Outlook: Thomson Travel
Tuesday 27 July 1999
A SUMMER SEASON can be an eternity in the cut-throat world of the package tour industry. Three months ago, Paul Brett, the chief executive of , was boasting to the world that he had no intention of relinquishing Thomson's position as market leader. Just in case that upstart, David Crossland of Airtours, had other ideas, Mr Brett announced plans to flatten the opposition by launching a new budget tour brand and adding a million extra package holidays to the market.
As the summer has run its course, Thomson has encountered terribly difficulty just selling the holidays that already feature in its brochures, at least at profitable margins. With the school break now in full swing, one in five Thomson package tours remain unsold and the holidaymaker is king. Mr Brett has been a terrible disappointment to the army of customers he recruited as shareholders a year ago and this was the final straw. After 20 years with Thomson he's been forced to pack his bags for a longer summer vacation than planned.
Thomson was at pains to point out that it was not the only tour operator that had been hurt by terrorist threats in Turkey and the war in Kosovo. The inability to shift late summer holidays at acceptable prices, was, Thomson suggested, an industry-wide problem. The market was not convinced. Thomson shares plummeted three times further than those of Airtours and FirstChoice, and the indications are that yesterday's profit warning from the market leader are not likely to be mirrored by the likes of Airtours.
Since Thomson made its stock market debut 14 months ago, life has not been easy. The flotation itself was a cack-handed affair, with thousands of investors complaining that their application forms had been processed too late. They have turned out to be the lucky ones. Thomson shares have lagged the market by a third since then. Meanwhile the management has struggled to keep its head above water now that it cannot rely on the financial might of the Thomson Corporation to bale out its mistakes.
Mr Brett has been replaced temporarily by the chief operating officer, Roger Burnell, who has been with Thomson even longer and is said to be a strong candidate to get the job on a permanent basis. Unfortunately for him, an infusion of new blood would seem the least that Thomson needs and its shareholders deserve.
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