Who’s Who in Travel: the Most Comprehensive Analysis of M&A in 2018
Most founders have a singular vision for how the exit will play out. Whether the high-profile IPO or a measured buyout, this vision propels entrepreneurs forward. After all, the pursuit of a windfall is a common trait of most entrepreneurs, who want to build a company that both impacts the world and creates economic value.
Each exit reveals a story, both of the company itself and the wider industry it plays in. We spent some time diving into the M&A pool for 2018 to see what stories were told with this year’s biggest deals — and what it all means for travel in the year ahead.
Mergers and acquisitions, in general, were on record pace in the first half of 2018, hitting $2.5 trillion in transactions and outpacing the previous record set in 2007. The values of deals over $10 billion also reached record levels, with a total of $950.43 billion coming from 36 deals over that threshold.
Caption: Graphic from New York Times Dealbook.
Travel didn’t see any $10 billion deals this year, but there were some significant movements for the industry. In a sector-by-sector breakdown of 2018’s significant mergers and acquisitions, we can identify wider industry trends, offering shades of hope — and possibly despair — for startup founders everywhere.
Tours & Activities
The tours and activities/in-destination sector was the standout of 2018. The race to connect the final frontier of offline travel resulted in some major purchases: TripAdvisor snapped up Bokun, only one day after Booking Holdings announced its acquisition of FareHarbor. Later in the year, TUI Group revealed its purchase of Musement.
Within a few short months, the landscape of in-destination connectivity was dramatically reshaped. When covering the Musement deal, Skift highlighted the push towards eliminating fragmentation, saying, “The tours, activities, and transfers market remains fragmented and is one of the last remaining “offline” travel markets. TUI is one of a number of players aiming to consolidate and connect up the segment.”
Part of the driver for these acquisitions is that OTAs and metasearch players seek to become software partners rather than soley demand channels. Now, these companies can offer inventory management, pricing, and operations technologies to tour operators, in addition to providing booking demand.
Takeaways for founders: Consolidation is happening quickly. New startups in the tours & activities space must solve real problems. The companies that were recently acquired had done a lot of legwork as far as on-boarding supply. There might not be much room left to run when it comes to startups focused on supply — the most appealing acquisition targets will provide technology to T&A businesses. Fair warning: growing an in-destination business requires a lot of traditional sales work to build market share.
Travel Agencies (corporate/leisure)
Offline. Offline travel agencies continue to consolidate, showing surprising resilience to the shift to online. First, Travel Leaders Group purchased Scotland’s Barrhead Travel Group and its 900 employees and 75 stores. Later in the year, Apple Leisure Group and Mark Travel merged to consolidate buying power and offer travel agents more lucrative commission opportunities, said Apple Leisure Group’s Zozaya.
Online. While online travel agencies focused more of their capital on the in-destination segment (see above), there was one major purchase: HotelsCombined sold to Booking Holdings for an estimated $140 million. In a bid to grow share in the Asia Pacific region, the acquisition will be folded into Kayak. Metasearch clearly still has room to run.
Corporate. The big story in the corporate travel segment was the estimated $575 million spent by American Express Global Business Travel on UK-based Hogg Robinson Group. Of note is that the bid was unsolicited, per a note to shareholders.
Takeaways for founders: Consolidation continues — but only for those with the healthiest P&Ls. Travel agencies live and die by customer acquisition cost. If you can manage to acquire customers at a reasonable cost and keep those customers coming back, there might be an acquisition down the line. Otherwise, It continues to be challenging to compete against the biggest offline and online travel agencies.
Hotels and Vacation Rentals
The major deal of the year was the $1.95 billion purchase of La Quinta by Wyndham Worldwide. The deal signifies the staying power of the mid-scale segment, and brings Wyndham’s brand count to 21, with 9,000 hotels and 75 countries.
Another headline-grabbing deal was Hyatt’s purchase of Two Roads Hospitality for $480 million, which adds 85 properties to Hyatt’s existing portfolio of 750 hotels. As Hyatt folds Two Roads’ lifestyle brands into its own, the trend is clear: lifestyle brands still command a premium in today’s hyper-branded hotel industry.
One analysis points to wellness and luxury trends, saying the deal “not only gives the company more scale but also complements its acquisitions in the wellness space and its efforts to appeal to high-end travelers.”
AccorHotels was especially active in 2018. A $110 million deal joined with Atton Hoteles’ 11 properties in South America. Another major deal was the €438 million paid for Movenpick Resorts, which complemented a much-smaller 85% investment in 21c Museum Hotels. Accor is focused on growing inventory (Movenpick), as well as expanding its boutique brand cachet by adding 21c to its MGallery collection of independent hotels. AccorHotels continues to prioritize cachet, spending $319 million on half of New York-based lifestyle hospitality company SBE to gain a foothold in prized North American cities like Vegas, Miami, and Los Angeles.
On the short term rental front, vacation rental network RedAwning acquired Leavetown Vacations, signaling a trend of platforms pushing into specialized technology to better leverage the benefits of scale. Leavetown focused on solutions for multi-unit properties while RedAwning is mostly single-family.
Takeaways for founders: To expand hotel footprints quickly, incumbents are looking for smaller brands with stellar reputations. Focus energy on efficient operations and a well-reviewed guest experience. As the vacation rental industry matures, specialized technology solutions garner more attention.
Amadeus dominated 2018 with its $1.5 billion megadeal for TravelClick. The addition of TravelClick’s business intelligence service indicates Amadeus’ efforts to grow its hospitality arm that sells software and related services to hotels. The deal also doubles the number of properties served by Amadeus Hospitality software, expanding the potential pipeline for its next-generation software, said Sundeep Chanana of Horatio Partners in comments to Skift:
“Their property reach is unmatched and potentially gives Amadeus an install base across which to hopefully deploy the productized version of its custom-built IHG guest reservation system.”
On a smaller scale, there was the merger of enterprise software companies Intelity and Keypr to better serve hospitality clients with more rich features, as well as RateGain buying DHISCO in a play to consolidate distribution channels into a single source.
Takeaways for founders: The big players are always looking for acquisitions that include a client base that is underserved by the acquiring company. Carve out a niche, serve it well, and prepare for a battle. If up against an incumbent, runway is your friend — raise enough capital to mount a vigorous campaign on many fronts.
The two dominant players in travel media continue to consolidate control. The most notable of the year were Skift’s purchase of Airline Weekly and Phocuswire’s acquisition of tnooz. One brand will remain (Airline Weekly) and the other will be retired (tnooz).
Consolidation in trade media often favors funded companies; fewer outlets means fewer reporters and fewer organic opportunities for coverage. At the same time, the consolidation of readership makes organic coverage more valuable. So brands that can supplement paid advertising with earned media efforts that don’t rely on a third-party’s audience, such as gated content and blog articles, will succeed.
Takeaways for founders: Fewer independent channels can mean fewer opportunities for coverage and more “pay to play” initiatives, such as sponsored content. Consider spending more time developing relationships with journalists; the trend of fewer journalists means it’s harder to get their attention.
Did we miss any significant acquisitions of 2018? Share your feedback in the comments or by tweeting us @VoyagerHQ!