Holiday giant ventures into the luxury segment

Now that there are just two dominant mainstream package tour operators in the UK, the search for profitable growth is taking businesses like Thomas Cook into more specialist segments. It has just bought one of the most exclusive luxury operators as part of a renewed acquisition strategy.

Elegant Resorts is the business bought by Thomas Cook. A high class operation, serving a wealthy client base. Take a look at the Elegant Resorts website to get a feel for the kind of holidays they offer. Certainly a world away from the popular Thomas Cook destinations in Spain and the Med.

The note about the deal on Elegant Resort’s website is interesting:

“As of this morning (07 April 2008) the shareholders of Elegant Resorts have completed a very exciting deal that integrates us into the Thomas Cook family. The strategic merger will allow us to continue to build on our previous success, whilst creating opportunities to develop the Company – including some genuinely special product innovations that will make us even more exclusive. We will continue to operate as a standalone business, building on our brand name creating luxury, stylish bespoke holidays. “

Of course this investment by Thomas Cook isn’t a merger. Nothing of the sort. Elegant Resorts has sales of about £60 and makes a net profit of around £1-2m. Compare that with Thomas Cook’s turnover of 11.7bn Euros. Thomas Cook merged with another giant tour operator MyTravel a year ago, so Elegant Resorts will become a tiny part of the enlarged group. A key short-term action for the management team at Elegant Resorts will be to reassure their affluent customers that the exclusive, aspirational brand will not be damaged by being part of a travel conglomerate.

The experience of specialist tour operators once they get taken over by large travel conglomerates is not always successful. Perhaps only First Choice Holidays really understood how to keep specialist brands separate from package holiday operations, but First Choice too has been consumed within a bigger business - TUI. I remember getting involved in the purchase of brands such as Simply Travel and Something Special Holidays when I was organising the acquisitions for Thomson Travel - it was so difficult to maintain the passion and individual attention to detail in a specialist operation once the big brother travel firm has taken over.

Still, the Thomas Cook acquisition of Elegant Resorts is a good example of a strategy we are likely to see repeated in the UK travel industry. Organic growth in both sales and profits will become harder to achieve in mature markets hit by the credit crunch. If the big two (Thomas Cook and TUI) want to grow their UK holiday divisions, then acquisitions are back on the agenda.