EP Magazine

Blue Sky and Beyond

As we go to press Thomas Cook has suffered a significant drop in share price, with the Group facing a number of questions about its business. Managing director of Thomas Cook’s London 2012 Partnership, Stephen Vaughan, has also faced controversy related to the allocation of subsidised hotel accommodation from LOCOG during the Olympic and Paralympic Games. In this special feature HEATHER GIBSON asks Stephen for his views, while he outlines the wider objective of reinventing one of the UK’s heritage brands

Just over two years ago Thomas Cook was confirmed as an Official Supporter of London 2012, winning a bid to be the official short breaks provider to the Games. It is a groundbreaking initiative for the travel company and a major investment, considering Thomas Cook has faced a number of commercial challenges in recent times; this year alone the company announced its third profit warning resulting in the departure of chief executive Manny Fontenla-Novoa. Sponsorship of the Games, however, is a carefully judged exercise in managing the company’s long-term future, aimed at increasing awareness of their multiple service offerings to deliver market differentiation and a sustainable business model post-event.

Thomas Cook, while established as a package provider in other sports, has never done so for an Olympic event and Thomas Cook London 2012 is a joint venture with iLUKA, a specialist event company with the relevant experience.

In itself the scope of the project is immense. So in 2011, when the business faced questions over its allocation of eight percent of the London Organising Committee for the Olympic and Paralympic Games (LOCOG) subsidised hotel accommodation, negative publicity immediately ensued.

Hoteliers reacted with public anger to the news that their discounted Olympic room rates were being publicised as part of Thomas Cook’s 2012 short-break packages. The matter escalated to such a degree that intervention came from the British Hospitality Association (BHA), with Ufi Ibrahim negotiating dialogue alongside her management and members, including Whitbread who had stated that they were withdrawing their rooms from LOCOG’s inventory. It was at this juncture the matter went quiet in the media, and what was interesting at the time is that the perspective of Thomas Cook was never reported.

Stephen comments that this lack of public communication was part of a deliberate strategy, preferring to remain calm and engage directly with hoteliers to explain their side of the story.

“We decided to remain totally silent knowing we were the innocent party. Despite the heated debate in the media, the matter was discussed at the BHA and put to bed in minutes. Our contract with LOCOG is entirely separate to contracts for hotel operators. The agreement is that we will provide a number of rooms at a discounted rate for short breaks as part of our customer mandate to provide an affordable Games experience, and as part of this we were given a selected number of hotels to choose from by LOCOG. We did not know that the contracts between hoteliers and LOCOG might have had different implications."

“It was slightly confusing, and slightly alarming, that it escalated in the way that it did. Our meeting with the BHA was completely open, during which the decision was made that if anyone did not want to work with us then they would let LOCOG know, but we just asked them to listen to what we had to say first. In my eyes it was a ‘light bulb’ moment for many as we were able to explain the full scope of packages, which hadn’t been fully understood. Once people took into account our overheads and what we paid for the Games they could see the full picture. Only two companies, Thistle and Whitbread, decided not to work with us. However, Thomas Cook has a great relationship with Whitbread and they have been very supportive in honouring customers who had already booked and helping to reaccommodate others elsewhere. We now have more hoteliers approaching us than we can facilitate, and that might be partly due to the realisation that if people don’t have tickets to the Games, they are not coming to London.

“I have a lot of sympathy for the hotel industry. It was a frustrating situation for Thomas Cook as we have worldwide deals with many of these companies, so it was unfortunate that we couldn’t deal directly with it from the beginning. It was tough at the time as there were conflicting internal pressures, including our shareholders, but I knew that it would die down.”

Stephen is an impressive character with a quiet air of determination. He has been managing director of the London 2012 project since February 2010. Following a brief spell as a footballer after leaving school he worked with British Gas and Land Rover. Since joining Thomas Cook he has worked as an overseas representative, and then in the Tour Operating, Retail and the Specialist Businesses. Notably, he was previously Managing Director of Club 18-30 and the Big Events Group. He subsequently held the role of Head of Sales and Commercial for the Thomas Cook Dynamic Packaging brand ‘Flexibletrips’ and was heavily involved in the creation and rollout of the brand to the marketplace.

With a number of legacy objectives to deliver for the business, profit is a key consideration. The Games are taking place during what would traditionally be Thomas Cook’s busiest period for outbound travel, so their investment in the Games provides some degree of insurance given that consumers often stay in the UK during major sporting events. Access to more than 300,000 Olympic and Paralympic tickets has been channelled into providing two distinct short-break packages for the consumer and corporate markets, Games Breaks and Games Breaks Plus respectively. These all include Olympic tickets and accommodation, ranging in price from £99 per person to £6,499 at the higher corporate end.

Since the conclusion of LOCOG’s ticket ballot, Thomas Cook will be embarking on a major consumer marketing campaign to emphasise that they are the final gateway for attending the Games, in addition to working with a number of partners to promote corporate packages.

Corporate packages, which include hosts, food and beverage and approved transport to and from the Games, require a degree of flexibility and demands have been varied, with some clients from China and India wanting to try specific restaurants, for example. A balance is required, explains Stephen, “It’s about a whole approach, rather than just being prescriptive. However, it’s not always possible so we have to be careful about overselling and under-delivering.”

Sustainability and diversification are ultimately the long-term objectives for Thomas Cook Group. Often perceived as similar to TUI, its major competitor, the Games are an opportunity to put blue sky between the two operators while increasing awareness of Thomas Cook’s range of services. Stephen explains: “This is an opportunity to increase customer recognition that they can travel with us in the UK if they are not travelling overseas. It’s also demonstrating that we are not just a holiday operator for trips abroad but have other services such as Thomas Cook Sport or Neilson, our activity holidays. Our Sport business is now the leading provider of match breaks for supporters to football games, and we have extensive involvement in cricket, boxing, rugby and other events, to name a few.

“As part of our deal with the British Olympic Association, Thomas Cook will support them until 2020 and will be providing packages until this time, including SOCHI in 2014 and Rio in 2016.”

Thomas Cook is also placing great emphasis on staff recognition, providing opportunities to access reward and recognition opportunities linked to the Games. In 2012 nearly 300 people from within Thomas Cook will be redeployed to act as hosts for customers during the Games, a team currently being recruited and which could comprise pilots, airline staff or head of office staff. In addition, torch relay places are to be filled, and LOCOG volunteers have already been recruited.

After the conclusion of the 2012 project next Christmas, the business will wind down, and Stephen’s team will handover their work to Thomas Cook Sport. Looking at the current focus on sales, with less than one year to go, Stephen exudes measured excitement as he ponders the months in the lead up to the Games:

“Thomas Cook is very different to other Olympic providers, sponsors and supporters. Companies like BP or Cadbury have traditional sponsorship rights and clear brand activation. Our link is tangible as we are physically taking people to the Games and the operational logistics around this are immense.

“My dream is that customers feel they had a once-in-a-lifetime Thomas Cook experience and it has opened their eyes to what we can deliver. So much can, and probably will, change right up until the event, but that is the one thing that we can control.”