Parade of Consolidation hits the Activities and Attractions Sector
UK Private Equity Firm now owns Boston-based Smart Destinations, UK-based Leisure Pass Group; and the New York Pass—after earlier acquiring Big Bus Tours
Does this scenario seem familiar: a European private equity firm reaches into the travel and tourism sector to expand its portfolio and, at the same time, hasten consolidation within the travel and tourism industry’s major sectors? Here’s a quick recap:
February 2016: The sprawling Swedish private equity firm, EQT Partners buys Zurich-based Kuoni (including GTA and AlliedTPro) for $1.4 billion, later spinning off its non-core products, including destination tours, events, activities and attractions tickets.
April 2016: London-based private equity group Cinven and the Canada Pension Plan Investment Board (CPPB) purchases Hotelbeds from TUI. Hotelbeds, the industry’s largest bedbank, is also a major B2B supplier of tours, events, activities and attractions tickets/passes. (The Hotelbeds group’s Transfer and Activity Bank (TAB) is the world’s leading online distributor of transfers, tours and activities. It provides both the industry and the end consumer with a consolidated range of in-destination products worldwide. The company currently offers over 19,000 transfer routes and over 12,000 activity options in more than 650 destinations.)
February 2017: Cinven and CPPB’s Hotelbeds acquires Tourico Holidays, one of the three largest bedbanks in the world (the other two: Hotelbeds and GTA)—also one of the largest B2B supplier of events, activities and attractions tickets. Hotelbeds is now the world’s largest bedbank and, arguably, the largest supplier of tours, events, activities and attractions tickets/passes.
April 2017: Cinven and CPPB’s Hotelbeds acquires GTA. The move makes Hotelbeds the world’s largest bedbank—the only bedbank with a global reach and inventory. It also makes Hotelbeds arguably the largest B2B supplier of tours, events, activities and attractions tickets/passes.
And now: Last week the London-based Exponent Private Equity acquired three leading sightseeing attraction pass companies: Boston-based Smart Destinations, parent company of Go City Card; UK-based Leisure Pass Group; and The New York Pass. All three are B2B and B2C. The combined bands will operate as subsidiaries of a newly formed parent company that will retain the Leisure Pass Group brand name and become what it declares to be “the largest tourism attraction pass provider in the world,” which will operate in more than 30 destinations across the U.S., Europe, and the Middle East, and is projected to deliver over 12 million attraction visits worldwide. (The Leisure Pass Group was founded in 1998 as Arrival Marketing, changing its name to the Leisure Pass Group in 2001. It launched the London Pass in 1999 and the New York Pass in 2002.)
As in the case of the private equity firms that acquired Kuoni and Hotelbed, Exponent did not have much of a track record in the travel and tourism industry, except for its purchase in February 2015 of Big Bus Tours. Last October, Big Bus Tours acquired Smart Destinations, parent of the Go City Card. (The pace of acquisition is so fast that the news release announcing the acquisition still referred to Hotelbeds, Tourico and GTA as separate entities (along with Viatour, that sell the new Leisure Pass).
Exponent describes itself as a private equity firm investing in UK headquartered businesses with enterprise values between £75 million ($97 million) and £350 million ($451 million). In addition to its new acquisition and Big Bus Tours, it has a portfolio of companies that are involved in: train tickets sales; financial services; counseling for graduate students; ship management; business publishing; production of whiskey, gin and vodka; a group of some 40 London theatres; and much more.
Exponent describes itself as a private equity firm investing in UK headquartered businesses with enterprise values between £75 million ($97 million) and £350 million ($451 million). In addition to its new acquisition and Big Bus Tours, it has a portfolio of companies that are involved in: train tickets sales; financial services; counseling for graduate students; ship management; business publishing; production of whiskey, gin and vodka; a group of some 40 London theatres; and much more.
Will there be further consolidation in this sector? Yes, if only due to the kinetic way in which trends develop in the travel and tourism industry build upon themselves. As consolidation has taken part in other segments of the industry (airlines, hotels, car rentals, etc.), some form of it in this new sector seemed inevitable as tour operators, especially U.S.-based receptive tour operators, began including tickets, reservations and reservation services as a part of its product.
