Large European tour operators appear to have an appetite to establish their own DMCs rather than outsource the handling of their passengers to in-destination agencies, as shown by the new joint venture (JV) company in Thailand created by Thomas Cook Group plc and Asian Trails.
If this becomes a trend, it will make a dent on the profitability of DMCs and intensify their need to diversify accounts. Thomas Cook Group’s new joint venture DMC in Thailand will mean a huge loss of business for inbound agencies that have been handling the account, in particular Travel Center Asia but also AED and Exo Travel, according to sources.
The new outfit, Thomas Cook In Destination Management (Thailand), will handle the more than 100,000 clients that Thomas Cook Group sends to Thailand each year effective November 1. Travel Center Asia is understood to be the hardest hit, as it has been handling a big part of Thomas Cook Group’s clients, particularly Germans, for over two decades, while AED is responsible for the Scandinavians, Exo French tourists and Asian Trails UK clients.
Michael Scheidler, Thomas Cook Group director, destination management, in response to questions from TTG Asia, said more than half of its clients to Thailand are from continental Europe, one-third from the Nordics, then “small programmes out of the UK and France”. He declined to comment why Thomas Cook Group did not set up the joint venture with its long-time partner Travel Center Asia.
Travel Center Asia’s managing director, Thomas Maurer, also declined to comment, saying: “For the whole duration of our cooperation (with Thomas Cook Group), Travel Center Asia does not give any kind of information at all.”
On why it picked Asian Trails, Scheidler said: “Asian Trails has proven to be a strong partner for UK and an established company with experience of working with other large tour operator companies like Kuoni; strong relationships within Thailand (hoteliers and authorities); positive negotiations and shared vision for the JV; and good cultural/values match.”
Scheidler said the primary driver for Thomas Cook Group to operate its own inbound agencies is “greater control over the quality and consistency of service all our customers receive in destination”, although a source observed that one big motivation surely must be “a cut of the profit” by owning the groundhandler.
“Such JVs are the future as they mean profit optimisation for large tour operators,” said the source.
The DMC business is still lucrative in Asia, with a flurry of M&As in the past two years, such as DNATA’s acquisition of Destination Asia or Thomas Cook India buyout of Kuoni’s DMC network including Asian Trails. The latter however had no influence on this latest JV; Thomas Cook India is not part of Thomas Cook Group.
If Thomas Cook Group had its way, it would probably set up a fully owned Asian DMC but Thai law does not allow 100 per cent foreign-owned DMCs. With Asian Trails it shares the same level of ownership in the JV, said Scheidler.
The company has been exploring options to either own, manage or set up inbound agency operations since 2014, he said. “We already have successful operating models in Spain, Portugal and the US and will also operate our own agency in the Caribbean from this winter,” said Scheidler.
He added the company is “reviewing the destination management set up across all major destinations, to find the best organisational solution and partner to work with in each destination to meet our operational and service needs”.
When asked about the structure of the new company, Asian Trails CEO, Laurent Kuenzle, said: “The control of the company will be under a Thomas Cook Group appointed manager who will sit at the administrative headquarters in Bangkok which is a separate office from Asian Trails. Also the operation hub in Phuket will be a separate office. It is a completely separate company from Asian Trails. Asian Trails will sit on the board together with Thomas Cook Group appointed officials. The company will have its own reservations, operations, contracting, finance, managers and staff. I can’t disclose the number of staff at the moment.”
Thomas Cook Group isn’t the only large tour operator to establish its own in-destination agencies. Germany’s REWE Group which owns DerTour, Meier’s Weltreisen and Kuoni Switzerland, has its Asian network, Go Vacation, which is represented in Thailand, Indonesia, Sri Lanka and Vietnam.