Last year was astronomical for acquisitions in the travel industry.
And, this year is already shaping up to match, if not rival, 2017’s list of companies choosing to shack up.
We saw Flight Centre gobble up hotel management firms, global agencies and Sydney-based Travel Partners – hell, even OTA rival Webjet got in on the fun!
And then just as the year was wrapping up, HelloWorld reveals its mega-deal with Magellan.
HelloWorld alone completed four acquisitions in its three divisions of leisure travel, corporate travel and wholesaling, including cruise data manager the Cruise Factory, wholesaler Seven Seas Cruising, home-based travel agency MTA and Magellan Travel Group.
Not to mention their most recent acquisition of web-based flight booking operator Flight Systems, just last week.
To find out more about what this increasing consolidation of the market means for the industry as a whole we spoke to Managing Director of Virtuoso Asia Pacific Michael Londregan.
Londregan gave us a rundown of what acquisitions mean in the travel industry.
“There are two real reasons for acquisitions, you’re either trying to gain a competitive edge because it rounds out your business or gain a competitive edge in the hope that you can do something more powerful in the market,” he told us.
“I think what we’re seeing at the moment, is a little bit of both.”
“We’re seeing travel companies buying other companies they would traditionally partner with to gain better control.”
“We’re also seeing some acquisition around buying more to try and corner the market or manipulate the market a little bit.”
“These sort of developments are really popular and worth discussing, is it an advantage to the customer, or an advantage to the supplier, where does the benefit to this acquisition go?”
According to Londregan, the second type of acquisitions, where someone is trying to corner the market is good news for independent, niche operators like Virtuoso.
“Any time the market gets put in bigger bunches, it’s a really good sign for the niche operators because what that means for us is they [the big players] won’t be able to focus on the niches.”
“They’re all working on fighting with each other so its glory days for niche operators who are really good at focusing on one thing.”
“Whenever anyone says ‘we’ve got it all’ it’s a good opportunity for anyone with a niche to capitalize.”
He likens market consolidation in travel to department stores in shopping malls.
“That’s why we go to big shopping malls. You see the big players, the Myers, the K-marts but you also have speciality shops who have specialist staff, product range and knowledge.”
“It allows them to have a value proposition that’s actually more powerful in a consolidated world than in a fragmented world.”
Londregan told us the increase in acquisitions is not bad news at all because it gives niche players a chance to prosper.
“Whether you’re a specialist in Indochina or diving or adventure touring, it’s an opportunity to actually go out and speak to specific people about specific value propositions instead of wasting energy saying ‘we have everything for everyone’,” he said.
“The good news is no matter what happens in the marketplace, the barriers to entry are such that the niche players flourish.”
