Going beyond plain vanilla ticketing
Since 2009, mergers and acquisitions (M&As) in the leisure travel market have been recovering. As the travel industry looks for ways to survive, ‘buy or be bought’ is becoming the rally cry. The credit crunch, leisure travel demand and economic uncertaint
Traditional operators making strategic acquisitions
Highlighting the importance of M&As in the travel scenario in India, Madhavan
Menon, Managing Director, Thomas Cook (India), says, “M&As in the travel space are picking pace more than ever, and this may have a lot to do with the margins in air-ticketing witnessing tremendous pressure. Travel companies are increasingly focussing on nonair revenue, resulting in acquisitions in hotels and the holiday business. The relative sluggishness has created a pent-up demand for M&A activity, which is likely to trigger more and bigger deals in the coming years. It is also the fact that creating a market-leading business in this sector organically is becoming more difficult and expensive, and so companies are looking at M&A activity. Companies are seeking to evolve their businesses from a low margin to high margin or consolidate their presence in the market. This could be done by enhancing service offerings to customers.”
M&As definitely enhance the market. They inevitably result in an amplification of services; ancillary services also end up benefiting immensely. There is a growth of players offering complete travel solutions, end-to-end products that are both credible and convenient. The consolidation of services will improve the quality of products as well, making travel increasingly stress-free, he adds.
Talking about the merger deal of Thomas Cook (India) with Sterling Holiday Resorts
M&As result in amplification of services; there is a growth of players offering complete travel solutions Private Equity firms are using acquisitions to leverage consumer demand
(India), which is expected to create India’s largest holiday company, Menon confirms, “The decision to invest in Sterling Hotels Resorts was primarily driven by the fact that they have a robust and attractive business model (Timeshare + FIT). Sterling Holidays are a manufacturer of services. Thomas Cook India is a multi-service provider in the travel space and so, there are synergy opportunities across the domestic holiday space, as well as the incentives business.” With the incredible Indian hungry for travel and a boom in domestic travel, Sterling’s pan India resorts offer a readymade solution for our diversity of travel consumers. “Today, the Thomas Cook India Group (Thomas Cook India, Ikya and Sterling Holiday Resorts) has a combined strength of more than 9,000 employees. Hence, from a shared services platform, we see a whole host of synergies that wait to be exploited, be they in terms of facilities management, HR services, food services, sharing of office space, etc. Going forward, the company will capitalise on Sterling Holidays Resort’s existing suite of resorts for its domestic and MICE consumer base.
Integrating travel search and travel content with distribution
Rajesh Magow, CoFounder and CEO-India, MakeMyTrip, feels India will definitely see a lot of action in the coming years with allied industries (such as aviation) in need of investments and international investors looking for potential markets offering better returns. “India is a key focus market for many global travel companies
both for the inbound and outbound potential. While major multinationals, travel suppliers, airlines and hoteliers are focussing on India, there are also thousands of small unorganised travel players,” he affirms. PE firms are using acquisitions to leverage consumer demand. Also, the Indian travel ecosystem throws up interesting opportunities for investors – such as the large market for online bus-reservations and subsequent investment by global funds into niche players operating in this area. Operators with strong brands exposed to favourable demographic trends, high levels of customer loyalty and an exclusive or distinctive product that is difficult to replicate will make the most preferred targets, he adds.
Regarding the new trend of M&A transactions involving online providers, he opines, “The potential growth in underpenetrated online travel markets and the importance of online as a sales channel to traditional operators is also driving investment through M&As. With consumers increasingly turning to the internet to satisfy their travel needs, online operators are attempting to increase their market share.”
Talking about the OTA’s acquisition of Amsterdambased EasyToBook.com (ETB) group of companies to enhance its presence in hotel bookings, he comments, “The acquisition of
EasyToBook.com will add momentum to our stated objective of growing our hotel and online holidays business. Like us, EasyToBook has a strong focus on technology and innovation. Being a pure-play hotel site, it brings a strong domain expertise to the table. ETB’s rich inventory of online hotel reservations in Europe, North
Low airline commissions have made many travel agents question their survival
America and other key global travel destinations will enable us to enhance the hotel offerings for our Indian customers travelling to Europe and North America. Furthermore, as we expand our presence beyond the South-East Asia region, we look forward to welcoming inbound customers to our hotels partners in Asia.”
Demand for specialist travel is leading to acquisitions
According to Viren
Sinha, Chairman & Managing Director, Balmer Lawrie, the travel industry has seen more changes in the last one year than what it had to go through in a whole decade. “While most airlines are bleeding, air travel - both business and holidays – has shown double-digit growth year- on- year. In the face of this, diminishing commissions from the airlines and the weekly payment has made many travel agents, who offer plain vanilla ticketing, question their own survival since their corporate clients pay anywhere between 30- 90 days,” he points out. Most ticketing agents will now require huge cash reserves just to manage their cash flows. Obviously this will lead to a high level of attrition in the travel trade and would spur consolidation in the industry, he adds.
Talking about how the new takeover of Vacations Exotica going to benefit the company, he reveals, “Balmer Lawrie has a huge customer base in the corporate travel sector. It has a presence in more than 88 locations. We took over the premier holiday brand Vacations Exotica along with its people and business with the objective of strengthening our foothold in the Holiday sector. This takeover will help Balmer Lawrie to expand its value proposition and offer end-to-end services in the Tours and MICE segment as Vacations Exotica brings with it a multi-talented work force and a wide range of holiday packages. The synergy between the two will make it a very potent force.” Going forward, the company is planning to merge Tours & Travel business unit with Vacations Exotica. “We will be actively pushing growth in the leisure market and also the inbound tourism business. We have our own travel portal, www.balmerlawrietravel.com, and you will find that the prices therein are among the best available,” he states.