Adapt or Die: A Lesson to Take from Airbnb

“How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

The dialogue above is from Ernest Hemingway’s 1926 novel, The Sun Also Rises.

Which brings me to Thomas Cook…

As you might’ve heard, the revered 178-year-old icon of the travel industry just went bust.

And it’s causing travel chaos around the world.

An estimated 600,000 Thomas Cook customers are stranded.

The UK civil aviation authority has had to implement ‘Operation Matterhorn’ to repatriate 150,000 UK citizens back to Britain.

It’s the largest operation since the Second World War.

Other countries will have to step in to assist their own compatriots.

And the effects will be felt well after the tourists are safely home.

Thomas Cook is one of the biggest travel agencies in the UK and has 22,000 staff worldwide. Real people that are now out of a job.

So, what went wrong?

It’s actually a familiar tale these days…

As is usually the case, it was the banks that finally called time…

A £200 million debt was due and Thomas Cook — despite some last-minute wheeling and dealing with China’s Fosun — couldn’t raise the funds.

They even made a last-minute request for a government bailout. A request which was rightfully denied.

But this moment was just the climax of a longer story.

To work out what really happened here, let me show you an email from all the way back in 2007…

Download now: Three ASX fintech stocks taking on the banks (and winning)

What really happened to Thomas Cook Group

Check this out:


Money Morning

Source: Twitter

[Click to open in a new window]

It’s one of the co-founders of Airbnb showing an email he sent to his business partner with the idea to open a bed and breakfast.

No one knew it back then, but it was the birth of a new travel icon.

It’s funny how these things play out…

Just as the original travel pioneer, Thomas Cook, goes out of business, a new travel icon, Airbnb, is preparing to go public.

According to recent reports, the company was last valued at US$31 billion and aims to list on the stock exchange in 2020.

Now Airbnb isn’t solely responsible for Thomas Cook’s demise.

It’s just one more nail in the coffin. Part of a larger story that has been unfolding over the past two decades.

The internet opened up the travel industry to huge competition, more flexible travel and a wider range of customer options.

The days of the ‘package holiday’ — the area Thomas Cook excelled in — have long been numbered.

Companies like Airbnb merely tapped into this changing behaviour at the right time.

After all bed and breakfasts aren’t a new idea.

But the idea of integrating it into a super flexible website, just when the smartphone revolution took off, is what gave Airbnb its massive growth curve.

While Thomas Cook died a slow death, Airbnb grew rapidly and cemented itself as part of the new cultural zeitgeist.

Today, they make over US$1 billion in revenue a quarter and have seven million listings in more than 100,000 cities throughout the world.

For a new generation of younger travellers, they single-handedly reinvented the concept of holidaying.

Much like Thomas Cook did in 1841 when he organised a one-day rail trip for members of his local community.

The Airbnb of banking

This story isn’t unique.

In fact, it’s quite a common one.

A new technology comes along and mixes things up. New business models spring up, old business models are torn down…the flux and change of capitalism does its Darwinian job.

Even for Thomas Cook, it was also a new technology — the birth of the UK railway network — that spurred his original idea.

The idea then takes on a life of its own and grows exponentially if it captures the public imagination.

But these things happen slowly to begin with.

So slowly, some people can’t see what’s happening before their very eyes. Some dismiss the opportunity as hype.

Until we reach a tipping point and things change overnight…

We’re seeing the same story happening today in banking.

Smartphones and the internet are part of it. Cryptocurrencies and blockchain technology are part of it.

And a new generation of younger customers eager for better banking models are driving it.

We’ll see the ‘Airbnbs’ of the banking world rise. We’re already seeing it in Europe and the UK.

Change is coming to Australia soon too.

The only question is: who can adapt in time?

And to be clear, I don’t expect any of them to go bust tomorrow.

But at some point, in the next few years (or sooner) we’ll get a ‘shock’ downgrade. A profit warning from a major bank.

Or some other trigger point, that’s alerting you to the fact the tipping point is here.

But in reality, the writing will have been on the wall for a long time.

Like Kodak, like Pan Am, like Bear Stearns and now Thomas Cook…the end will be swift for those that can’t adapt.

Good investing,

Ryan Dinse
Editor, Money Morning

PS: Bank Busters! Three Aussie tech plays outsmarting the ‘big four’ banks. Click here to find out more.


Ryan Dinse is an Editor at Money Morning. He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle. Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.  


Leave a Reply

Your email address will not be published. Required fields are marked *

Money Morning Australia