Online travel mergers and acquisitions soar

14th Feb 2001

The online travel consolidation train is running full speed ahead. Distribution Systems (GDS) buying online agencies and B2B technology companies, and leading online travel agencies buying smaller competitors.
The effects of these deals are clear—the top five online travel services represent 57% of the entire online travel market, according to PhoCusWright data. The rate of consolidation should increase in 2001 as small companies find it difficult to compete in this expensive marketplace, financing opportunities dwindle and market leaders get even more entrenched. The largest of all deals was Sabre’s October acquisition of
for $757 million. That transaction solidly positioned Sabre as the leading provider of business-to-business online travel services. Before being acquired, was involved in its own M&A activity. It purchased AllMeetings Corp., a provider of online corporate travel and meeting management solutions, in July for $25 million. The month prior, bought Automated Travel Systems, an Internet low fare search system. was not Sabre’s only online travel deal. In August, Sabre acquired Gradient Solutions, a Dublin, Ireland-based travel technology company that complements Gradient’s competitor, Datalex, had purchased Sight and Sound for $40 million to shore up its booking engine technology. To strengthen its position in the Web-based corporate travel market, Datalex also acquired 50% of Yatra, which provides a direct-connect solution for corporate travel, for $11 million. Then, to further compete with the Sabre/Gradient combination, Datalex teamed up with another leading GDS, Worldspan, which took a small equity position in Datalex for $10 million in September.
At least two other deals were valued at over $250 million; both were acquisitions of online travel agencies. spent $286.2 million to “merge” with Preview Travel, the third largest online travel agency, to form the market leader. The price included Preview Travel stock as well as the value of the vested options of Preview Travel assumed by and other costs directly related to the merger. That payment seems reasonable considering that just one month prior, Galileo spent close to the same amount—$269 million—to acquire 80% of the seventh largest online travel agency— (Galileo had purchased 20% in in April 1999.)
Other online travel agencies acquired during the year were by Expedia for $103 million, by Amadeus and Terra Lycos (55% stake), and by Hotel Reservation’s Network for $47.4 million. In January 2001, merged with Aviation Group Inc. to form two separate public companies, Travelbyus Inc. and Ltd. Two European online agencies changed hands: the French Degriftour Group was bought by for $88.4 million and the Swedish was purchased by
Consolidation in the adventure travel industry became reality: there were three major transactions in the year, including Unexplored’s acquisition of Adventureseek in November. That leaves, Gorp, and iExplore as leading independent adventure travel sites (National Geographic took a 30% stake in iExplore in August). All four leading GDS made at least one online travel deal in the year; besides those mentioned, Amadeus also acquired in a $90 million deal.
There are few independent online travel agencies, since is majority owned by Sabre, Expedia by Microsoft, by Amadeus/Terra Lycos and by Galileo. is 100% owned by Rosenbluth.
Of those that are independent, is the most vulnerable. Its flagging stock price makes it an easy target—its value is millions of customers buying more than $1 billion in online travel using a unique demand-driven system. It would be a great asset for a travel agency to own (don’t plan on it shutting down and going away).
Also look for further consolidation in the adventure travel market where the three remaining leaders struggle to build transactions in a burgeoning, but overcrowded, market niche.
Discount hotel leader Hotel Reservations Network will need to become more aggressive if it wants to become a full service online travel agency. The deal was a start, but certainly not enough to significantly expand HRN’s air, vacation and car rental business. HRN would be perfect a fit for a larger travel agency; it already has a partnership deal with
Of course, one can only speculate on future transactions. But a look at the previous year’s deals does show a certain natural progression that is likely to continue into 2001.



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