Thomson Travel: there’s life in the old dog yet

2000-03-03

At the end of last week, UK travel operator Thomson immediately followed its report of sliding profits (down 38 per cent on last year) with the announcement of a £100 million Internet strategy. In Friday’s Independent newspaper it was reported that analysts saw this as “too little, too late,” when positioned against the rising web stars which are Lastminute.com and Travelocity. In this game, though, it ain’t over until the well-proportioned lady sings, and we would like to point out a few points in Thomson’s favour.

The whole disintermediation concept is proving very difficult to follow. It seemed that intermediaries would be the first casualties of the Web revolution. Then it became apparent that new types of intermediary were starting to turn a sizeable profit – these are the transaction infrastructure providers such as Tibco and CyberSource, not to mention security, directory, billing and other service providers. Now with the clear success of the travel sites, it is obvious that intermediaries are here to stay – at least on the Internet. Companies that still lack a Web presence are quite right to be losing sleep.

Thomson’s main strength lies in the fact that it is not really a travel agent at all. High street outlets such as Lunn Poly are little more than a front for the wide variety of Thomson holidays, sold under different company brands. In other words, it is its own intermediary and it has real products to sell. To see why this is a strength, we only have to look at the proposed alliance between US and international airlines, to set up a portal for air fares and effectively cut out the middle man. A similar alliance between package holiday operators would certainly put the squeeze on the Lastminutes and other pretenders.

Second, we must emphasise the importance of the over-used phrase “the competition is only a click away.” In my own experience, when hunting for a last-minute weekend stay in London, I found Lastminute.com lacked the choice of other, similar sites. It was also – heaven forbid – slow, the navigation was non-intuitive and the end result cluttered. Even the best players in the game, new breed or old hands, can fail – to offer the necessary services, or to offer them in a way that turns off the prospective customers. Thomson have as much chance of success as anyone else.

Finally, nobody has the monopoly on the future. Financial analysts are making the best guess on how dot-coms should be valued and while it is generally agreed that many are priced way above what is reasonable, nobody is prepared to say which ones. The dot-com crash may come, and the pure clicks-and-mortars are not guaranteed to beat the companies they are trying to oust. The Web is a channel for products and services: it is true that it is indispensable, but ultimately it is the products and services which will determine the success of a company, and not the channel. Thomson cannot afford to miss out on the Web: to succeed, it must establish itself as an eCommerce player, and the quality of its web presence must be second to none. Given that it achieves this, its future will once again be down to the attractiveness of its holidays, and its ability to deliver them.

(First published 3 March 2000)