Says the travel, tourism and hospitality group research firm, Phocuswright, in an article just published on its website—The Real Revolution in Tours & Activities—“Driven by a slew of B2B reservation system (res system) startups – we have tracked more than 30 currently operating – tour and activity operators are getting wired up. In our first supplier survey, conducted in 2011, just 14 percent of respondents globally reported using a third-party reservation system. In our most recent survey, conducted in 2016, that figure has risen to nearly half.”
“The Screw Job” that is Best Rate Guarantee
Thoughts, Ideas, Opinions on the above…and They are all Mine!
By Wallace E. Johnson
This is the second of three part series of articles on the U.S. lodging industry. The first, “Hotel Brands – The Buggy Whip of the 21st Century,” ran in the March 7, 2017 issue of the Inbound Report: https://www.inboundreport.com/2017/03/07/hotel-brands-the-buggy-whip-of-the-21st-century/
Well, well, well …” these times they are a changing” as the Bob Dylan song goes; or you can play “Roll with the Changes” by REO Speedwagon; “Changes” by David Bowie; or, “Change” by John Waite … and there are many more. We’ve heard about the Airbnb and Uber disruption but the leisure segment has disruption and changes of its own. The only constant is change, so to speak, and nobody should have expected the traditional tour operator/hotel/client relationship to last forever. It hasn’t and it won’t. As a matter of fact, it’s getting pretty weird out there. So without further ado, let me give you my thoughts and opinions on the goings on these days.
CONSOLIDATION:
Unless you have been living under a rock, you no doubt are reading about this and in some instances being affected by the consolidation phenomena going on right now. It actually started with the airlines a few short years ago, as we now painfully only have four major domestic carriers while only a few years ago we had 12-15. Then recently, the big merger. Marriott and Starwood merged which immediately put all other lodging companies, with the exception of Hilton (due to brand strength) on the defensive.
Then Accor picked up Fairmont, Raffles, etc. and no doubt other hotel mergers are on the way as the other companies are just not big enough or strong (brands) enough to thrive. Lastly, and this hits closer to home, Hotelbeds has acquired both Tourico Holidays and GTA while Thomas Cook India has acquired AlliedTPro. Getting the message? If you are a Mom-and-Pop or even a small operation with a niche business, it might be a good idea to search around for like-minded competitors to merge with. You are going to need to be bigger and stronger to compete logistically and technologically or you will end up in the obsolescence closet soon enough. Out of business!
PRICE PARITY:
OK … this one has been driving me nuts for years. We’ve all heard of the Best Rate Guarantee (BRG) which has evolved into the Best Price Guarantee (BPG) which by itself tells you a bunch of confused hoteliers are at the helm. So, first of all, has anyone ever or do you know of anyone ever that has filed one of these claims? Didn’t think so. (1) It’s a pain in the a** to fill out the paperwork; (2) If I’m a business traveler, I’m on someone else’s payroll and I don’t care about a few dollars difference and (3) net, I really don’t care even if I’m not on someone else payroll. Too much trouble which brings me back to #1 above.
When I bought my first Popiel Pocket Fisherman with a money back guarantee, did I send it back when it broke? No, I sent it to the trashcan. When you see money-back guarantees or best price guarantees in print or on the TV or internet, does it really influence your decision? Of course not. But, don’t just believe me. To quote from the definitive Cornell study on this issue, “We show that such guarantees in their present form have little value to the consumer.” This one is even better: “Although rate guarantee programs appear to give guests the assurance that by booking at the brand’s website they would pay the lowest rate, in actuality the 24-hour time limit gives this guarantee a value of zero.”
Whew, there you have it. From what I hear, the only people taking advantage of this offer are the parasites who find these discrepancies for a living and the corporate offices of hired guns (at $3.50/hour somewhere) that police their own hotel websites and everyone else’s to book rate violations which in turn allows them to fine either the third party site or the hotel. This brings us to the next section … The Screw Job.
THE SCREW JOB:
So, if the BRG or BPG is worthless or, as the Cornell study says, “has a value of zero”, what’s the purpose? Why all the pain and aggravation, all the policing, all the tormenting of the tour operator and hotel community? The hotel higher-ups will tell you “it’s to promote more direct bookings to our websites, which is cheaper.” Oh, really? Cheaper for whom? Is that why you are falling all over yourselves connecting with large OTAs? Didn’t Hilton and IHG just recently connect with TripAdvisor, which books rooms on their site? Yep! (For legal reasons, let’s just call the following a hypothesis). The bottom-line, and it really does help the hotel companies bottom-line, is that hotel companies want ALL bookings to go through their systems so they can charge FEES.
