Thomas Cook’s collapse leaves global tourism industry in hot financial soup
Athens/Madrid — Nikos Chalkiadakis says the collapse of the Thomas Cook Group has left Crete, Greece’s largest island, with a €100m headache.
The CEO of Cactus Hotels in Herakleion, the capital of Crete, and the head of its hotel owners’ association said that is what the UK company owes him and his fellow hoteliers.
Fielding endless phone calls from the lobby of his beachfront lodging, Chalkiadakis said 80% of the city’s 600 hotels had contracts with Thomas Cook and many are working on plans to see them through disruptions, cancellations and other costs.
“October is basically lost,” he said. “Many of the hotels have debts as high as €10m. They’re looking into getting credit, contacting banks, any sort of aid to get them through next year, when clients will hopefully be replaced by other agencies.”
About 70% of Crete’s €3.13bn tourism industry has links to Thomas Cook. The island, the birthplace of Zeus according to Greek mythology, draws more than 5-million tourists a year to its sandy beaches, crystal-clear waters and white mountains. Thomas Cook had signed about 400,000 contracts with local businesses for 2020 before it declared its demise on Monday. Now all those deals are in question.
Like Crete, Europe’s other tourist hotspots are bracing for the fallout of the collapse of Thomas Cook, which is threatening to take down a large chunk of the industry it spawned. Businesses that rode on the coattails of the 178-year-old package-travel company are counting the cost of the sudden disappearance of one of the UK’s best-known brands, the most high-profile casualty of the decades-long shift in the tourism business.
Greece’s tourism confederation estimates the collapse will cost the country up to €500m, while its Spanish counterpart sees unpaid bills of at least €200m. In Cyprus, the hospitality industry is looking at a hit in the worst case of €175m, while Turkey’s south Aegean region put receivables from Thomas Cook at more than £100m.
“An earthquake just happened and it’s seven on the Richter scale, but what worries us the most is the tsunami that will follow,” said Michalis Vlatakis, chair of Crete’s Association of Cretan Tourism and Travel Agencies.
Founded in the 1840s by the eponymous Victorian entrepreneur, Thomas Cook started out by running train trips through the English Midlands. Offering low-cost package holidays, the company expanded as Britain’s growing middle class discovered they had more time — and money — to explore the delights of continental Europe.
Now, those tourist destinations on the continent face unpaid bills, falling hotel occupancies and a drop-in visitor numbers as they struggle to find other service companies to fill the gap. While the immediate impact of the company’s demise was stranded tourists, confusion and one of the largest repatriations by the UK in peacetime history, the hospitality industry is reviewing possible longer-term pain.
Businesses in Crete are concerned that tourists due to visit in November will cancel. More crucially, they worry contracts signed in May for the 2020 tourist season may be annulled. With the tourist industry directly employing about 16% of the island’s 630,000 population, the disappearance of Thomas Cook threatens to have an outsize impact on its economy.
In Spain, one of the world’s top tourist destinations, the Canary Islands may bear the brunt of the company’s fall. Tourism accounts for 40% of the archipelago’s employment and 35% of its €46bn economy. Thomas Cook brought in about a quarter of the tourist volumes on the islands, said Jose Maria Manaricua, chair of the Federation of Hotel and Tourism Businesses of Las Palmas. If the company’s collapse is total, some hotels risk sharp declines in occupancy rates just as the winter season gets under way, he said.
“Thomas Cook has been a partner that has been instrumental in helping the Canary Islands tourism business become what it is today,” he said. “It’s an enormous loss.”
The company has also been a operator for Majorca, one of Spain’s Balearic Islands, with its beach resorts and sheltered coves. In Calvia, a municipality in Majorca that includes the tourist hotspot Magaluf, the loss of Thomas Cook will be a bitter blow, said tourism director Javier Pasquet. As many as 40% of the foreign visitors to Calvia are British and Thomas Cook was an important client for hotels selling room quotas, he said.
“Thomas Cook was a classic brand that played a huge role in the development of tourism in Majorca,” he said. “Most important for now is attending to the customers — we will have to rebuild this business, but that will come later.”
For Cyprus, the challenge will be to make up for the 250,000 visitors Thomas Cook has been bringing to the country every year, who on average spend about €700 each. The Sandy Beach Hotel in Larnaca, Cyprus, is bracing for empty hotel rooms.
“Thomas Cook provided 70% of the capacity of the hotel, or 120 rooms,” said Joanna Florentiadou, the hotel’s MD. “We cannot discuss the damage, but we have been left significantly exposed.”
In Turkey, Thomas Cook brought 700,000 visitors from the UK in the January-to-July period, or about 50% of the total. The company’s collapse will be hard on businesses in and around Marmaris, the Mediterranean resort town along the Turkish Riviera favoured by the British.
“Thomas Cook was the biggest supplier of tourists for our region,” said Bulent Bulbuloglu, head of GETOB, an association of hotel operators in Turkey’s south Aegean region. “We will probably see the impact over the next four, five years.” The company last made payments to businesses on August 22 and another was due early October, he said.
“If the businesses don’t get support, both hotels and their suppliers will go bankrupt,” Bulbuloglu said.
In Crete, meanwhile, Michalis Kokolakis, 71, has spent a couple of sleepless nights. His King Minos Palace hotel on the island is owed €200,000 by Thomas Cook.
“It’s never happened before, it’s like a domino that draws everyone in, the hotels, the services and so on; it’s like a chain,” he said. “Some hotels that have 90% dependency on Thomas Cook may need to shut down and jobs are at stake.”