Simon Calder: The firm that Thomas Cooks the books
The man who pays his way
Saturday 02 October 2010
Plenty of British visitors to North America inadvertently award themselves a discount every time they go out to eat. The unwritten rule at any waiter-service restaurant is that you tip a minimum of 15 per cent. Any less, and you do two things: depriving the server of their wages, and making a statement that approximates to "the food and the service were rubbish". Some American waiters will helpfully point out your blunder, perhaps by chasing you down the street. And at least one restaurant in Banff, Alberta, specifies that a 15 per cent service charge will be imposed if the staff believe a customer may not tip. ("Who is this rule aimed at?" I enquired of one waitress. "Scots and Australians," came the immediate response.)
Britain's second-largest holiday company, Thomas Cook, has gone one stage further. In a move that is breathtaking even by the standards of the always-strange travel industry, the firm has told the hoteliers who provide its rooms in Spain, Portugal, Greece and beyond that their invoices will not be paid in full. Thomas Cook is unilaterally deducting 5 per cent from the money owed for August and September.Not our fault, says the company, which blames – "the volcanic ash impact, the general election and emergency budget, the interest in the World Cup and the especially good weather in the UK".
No one will argue that the travel industry has had a tough old year. Thomas Cook itself suffered the indignity of being ejected from the corporate premier league, the FTSE 100, in June.
Many holiday companies are putting the squeeze on suppliers, demanding better deals in order to share the economic pain. Yet that is apparently not enough for Thomas Cook. If the firm owes a big hotel €1m, it will send a cheque for only €950,000.
In the travel industry, margins are wafer-thin – so a 5 per cent cut could wipe out any profit.
You might imagine that any hotelier in possession of a signed deal would call the nearest lawyer and begin a breach-of-contract action to recover the outstanding cash. But Thomas Cook pronounces itself, "delighted with the response that we've received from hoteliers in Turkey, Greece, Cyprus, Egypt and other important holiday destinations". They have shown, "a great deal of understanding".
But why should businesses accept, or even welcome, being shortchanged? The answer lies in the Thomas Cook claim that, "it's a better solution than reducing capacity". That, I submit, is the nub of the tour operator's case: "You need us more than we need you."
In the short term, Thomas Cook stands to benefit at the expense of the people who provide its accommodation. I wonder, though, if the company has thought through the longer-term effects of this initially profitable move. First, some prospective customers may infer, wrongly, that a company reneging on its deals with hotels must be in trouble. Thomas Cook says, "the business is in a strong financial position"; all the more odd, then, that it should resort to such a strategy.
Next, as the catchphrase "to Thomas Cook the books" enters the travel vocabulary, hoteliers may fret about whether they'll get all the money they are owed from British holiday firms. Some UK holidaymakers could consequently find themselves being asked to pay upfront.
When fortunes improve, as surely they will, Thomas Cook cannot expect any favours from the people whose rooms, reception staff, chambermaids and waiters keep the show on the road. And with so many travel options on offer, the firm may discover that British holidaymakers need Thomas Cook rather less than it needs us.
One discount rule for them ...
If you run a retail operation, beware of Thomas Cook executives: they'll be the ones turning up at the local pound shop with only 95p in their pocket. East Coast Trains will be watching for Thomas Cook staff travelling by rail from the travel firm's HQ in Peterborough to London, seeking to deduct £4.35 from the standard-class return fare.
One consequence of Thomas Cook helping itself to a 5 per cent discount is that its customers may be tempted to try the same trick; on a typical family holiday costing £2,000, they could save £100. All that is needed, surely, is to plead – as the company does – that the move is "a result of the impact of the exceptional challenges" you have faced this year.
Sadly, Thomas Cook will brook no such behaviour, saying,flatly, "Our customers already benefit from the deals we do with our hotel partners in the prices they pay for their holidays."
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