In yesterday’s entry on the big slowdown detected in UK demand for holidays, I referred to a Guardian article on the impact of this slump on Thomas Cook’s summer holiday bookings. While the firm reported strong growth in Scandinavian markets and reasonable expansion in central Europe, the UK showed a different picture. Thomas Cook is one of the UK’s largest retail travel providers. It has strong brand-recognition in this country. But it’s easy to forget that the company is primarily a leading global leisure travel group. Today’s tourism blog entry takes a closer look at Thomas Cook Group plc.
The firm’s website gives some key information about its financial performance, main brands and historical background. With almost £9bn turnover, you’d expect the company to be an important part of the global retail travel market and so it proves. Biz/ed has covered aspects of the firm’s activities before, notably its merger with MyTravel in 2007. Despite the slowdown in the UK market, Thomas Cook plans a busy summer 2012 here as a result of its sponsorship deal with the London Olympics. The firm has paid to become the official provider of short breaks to the 2012 Games.
When you start digging into a firm’s recent activities, of course, you tend to find out about negative as well as positive news stories; one example is this year’s shareholder revolt over executive pay and bonuses. Last month, the firm was reportedly rebuked by its owners (shareholders) over the bonuses paid to 100 of its most senior executives. This story came about after an alert issued by corporate governance watchdogs at the Association of British Insurers (ABI).
In this episode, the ABI warned that Thomas Cook artificially inflated top bosses’ bonuses by excluding the effects of the Icelandic volcanic ash cloud from its results. Disruption caused by the ash cloud cost the firm an estimated £80m, which Thomas Cook decided to treat as an exceptional event. This meant that executive bonus payments were higher than they would have been otherwise. The ABI’s alert led to a revolt in which over a third of shareholders voted against the payments. Although the rebellion ultimately failed, it is highly unusual and is a humiliation for the company.
In the aftermath of the financial crisis of 2007-09, which saw state support for many industries, the topic of executive pay is very sensitive. We have seen broad public anger expressed over remuneration levels at some of the UK’s biggest firms, particularly the high street banks. In this context, the row sparked by reports of Thomas Cook’s chief executive’s pay in 2010 are perhaps understandable. Manny Fontenla-Novoa was paid a salary of £850,000 last year, which with bonuses and benefits rose to £2,272,000.
The rights and wrongs of this are debated in the article above, but the comments that follow it are significant. One contributor says that it would take an average sales consultant in the tourism industry between 150 and 170 years to earn a similar amount to this firm’s boss’s annual income. Thomas Cook has agreed to merge with Cooperative Travel this year, subject to competition authority approval. The joint venture, in which Thomas Cook would have a 70% stake, is likely to result in large numbers of job losses.
The Office of Fair Trading wants the Competition Commission (CC) to investigate if the new merged business will lead to a substantial loss of competition in the UK’s retail travel agency market. Workers in the retail travel industry are understandably upset at the prospect of large-scale redundancies, especially in light of the high levels of pay given to industry executives. But the CC report, expected this August, will not look at the merger’s impact on staffing. We can expect the structure of the UK’s retail travel sector to change once again later this year. Industry staff may have other things on their minds.