The travel management world was shaken up, or shaken out, during the first five months of the year, with high-profile acquisitions and hundreds of millions invested by private equity firms.
There are upsides to these mega-deals, but some travel managers are jittery, spooked by the amount of power that’s concentrated in the hands of just a few players.
American Express Global Business Travel got the ball rolling in January, buying high-end agency Ovation Travel, while Spain’s TravelPerk bought California-based Nextravel.
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In March, Pana was acquired by expense management company Coupa, and Roadmap by Emburse. The following month, TravelPerk announced it had raised $160 million.
The pool shrunk further in May, with Amex GBT buying Egencia and TripActions making a swoop for Reed & Mackay (probably using some of the $155 million it raised earlier in the year).
The list goes on.
The market’s not really been rocked this much since Amex GBT bought HRG in 2018. Then the pandemic arrived, and now we are seeing the results of months of planning and strategizing during the downtime.
“Usually in a recession, you either save your way out of a recession, let go of staff, stop your capex investments, and you lock everything up,” said Mohamad Halawi, global travel director at perfume company Firmenich. “Or you invest your way out, putting more into research and development, and buying someone else. So when you’re out (of the recession), you’re much stronger than when you went in.”
The latter tactic is being embraced by the larger travel agencies, with their bigger backers, and balance sheets.
The travel industry isn’t unique, with record deals reported across many sectors.
“Private equity firms are just becoming increasingly aggressive and doing atypical or unnatural things with valuations, because they get very excited about a particular asset or sector,” Jordan Klein, managing director of investment banking at Baird, told Skift.
“Globally, the number of unicorns and businesses with billion-dollar valuations seems to go up every day … it comes down to the investors, and investors are willing to put capital in at certain valuations. The market will speak,” he added.
Klein, who advised Inflexion on its sale of Reed & Mackay, and Ovation Travel on its sale to Amex GBT, said these deals reflect buyers trying to bolster capabilities, geographic presence, technology, or going after a particular end-market.
But can too many deals stifle a market?
“It will cause issues for competition. Amex GBT is too big right now,” said Firmenich’s Halawi, speaking at an Arabian Travel Market virtual event on Wednesday.
“As a reaction, its competition will look to buy somebody else, to make the market even more concentrated. Having fewer agencies isn’t going to be good, from my perspective,” he added.
One travel manager, based in the Netherlands, said he wondered if it would make sense for CWT and BCD Travel to join forces to take on the newly expanded agencies.
“Amex GBT is already by far the dominant market player, and with HRG already big enough in my view. Adding Egencia creates a travel management company you cannot go around,” added another travel manager, based in Germany, who also wished to remain anonymous.
Meanwhile, another global travel buyer was concerned that overnight, her own travel agency suddenly becomes a more likely takeover target.
“We actively stayed away from the huge global agencies, as our travel is mainly domestic within its three territories, and we felt we would get a much better service from a ‘local’ agency,” she said, preferring to withhold her name.
“In fact, we moved away from Amex GBT in the U.S. But, I can only see this driving up fees and reducing service if the likes of Amex GBT roll out their own way of doing business to the companies they acquire. Our pool of smaller agencies to choose from is getting smaller — we are with Capita Travel and Events, which is up for sale, and if they were bought by one of the huge globals it would be a concern,” she added.
Time for Innovation
At the same time, there are positives. Referring to Amex GBT and Egencia, Baird’s Klein thinks the fit makes sense, and ultimately the customers stand to win
“There’s opportunity for Amex GBT to access a lot of (Expedia’s) B2B and other hotel and inventory travel rates that otherwise they wouldn’t have got exposure to,” he said.
This particular deal, which is expected to close in nine to 12 months, involves Expedia taking a 14 percent stake in Amex GBT, valued at around $750 million.
“We see benefits from these (acquisitions), with the innovation, technology and knowledge base coming out of that, and that’s being passed on to us as a client,” said Anthony Baldwin, EMEIA emerging markets travel, meetings and events leader at EY,” also speaking at the Arabian Travel Market event, which was organized by the Global Business Travel Association.
However, in the Middle East and North Africa region, he said most travel management companies operate on a partner network with larger agencies. “What impact will this have on the network, and the ability to give a consistent approach globally, with these deals? My feeling is that it will improve. It’s one to watch for sure,” Baldwin added.
Meanwhile, with growing numbers of corporate travel tech startups diving in to disrupt the sector, perhaps companies shouldn’t fret too much.
“I don’t think competition is stifled,” said Judy Emma, former senior global travel manager at Twitter. “I’m aware of all the startups in the travel and expense space, and it will be interesting to see what their impact will be.”
But she added that travel management companies need to focus on “favorable, creative and transparent pricing models” for a mutually beneficial partnership with their customers.
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