Call them direct connect fees, usage fees, OTA fees, etc., FIT rates, which were being booked and paid for offline did not generate these fees. This wasn’t a war on intermediaries, especially since hotel companies are by definition an intermediary. This was a war on static rates whether they be FIT contracts, pre-buys, whatever. Hotel companies saw this as soft money to be had and many tour operators/wholesalers are paying the price.
But, paying the price even more are the franchisees and their hotels. Look at your monthly franchise bill. In addition to the royalty fees, the S&M fees and the reservations fees which are pretty standard, add up the rest. What used to be a one pager is now multiple pages. Tour operators/wholesalers have been screwed but hotels and their franchisees have really been screwed. No doubt airline crews will be the next screw job, somehow and someway. This leads us to the following which I wrote about a few weeks ago and can be perused with this link (https://www.inboundreport.com/2017/03/07/hotel-brands-the-buggy-whip-of-the-21st-century/). We have seen the future and the future is the growth of the “Independent brand”.
INDEPENDENCE DAY:
When I wrote the above article about brands becoming like buggy whips, home doctor visits or, my favorite, movie rental stores, it wasn’t satire, it was reality. It’s going to happen. It’s happening as we speak. Branded hotels’ lead in revenues over independents has declined from 32 percent in 2000 to 19 percent in 2015. And, all the measurables keep moving in that direction. Why and how? Online reviews are one part of the equation. No longer are independents mysteries. Potential guests can not only see the hotel but read about other guests experiences.
Another reason? OTAs. Independent hotels don’t have the burdensome franchise fees on their P&L and can offer steeper discounts, as well as pass them off to other intermediaries to sell without having to answer to the SVP in the corner office with the bullwhip in his/her hand. (Don’t you like my political correctness?) And (get this) tour operators/wholesalers are getting attractive rates of independent hotels from OTAs! Really? Go figure …and yet another reason the Age of the Hotel Franchise is moving towards being the Age of the Dinosaur. Given the proliferation of “soft brands” at these companies (Curio, Ascend, Quorvous, etc.) I’m thinking the brand heads see the future as well.
With all of the fees and rules and standards, and unrealistic PIPS, and mediocre global sales efforts; the hotel franchise is certainly at risk. As someone said, hotel companies used to make their franchisees rich, now they make their senior officers rich. Check it out. But, there is one hotel company that it worse than the others which I’ll call the Hotel Company That “Shall” Not Be Named. More on this next time.
See ya!
German Trade Expects FITs to Drive Future Growth
German survey shows travel agents predicting strong demand for individual holidays: The latest survey on travel agency opinions by the authoritative German travel trade publication, FVW, indicates that German travel agents believe that individual holidays, cruises, city trips and long-haul holidays will be the main growth travel segments in future.
The appearance of long-haul holidays in such a survey comes on the heels of new public battle by the country’s No. 1 and No. 3 tour operators in terms of overall market share—TUI and DER Touristik, respectively—in which each has claimed to be the long-haul market leader.
Such a claim has never been a news item before, nor has the long-haul segment been deemed so important by German travel agents before, and could bode well for those in the U.S. inbound tourism industry hoping for something to get the German market growing again following a drop-off of three percent in 2016 and is forecast to register no growth through 2021, according to the latest figures posted by the U.S. National Travel and Tourism Office (NTTO).
The Agents Speak: “The vast majority of agents had clear views about which market segments will grow in future” reported FVW. The following tables, based on the survey results, shows us what Germany’s retail travel trade is thinking.
A note from FVW: “These views also reflect their dependency on tour operators, who generate about 83 percent of the combined revenues of the agents surveyed.” In the survey, owners and sales experts from 212 representative travel agencies were asked to give their views on market trends.
Announced this week: New Flights to USA from Condor, American and WestJet
On May 3rd, Condor began service to two U.S. cities: to New Orleans from its Frankfurt base; and to Las Vegas from Munich. This summer Condor will be operating to 10 US cities from Frankfurt and two from Munich with a total of 38 weekly departures, and pushing its share of the Germany-USA market up to six percent.
