American Express Company
Prior to its acquisition by the American Express Company in 1994, Thomas Cook Travel Inc. was the third-largest travel agency in the United States. At the time of the takeover, Thomas Cook operated 500 offices across the country and sold one out of every 50 airline tickets in the United States. Staffed by more than 3,000 employees, the company had an impressive roster of business clients including Ford Motor Co., AT & T, and John Hancock Financial Services. Independently owned by Linda and David Paresky, Thomas Cook Travel licensed its name from the oldest travel agency in the world, The Thomas Cook Group Ltd., based in the United Kingdom.
Thomas Cook Is Founded in 1841
The Thomas Cook Group Ltd. was the eponymous creation of an industrious English entrepreneur. From a humble beginning chartering a train to a temperance rally in 1841, Cook expanded his business into one of the world's first full-service travel firms. After the resounding success of his first venture, Cook quickly expanded his operations, providing rail trips and making hotel reservations for customers for journeys all over the British Isles. Cook's excursions proved so popular that he began offering trips to Europe, North America, and--beginning in 1871&mdashound the world. Buoyed by these successes, Cook's company was able to open 120 travel offices in the United Kingdom and abroad by 1885, and Cook himself branched out to write guidebooks. The company also remained on the cutting edge of developments in the travel industry. Thomas Cook Ltd. began offering cruise trips as early as the mid-1870s, pioneered an early form of travelers' check, and was booking air travel by 1911, a mere eight years after the Wright Brothers made history at Kitty Hawk, North Carolina.
The company also had a long history in the American market. Just months after the Civil War ended in 1865, Cook's ran its first U.S. tour, which included stops at various battlefields. Six years later, Cook formed a partnership with an American businessman that they called Cook, Son & Jenkins. This relationship subsequently dissolved acrimoniously, but by then it had helped Cook's entrench itself in the American market. To bolster its business further, the company took a pavilion at the Centennial Celebration in Philadelphia in 1876, and later expanded its offerings to include not just traditional sightseeing trips but even travel packages for immigrants coming to the United States and Canada. By 1896, Cook's American business made travel arrangements to the Klondike for gold prospectors.
Control of the company remained with the Cook family until the late 1920s. Thomas Cook himself had died in 1892, and his son and business partner did the same eight years later. His three grandsons then ran the company until the last of them retired in 1928, at which point it was sold to a Belgian travel concern, Compagnie des Wagons-Lits et des Grands Express Europeens. When Germany occupied Belgium in World War II, the company was taken over by the German Custodian of Enemy Properties, but the British government arranged for it to be re-acquired by several railway companies at the close of the war. When the railroads were nationalized in 1948, ownership of Thomas Cook Ltd. passed to the crown as well.
Although Thomas Cook had become an institution both in the United Kingdom and the United States, the company risked losing touch with younger consumers in the 1960s. As a state-run business, Thomas Cook was unable to invest the same level of funding into its operations that its private rivals could. While other travel agencies crafted new strategies to attract more customers and increase revenue, such as purchasing airlines, Thomas Cook saw its sales flatten. As a result, the British government tentatively explored selling the travel agency.
U.S. Corporate Laws Prevent New Owner of Thomas Cook from Owning U.S. Offices
Midland Bank acquired Thomas Cook in 1974. Since U.S. banking laws prohibited any national bank--such as Midland--from owning domestic travel agencies, Midland sold Thomas Cook's U.S. operations to Dun & Bradstreet in 1975. Midland did not relinquish control of the Thomas Cook name, but Dun & Bradstreet was allowed to continue to operate the U.S. travel agencies under the Cook name through a licensing agreement. Although The Thomas Cook Group Ltd. had no equity in the American operations, it did link the agencies into its travel network. More importantly, the British branch could supply the independent American offices with travelers' checks, which represented an increasing portion of The Thomas Cook Group Ltd.'s revenues. Only American Express outperformed Cook in this segment of the travel industry.
Crimson Travel Is Founded and Flourishes
At about the same time that Dun & Bradstreet made this pivotal purchase, Crimson Travel Service--the Cambridge, Massachusetts-based travel agency that would later carry the Thomas Cook American franchise--began to expand. Founded in 1965 by the husband-and-wife duo David and Linda Paresky, Crimson quickly grew through creative marketing efforts. Graced with the same gift for travel innovation as Thomas Cook, Paresky launched a number of bold initiatives. As a competitor explained in the September 18, 1994, Boston Globe, 'Paresky saw before most of us that the masses wanted to go, and he knew where they wanted to go.' Crimson chartered several immensely popular 'Cruises to Nowhere,' that brought the luxury of a cruise vacation to middle-class consumers. In 1968 the company forged a strategic alliance with a Western-themed television show called 'Boomtown,' whereby Crimson chartered mass trips for kids (guided by Trailer, the show's host) and received ample exposure in the process. The 'Boomtown' trips were a huge success and continued through the 1990s. By 1969 Crimson had opened its third Boston-area branch office, and its leisure travel business soared. By 1987 the company reported billings of $150 million.
