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 GetThere.com
for $757 million. That transaction solidly positioned Sabre as the leading provider of business-to-business online travel services. Before being acquired, GetThere.com 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, GetThere.com bought Automated Travel Systems, an Internet low fare search system.
GetThere.com was not Sabre’s only online travel deal. In August, Sabre acquired Gradient Solutions, a Dublin, Ireland-based travel technology company that complements GetThere.com. 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. Travelocity.com 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 Travelocity.com 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—Trip.com. (Galileo had purchased 20% in Trip.com in April 1999.)
Other online travel agencies acquired during the year were Travelscape.com by Expedia for $103 million, OneTravel.com by Amadeus and Terra Lycos (55% stake), and TravelNow.com by Hotel Reservation’s Network for $47.4 million. In January 2001, Travelbyus.com merged with Aviation Group Inc. to form two separate public companies, Travelbyus Inc. and Travelbyus.com Ltd. Two European online agencies changed hands: the French Degriftour Group was bought by LastMinute.com for $88.4 million and the Swedish Travelstart.net was purchased by Tiss.com.
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 Away.com, 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 Vacation.com in a $90 million deal.
There are few independent online travel agencies, since Travelocity.com is majority owned by Sabre, Expedia by Microsoft, OneTravel.com by Amadeus/Terra Lycos and Trip.com by Galileo. Biztravel.com is 100% owned by Rosenbluth.
Of those that are independent, priceline.com 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 TravelNow.com 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 Travelocity.com.
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.