Unable to pay suppliers for trips already booked, Cox &
Kings, the Americas recently became the third global tour operator in six
months to collapse, a trifecta of failures that sparked questions last week
about whether the shutdowns were coincidence or indicated underlying problems
within the industry.
"I have to think it's coincidence," said Robert Joselyn, CEO
of the travel business advisory firm the Joselyn Consulting Group. "What's
baffling to me about what's going on is that it's happened after three or four
of the most profitable, expansive years that I have seen in the travel
Still, Joselyn said, short of a forensic accounting analysis
of Cox & Kings and the other failed operators, Thomas Cook and JG
Worldwide, it would be impossible to know if any underlying similarities
Travelsavers chief marketing officer Nicole Mazza said that
while she also sees "each of these situations as unique," the closings might be
a result of failure to keep up with a fast-changing industry.
"The closure of legacy companies Thomas Cook and Cox &
Kings, while particularly sad, does offer lessons in the necessity of being
nimble and able to address the needs of an evolving travel marketplace," Mazza
Douglas Quinby, a longtime industry analyst and co-founder
and CEO of Arival, said the failures were a "long time in the making."
"The rising pressure of self-booking online, the rise of
OTAs and [low-cost carriers] have all eaten away at the classic packaged-tour
market," Quinby said. "Some operators have adapted, but others have not. I know
there have been some closings of smaller operators in the U.S., but my sense is
these are isolated. But when the slowdown comes -- some say we're already seeing
signals -- the weak and strong will be separated."
George Morgan-Grenville, founder of U.K.-based travel agency
Red Savannah, blamed discounting for exacerbating already low profit margins.
"It's very sad when you see old, established brands like
that going under," Morgan-Grenville said. "But I think we live in an age where
the consumer is king and where there is a constant downward pressure on the
He added: "As an industry, we need to think about how to add
value and make [consumers] pay full fare rather than using discounting. As long
as we see discounting continue, we will see business failures."
Mike Estill, COO of the Western Association of Travel
Agencies, said he sees two related factors at play.
"Unbridled growth simply for growth's sake, that seems to be
the singular yardstick by which all things are measured today," he said. "I
rarely hear anyone discussing 'smart growth.' So I don’t believe we have an
intrinsic problem in the industry, but we have become a very large, complex and
dynamic ecosystem. And as the ecosystem changes, some species will adapt and thrive,
and some will become fossil fuel."
According to a confidential email obtained by Travel Weekly
last week, Cox & Kings, the Americas suspended operations this month,
saying it was unable to pay its suppliers for trips that had already been
Although the tour operator said it was in talks with an
investor interested in taking over the company, the email said travelers who
had already booked trips have just two options: Cancel and apply for a refund,
or pay local suppliers directly and apply for a refund of any deposits and
duplicate monies already paid.
The Cox & Kings collapse came less than a month after
the huge U.K. travel company Thomas Cook went under, leaving some 150,000
travelers stranded around the world, and less than six months after JG
Worldwide shuttered, leaving untold numbers of travelers holding worthless
bookings made through two of its tour operators, Revealed America and Heritage
It also came a little more than two weeks after Azamara Club
Cruises sued Cox & Kings, the Americas alleging breach of contract for
booking land excursions but failing to pay local suppliers. At about the same
time, Virtuoso removed the company from its preferred suppliers, citing the
financial woes of India-based parent Cox & Kings Ltd., which, like Thomas
Cook, has long billed itself as one of the world’s oldest travel companies.
When media reports first surfaced about Cox & Kings of
India, the U.S. affiliate insisted that its operations were fully independent
and insulated from the parent company’s financial woes.
Cox & Kings, the Americas also emphasized that "as an
active member of the U.S. Tour Operators Association (USTOA), significant customer protection is required and
carried. The business also holds supplemental insurance policies, such as
errors and omissions, which are well above industry standards and does so to
offer additional peace of mind to our clients."
The USTOA declined to comment beyond issuing a notice on
Oct. 15, which said that effective immediately, Cox & Kings, the Americas
was no longer a member. It also noted that any claims for lost monies under the
organization’s Traveler Assistance Program would only cover refunds for trips
booked before Oct. 15.
That program requires all members to post a $1 million bond
to cover lost monies in the case of a default. It's unclear, however, whether
that will be enough to cover travelers' losses should the company be unable to
In the case of Cox & Kings, the Americas, that seems
In a bankruptcy court filing earlier this year, JG
Worldwide, a much smaller company, stated that it had $10 million in debts and
no assets with which to satisfy creditors.
ASTA general counsel Peter Lobasso said, "The $1 million in
security that each USTOA active member is required to provide certainly offers
a degree of protection."
But he added: "That being said, the $1 million amount is in
the aggregate and not per traveler. This means that if a large tour operator
ceases business operations or files for bankruptcy protection, not every
affected traveler will necessarily be made whole. For that reason, among many
others, travel insurance remains important, and recommending a policy that
includes financial-default coverage is well-advised."