Thomson float heralds new era

In a few months time, the Thomson Travel Group is expected to make a momentous move. It will, conditions permitting, float itself on the UK stock exchange.

So what? you say; companies do it all the time. But Thomson is no ordinary company. Its size and importance within the travel sector give it a commanding position. Many in the industry believe that if Thomson changes its ways, the rest of the industry will have to follow suit. And change is precisely what will be forced upon Thomson if it submits to City disciplines.

Thomson, and particularly its travel operating arm Thomson Holidays, has always liked to portray itself as a sophisticated brand-led company struggling in a Neanderthal price-led environment. This image is not altogether congruent with the reality. True, it has – unlike many of its boom-and-bust rivals over the years – developed an admirable reputation for sound management and product consistency. It has also managed to attract capable and imaginative marketers: Shaun Powell is only the latest in an honorable roll-call.

But when it comes to price-cutting – the bane of long-term brand building in this volatile market – Thomson is more guilty than its competitors. Faced with the least threat, the dominant market leader has resorted to a swift, ruthless defence of its share, whatever the havoc it causes to margins. Its security has been its private status, protected by the financial indulgence of a powerful Canadian parent company.

The thinking (not altogether misguided) has been that whatever’s bad for Thomson is still worse for the rest of the industry. This is not a tactic which will find favour with shareholders of a public company, who not unreasonably expect a consistent return on their investment.

Not that Thomson need worry unduly: a successful flotation should, after all, bring benefits which far outweigh any constraints. Among them, according to City sources, will be a 200m war-chest to fund expansion into new areas. Expect to see Thomson moving vigorously into new media and reinforcing its forays into direct marketing and car hire.

But the biggest challenge will be to instill more loyalty in its customers, who for years now have been programmed to seek out price over quality. Only a massive and sustained investment in brand-building will achieve this aim.

Whether new money will indeed break Thomson of old habits is anyone’s guess. The rest of the industry will be fervently praying it does.

News Analysis, page 23

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