As Crimson saw its fortune rise, the travel industry as a whole experienced tectonic changes in the 1980s. The frenetic globalization of American business meant that corporate employees traveled more frequently and purchased a growing percentage of airline tickets. Since Crimson's revenues came mostly from vacationers, not business people, the company would risk its future profitability if it did not develop the corporate side of its operations. In 1988 Crimson purchased Heritage Travel, a rival Cambridge agency. Not only was Heritage equipped with cutting-edge computer technology, but it also ran a formidable corporate business.
Thomas Cook Changes Ownership in 1988
In 1988 Dun & Bradstreet put Thomas Cook up for sale in order to concentrate on its core marketing, credit risk, finance, and directory information divisions. Publishing magnate Robert Maxwell purchased Thomas Cook in 1989, and immediately renewed the licensing agreement with Midland to use the storied Cook name. At the time of Maxwell's acquisition, Thomas Cook was a sizable operation, generating sales of $365 million and operating 60 full-service locations and nine regional reservation centers. Many industry analysts speculated that Maxwell would quickly sell the company, since publishing was his primary concern. However, Maxwell pledged to expand Thomas Cook through a series of acquisitions that would make the franchise the leading American travel service firm.
But despite his protestations to the contrary, Maxwell sold a 50 percent stake in Thomas Cook to the Pareskys' Crimson/Heritage business in 1988. With Maxwell, the Pareskys presided over the third-largest agency in the country, with revenues topping $1.3 billion. David Paresky served as president, chairman, and chief executive of his new empire, and he moved Thomas Cook's corporate headquarters from New York City to Cambridge. The co-owners quickly turned to bolstering Thomas Cook's roster of corporate clients.
While the ownership of Thomas Cook changed hands in the United States, the keeper of the coveted license--The Thomas Cook Group Ltd.--went through its own shifts. In 1992 Midland sold its subsidiary to LTU Group, one of Germany's largest tour operators, and Westdeutsche Landesbanke, a German bank. Westdeutsche Landesbanke purchased 90 percent of The Thomas Cook Group Ltd.'s shares, while LTU Group controlled the remaining ten. The Orange Country Register was quick to point out to its readers that the sale in no way affected Thomas Cook Travel Inc. 'The company licenses the name and expects to continue doing so under the new ownership,' noted the paper.
The Pareskys Gain 100 Percent Control of Thomas Cook Travel
Although Thomas Cook Travel Inc. had no problems with the license, the company did endure some turbulent times in 1991 when Maxwell died suddenly. One of his privately held companies, Headington Holdings Limited, went into bankruptcy. Headington owned Maxwell Travel Inc., which in turn owned Maxwell's 50 percent share of Thomas Cook. A number of potential buyers hungrily eyed the stake in Thomas Cook, including Midland Bank, which had by then divested the bank that had prevented it from owning the chain in 1979. Paresky had right of first refusal, though, and in 1993 he and his wife purchased the Maxwell stake.
Even with complete control of Thomas Cook Travel, Paresky planned no major changes. 'We're continuing with the same strategy we've had before, differentiating our service through innovation and quality,' he told The Boston Globe on January 12, 1993. 'I don't think our operating philosophy will change.' 1993 sales soared to over $1.7 billion, and the company ran approximately 500 offices throughout the United States.
Paresky's efforts to bolster Thomas Cook's corporate accounts had succeeded. At the close of 1993, 84 percent of the company's sales were from businesses. Thomas Cook's list of clients was impressive. Ford Motor Co., Fidelity Investment, Hewlett-Packard, and John Hancock Mutual Life Insurance Co. all made their travel arrangements through Thomas Cook. In 1994 the company won three more substantial accounts--the British Embassy, Walsh America, and Pharmaceutical Marketing Services Inc.
Sale to American Express
Despite their success, the Pareskys approached arch-rival American Express about selling Thomas Cook. 'American Express will bring more size and more strength and more ability to invest in our people,' Paresky explained to Travel Weekly on September 15, 1994. To the Boston Globe, Paresky admitted that the cost of upgrading technology to better serve global business travelers was a factor in the decision to sell. American Express had much to gain from the purchase. Already gigantic--with over 1,700 travel offices in more than 120 nations--American Express would boost its annual sales an additional 33 percent with this new division. The acquisition also had significant prestige value. Although American Express had recently snapped up five other large agencies, the Cook deal was to be the largest takeover in the history of the travel industry.
The transaction was finalized in September 1994 with American Express paying $375 million for the company. Although they had relinquished their ownership interests, the Pareskys remained involved in the business. Both were appointed vice-presidents, and in 1995, David Paresky was reported to be 'in line' to become president of American Express Travel.
American Express also moved to acquire the corporate accounts of The Thomas Cook Group Ltd. (which represented about ten percent of the British company's total revenues). While this segment of the business was lucrative, The Group was willing to part with it to in order to concentrate on servicing leisure travelers and on its burgeoning financial services division. However, American Express was not able to obtain from The Group the rights to the venerable Thomas Cook name. The Pareskys' licensing agreement had been due to expire in 1999, and, according to the Guardian, The Thomas Cook Group Ltd. took immediate steps to secure a new licensee. As a result, all former Thomas Cook offices were to be re-christened American Express.
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