals, “5,000 are covered by travel agencies and 2,000 have tickets on regular airlines, allowing them to return home without any problems,” according to René-Marc Chikli, president of the trade union of tour-operating companies in France (SETO).

Tourists from the United Kingdom will be cared for by their government through the British Civil Aviation Authority (CAA) as part of Operation Matterhorn, the largest civilian repatriation operation since the Second World War.

The Properties: As for the hotel business, it will also enter into liquidation. As this division generates profits with well-known brands such as Casa Cook or Cook’s Club, it is likely that the group’s hotels will find buyers in the coming months.

As they had partners like LMEY one assumes there were agreements in place as to what happens to the hotel in the event of either partner getting into trouble. Thomas Cook owned 42% stake in the JV.

The millions owed to non-Thomas Cook hoteliers will have a knock-on effect to many thousands of hotels….and the banks, Norway’s biggest bank, DNB, which took a NKr1bn ($110m) writedown relating to Thomas Cook this week, and UniCredit were two of the larger lenders to the travel group’s revolving credit facility. Others lenders exposed include Bank of America Merrill Lynch, Barclays, BNP Paribas, Lloyds, RBS, Société Générale, Morgan Stanley and Credit Suisse. Lloyds made a provision for exposure to the company in its first-half results, although did not say how much, given it was deemed “non-material”, according to London’s Financial Times.

Main Photo: The breakdown of Thomas Cook hotels

Brand/Management: Currently Cook’s Club, Casa Cook, Sentinido, Sunprime, Aldiana, Sunwing, SunConnect and Smartline.

Current Owner: Good question!

Guide Price: Unknown at this time

First Seen: Hospitality.on

Agent: To be appointed

Date Posted: September 2019

THPT Comment: Wow…200 hotels supported by a company that has gone down, so the future is the hands of who take the Thomas Cook capacity…remember Tui and others already have their own hotels, so the acquirers could be a different range of companies. Watch this space!

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