Will There Be Ripples or a “Trickle-Down” Effect By The Collapse of Thomas Cook?
If you have read the short story, or seen the film made based on the story, “The Butterfly Effect”, then you know something happening in one place and/or time, can have an affect on something else later on down the line or in the future.
A definition of this theory is “in which a small change in one state of a deterministic nonlinear system can result in large differences in a later state”.
Which sounds complex, so it may be best just to watch the film to get a full understanding.
In the business world there is a theory of a ripple effect, or trickle-down theory, in which one business can have an affect on another.
This can be especially true when a company goes bust. The affect the company’s demise is not just on its customers, and employees, but also its suppliers, or if it is a supplier, the companies it supplies further up the food chain.
Unless you have been away on holiday, and even then you could not miss the news regarding the recent collapse of “travel giant” Thomas Cook.
When Thomas Cook could not receive the £200 million cash injection it required to continue trading, the company went bust, which left 150,000 holidaymakers scattered across the globe.
There are many reasons why a company can out of business or bust.
Many speculate that Thomas Cook did not keep up with the times, and more and more people booked their own holidays as they could easily do this via the Internet.
In the end, debt caught up with Thomas Cook, they were insolvent and could not borrow the money to stay afloat.
The ripple effect from Thomas Cook going out of business on the surface is those directly affected by the company’s closure.
Employees who are not out of work.
People on holiday and needing to get back home, and those who have future holidays that were booked with Thomas Cook, paid for, and now there is no company to make good on the purchased holiday.
Fortunately as direct customers we have some rights, and protections in that the holidays booked were Atol/Air Travel Organiser’s Licence protected, and the CAA/Civil Aviation Authority, have promised to bring back, or repatriate those abroad.
However, we have been hearing horror stories of holidaymakers being “held hostage” at the resorts they are staying at due to the hotel or resort not being paid by Thomas Cook. There can be a few week delay in them getting paid once the holiday has been taken.
These resorts are concerned they will not get paid, and are demanding money from the people who are there on holiday.
This is a valid concern, however, the CAA has assured those resorts and hotels affected they will get paid.
Thomas Cook owed over £330 million to hotels and resorts, and Benidorm and the Canary Islands being hit hard with 200 million euros being owed to the Spanish tourism sector.
So what does this mean for future holidays to some of this areas that have been financially sucked into Thomas Cooks demise vortex? And what about the Brexit adding to this?
From the standpoint of how Brexit will impact our holidays, that remains to be seen. Much will depend on if there is a “deal” or not.
However, we are already seeing the ripples from the collapse of Thomas Cook in the airline industry, as air fares have gone up.
Due to “supply and demand” and demand pricing, airfares for some flights have doubled or tripled, as other airlines pick up the slack to fly passengers to their holidays, with one less airline, Thomas Cook.
So that is one way we as consumers are being impacted in the long run by the travel agency’s going bust.
There may be another ripple we as consumers may feel, and that is through the cost of hotels and resorts in the future.
While the CAA has promised all hotels and resorts will get paid, how long will this take?
Resorts may need the money now, and they may be wary for future bookings from travel agencies or packaged holidays, and could demand payment upfront, or a much larger deposit.
They could also simply raise their rates to cover any losses they may have experienced.
As to if Thomas Cook’s demise will have this strong a ripple effect on our future holidays, we can only wait and see, but there have been changes in other agencies stock value, and as Thomas Cook was such a huge presence in the holiday and travel sector, it is speculated we will all be feeling this for sometime.