Results show why Thomas Cook boss was right to go

WHEN Manny Fontenla-Novoa was ousted from Thomas Cook last week, many in the travel industry felt more than a little sad at his departure. The charismatic Fontenla-Novoa, who started working in Thomas Cook’s printing room in 1972 at age 18, was one of a kind; a bon vivant whose boozy dinners went down extremely well with journalists. Alas, he was less successful at winning round investors, who had been agitating for his departure for some time.

Because he was well-liked, it was tempting to blame the woes of Thomas Cook on the wider market. Cash-strapped consumers were cutting back on holidays while online agents like Expedia were stealing share: Thomas Cook was bound to suffer.

But a quick glance at nearest rival TUI Travel’s third quarter results show that it is possible, if difficult, for a tour operator to prosper in these troubled times. Underlying profit grew 57 per cent to £88m.

The company puts its success down to what it calls “differentiated” holidays, management speak for going upmarket. UK consumers no longer want to spend 14 days sunning themselves by a tiny pool in a bog-standard hotel. A holiday has to be an event, an experience, something unique. Spa holidays, activity trips, isolated hotels – these are the kinds of high-margin vacations that customers are buying, with sales up some 15 per cent in summer 2011. TUI’s decision to break away from the old seven or 14 nights rule has also paid dividends. Sales of holidays that last 10 or 11 nights were up 24 per cent on last year.

It has also had significant success online, which now accounts for some 40 per cent of bookings, compared to a paltry 23 per cent for Thomas Cook.

Fontenla-Novoa was a lovely guy, but business is business. Shareholders were right to push for him to go.