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Is Tour Operator Cox & Kings the Next to Fall?

Raini Hamdi, Skift
Is Tour Operator Cox & Kings the Next to Fall?

Concerns are mounting over whether Cox & Kings is next on the chopping block following Thomas Cook Group’s demise earlier this week.

The India-based tour operator shuttered its Australian/New Zealand operations last week and received a vote of no confidence from Virtuoso after it cut ties to Cox & Kings in the U.S. and Dubai citing “continuing financial problems with the operator’s affiliate in India.”

The Australian/New Zealand business — Tempo Holidays and Bentours — announced on September 19 that it was closing following advice from parent Cox & Kings India that its negotiations with “investors/buyers with heavy interest” had failed to materialize.

Tempo and Bentours had been wholesalers within Australia and New Zealand for more than 30 years. Tempo prided itself as “tailor-made specialists” offering a huge range of hotels, villas, walking/cycling holidays, coach tours, and cruises, while Bentours specialized in tours to Scandinavia, Nordics, Baltics, and Russia.

Around 90 staff members in Australia and New Zealand lost their jobs. 

The closure of the Australian/New Zealand operations followed the shutdown in August of Cox & Kings’ outfit in the UK, the Malvern Group, which operated LateRooms.com and Super Break, as the company began stripping off assets to pay off debts and stay afloat.

Cox & Kings is grappling with a debt load of $500 million, $100 million of which is short-term debt due soon.

To cut debt, it was also exploring a potential sale of its European hybrid hotel/hostel chain, Meininger, but an informed source told Skift this was “not happening.”

In July, IATA suspended its ability to sell airline tickets on credit.

In a separate blow, luxury travel network Virtuoso said as part of its contract compliance review, it had asked both Cox & Kings affiliates in the U.S. and Dubai to provide it with financial assurances. “However, with continued negative financial reports from their India operations, our members began to lose confidence, which resulted in their termination [on September 20],” said a Virtuoso statement.

“We have shared the news with our membership and recommend that members reconfirm reservations if they have bookings with either company and contact the individual hotels being used in the tours to confirm details,” the statement added.

This is despite Cox & Kings U.S. having issued a statement in August saying it is a direct subsidiary of Cox & Kings UK, an independent company, and both were operating as normal.

What Happened 

MakeMyTrip, Thomas Cook India, and Abercrombie & Kent are among names speculated to be considering a Cox & Kings acquisition, although sources told Skift that MakeMyTrip was never in the game. Thomas Cook India is an unlikely suitor, as it has grown big on its own and it wouldn’t make sense for it to acquire a company that runs an identical business. Both MakeMyTrip Group CEO Deep Karla, and Thomas Cook India CEO Madhavan Menon declined to comment when approached.

Abercrombie & Kent’s co-chairmen Geoffrey Kent and Manfredi Lefebvre d’Ovidio could not be reached for comment at press time.

Cox & Kings did not respond to Skift’s queries on what measures it was considering next.

But how does such a storied brand, with a similar lineage to Britain as Thomas Cook and which is the world’s oldest travel company (261 years compared to Cook’s 178 years), get to this sad state?

Interviews with people with knowledge of Cox & Kings traced its troubles to its purchase of Holidaybreak, a UK-based educational tours and camping company that caters to the educational tours of schools in Europe, in 2011. At a whopping £312 million ($385 million at current rate), it was the biggest overseas acquisition by an Indian travel company, and one that sent its share price south at the time as investors worried about the hefty bill the company would have to nurse.

Cox & Kings was on an acquisition spree strategy to grow the business. Other acquisitions included the East India Travel Company U.S. in 2010 for $22 million, and Laterooms Group UK in 2015 for £8.5 million ($10.5 million at current rate). The purchases were funded by debt and were said to be at a premium.

“All of it were leveraged buyouts and the company was stacking up debt while revenues were not necessarily growing as high,” said a source who spoke only on the condition of anonymity.

Murmurs began flying last year that Cox & King was delaying salaries to employees but no one really paid attention, until June this year when it started to default on payments and was called out for having a short term debt of $100 million. 

Things, as expected, went downhill from there. Banks became wary and suppliers stopped giving credit, putting a further squeeze on the company’s liquidity. 

As it stands, things are looking bleak for Cox & Kings. “We understand they have started telling incoming clients that they don’t have money to pay for hotels and aren’t able to handle them. They’ve stopped advertising completely in the Indian market. Business has come to a standstill; there are no fresh bookings,” said the source.

While being over-leveraged is deemed the main problem, there’s also the theory that some of its strategies to win customers, such as a “Fly Now Pay Later” campaign, common in India, caused a cashflow crunch. 

“They tried to finance this via their in-house bank, rather than let established normal banks with large cash reserves handle such credit arrangements. Seems they ran out of cash doing this,” observed another source.

Distinguished history

Cox & Kings is owned by its Group CEO, Peter Kerkar and his sister, Urrshila Kerkar, Liz Investments, and Anthony Good, records show. It completed a $110 million initial public offering in December 2009.

A closure of Cox and Kings would be considered by many a dreadful loss. Its history is as distinguished as it is charming. 

In 1758, it was appointed general agents to the regiment of Foot Guards in India under the command of Lord Ligonier. By 1878, it handled most British regiments posted overseas, including the Royal Cavalry, Artillery and Infantry, as well as the Royal Wagon Train, and the Household Brigade. The Royal Navy was next and in 1912, The Royal Air Force came under its wings.

Cox & Kings grew to be a premium brand in all travel-related services in the Indian subcontinent, employing more than 5,000 staff. The India operations are headquartered in Mumbai and it has fully owned offices in New Delhi, Chennai, Bangalore, Kolkata, Ahmedabad, Kochi, Hyderabad, Pune, Goa, Nagpur and Jaipur.

Aside from the UK, U.S., and Dubai, it also has worldwide offices in Japan, Russia, and Singapore, and associate offices in Germany, Italy, Spain, South Africa, Sweden, and Australia.

When companies like Thomas Cook and Cox & Kings log anniversaries by centuries, not just years, it’s easy to forget they may not be around forever.

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