The tour and travel industry’s largest bedbank, Hotelbeds, has announced that it is acquiring GTA, and major consolidation within the bedbank segment of the travel and tourism industry has ended for a while. The Hotelbeds announcement last week that it is acquiring the second largest bedbank (GTA) came just two months after it announced that it is also buying the third largest (Tourico Holidays).
A source inside Hotelbeds told the Inbound Report that while GTA, Hotelbeds and Tourico are merging, the Tourico Holidays brand would remain intact at least for the foreseeable future as the new-and-larger company seeks to take advantage of the pre-bought room blocks Tourico has contracted for in many major cities, as well as the latter’s technology prowess.
The rationale for the merger was a power struggle on two fronts: first, bedbanks and hotels on the buying side, where leverage has been undermined due to the consolidation last September of Starwood and Marriott chains; and, second, on the selling front with the two online travel agencies, Expedia and Booking.com, leading the front.
A Timeline: Last week’s transaction has a history that had its genesis in the inability of the previous owners of GTA (it is more than 40 years old) to fold it into their operations. Travelport, headquartered in the UK, sold GTA to Zurich-based Kuoni in 2011 but Kuoni, which was well behind the curve in adapting to new technology and still reeling from the wake of the Great Recession of 2008-09, could never configure it into its system, which included national Kuoni brands in Europe and India.
As Kuoni began selling off components for needed cash and to cover losses, TUI, Europe’s largest travel company, began conducting a strategic review of its company, in anticipation of its merger with parent company TUI AG, which came about in December 2014. Within a year, TUI announced that it was prepared to sell Hotelbeds, which is headquartered in Palma de Mallorca, Spain. Following is brief timetable of the key actions that led to last week’s acquisition.
What it Could Mean for the Industry: The big question to be answered going forward is: What will the impact of bed bank consolidation on the wholesale travel industry? For starters, it means the following:
1. Hundreds of people all over the world will become redundant and probably lose their jobs.
2. Some of the more entrepreneurial ones will use their experience and contacts to open new receptive style companies in their markets.
3. In some ways, we are going back to the 1990s era, with a preponderance of traditional receptive tour operators selling mostly service and niche tour group programs.
4. Destinations will now have only one high volume bed bank instead of three competing for hotel
contracts in their markets.
5. No one knows what the management team will look like, although Joan Vilà, the current Hotelbeds CEO, remained in place after Cinven Capital Management and the Canada Pension Plan Investment Board acquired Hotelbeds from TUI.
6. Tourico has invested heavily in its Tourism Academy, which has schooled and placed some 300 graduates of the program in Tourico jobs. It has become founder Uri Argov‘s pet project. Will this be spun off into a separate project or will it folded into Hotelbeds?
One More Thing: The move coincides with the final stage of the implementation of a single, global TIU brand. Along with divesting itself of Hotelbeds last year, TUI recently (February 2017) sold Travelopia, its portfolio of 50 specialty operator brands—some of them quite well known—and is supposed to fold all remaining independent brands (such as Thomson and First Choice in the UK) into the single TUI brand. TUI has made it clear that it wants to be the global tour operator brand.
Eric Thomas says
This is not new for the travel industry. We have seen the purchase and consolidation of major travel brands only to find that, while the market is growing overall the technology is making the field smaller and smaller. In reading the hopes and aspirations of the new management team to “integrate”, “consolidate” and “grow” the existing business. I am reminded of a similar forecast some time ago.
“Pedro de Esteban, President of Orizonia and Managing Director of The Carlyle Group, explained that, “The integration of the three companies will improve synergies and increase profitability, thus creating one of the European giants of online travel. We are very happy about continuing to contribute toward Orizonia’s growth as one of the key operators in the Spanish tourist market.”
The timing is obviously different, but the complexities of integrating three “distinctly” different cultures into one finely tuned machine, is unobtainable. We have seen this at all levels of the industry, airlines, hotels, and agencies. Once the market becomes over bloated and businesses look to sell off “strategic” sectors and others companies purchase and combine “synergistic” partner businesses only to effect efficiencies, that in the end, result in cuts to people. This seems to look like a business purchase + a market purchase + a technology purchase and the real trick will be to integrate the three sans existing management.