- American Airlines has begun new flights from two U.S. hubs to three European cities. Chicago O’Hare is now linked to Barcelona, Spain; Dallas Fort Worth is connected to Rome Fiumicino and Amsterdam. Daily service to and from all three cities began May 5. With these three launches, American now offers 52 routes between the U.S. and Europe on over 450 weekly flights this summer, with the busiest routes being from New York JFK and Chicago O’Hare to London and O’Hare to London; both are flown four times daily).†
- WestJet began another Canada-USA connection on May 4, with a 1,705-mile flight between Calgary and Nashville. Service will be twice-weekly (Thursdays and Sundays). No other airline currently offers flights between the two cities. With this launch, WestJet now offers 39 routes between Canada and the U.S. on 334 weekly flights. Calgary becomes the second destination in Canada to be served from Nashville, with WestJet already operating a daily service between Toronto Pearson and the capital city of Tennessee.†
† Source: anna.aero
Global Trends Affecting Tour and Travel Industry– According to Deloitte Analysts
The Travel, Hospitality and Leisure practice of UK-headquartered Deloitte Touche Tohmatsu Limited, referred to more often as Deloitte and known for its audit, consulting, tax, and advisory services, has posted an updated summary of key issues facing the travel, hospitality and leisure sector.
Deloitte’s Travel, Hospitality and Leisure practice serves companies across multiple categories including aviation and transportation, gaming, hotels, restaurants and food service, and sports and has a staff of 1,450 worldwide. Its key issue updates are designed to keep its sector’s businesses apprised of developments affecting their activities (and, no doubt, to attract clients). Here’s how Deloitte summarizes the key issues:
International growth
—Many Travel, Hospitality and Leisure players are increasingly using an “asset-light” strategy in which they expand their brand footprint globally without taking on huge capital investment and by exploring joint ventures with local partners.
—Technology, mobile, and social drivers are contributing to an increasing number of global brands.
—Everyone should consider the table stake attributes —comfort, price, food taste, loyalty programs, among many other things. Yet, players across the Travel, Hospitality & Leisure spectrum should grow smartly, and not try to be all things to all people.
—Companies should consider the regulatory framework of each domestic and foreign market that they serve.
—While looking for international growth avenues, especially in politically sensitive regions, Travel, Hospitality & Leisure players need to consider their risk management strategies.
Data Privacy
—Customers have different appetites in sharing personal information with companies but each customer wants to ensure that personal data finds safe custody.
—The risk of cybersecurity breaches looms large, especially in consumer sensitive sectors.
—Whether Travel, Hospitality and Leisure companies’ legacy systems are good enough to catch up with innovative breaches is a question that needs deliberation.
Millennials
—To “win the Millennial,” any consumer-facing business should understand the needs and desires of this critical consumer demographic.
—Millennials have a robust appetite for innovative technology and they often want a customized experience. Consumer engagement is not something that begins at the company’s front door; it typically begins with online search and should be ongoing and evolving.
—They want transparency and the sense that they are receiving “value for money.”
Technology
—Many consumers feel free Wi-Fi in a hotel or restaurant is ”table-stakes” and no longer a novelty.
—Social Media continues to get stronger and influences the purchasing decision.
—Emerging technologies including keyless entry and digital payments are being introduced in more markets and are expected to continue to surface in the coming year.
Alternative Platforms
—Emerging platforms are gradually becoming mainstream and challenging established players. In the race of traditional vs. alternative, the winners will likely be those who can create value for customers that they can experience and measure.
New Insights into What Travelers Really Want out of Vacation
From the Nuremburg, Germany-based marketing research firm GfK, the results from a couple of surveys—one recent and one not-so-recent—offer some keen U.S. travel suppliers who want to tailor product to what their customers from key markets want and don’t want.
Get this: more than travelers from other key markets, Brazilians want to relax; and more than travelers from other key markets, the Chinese want to stay connected via the Internet.
First, the relax-vs.-active equation. Based on the results of a 17-country online survey conducted by GfK, we know these facts:
—Internationally, 59 percent of people prefer a relaxing vacation.
—35 percent prefer an active vacation.
—Just 6 percent are not sure which type they prefer.
—Teenagers are the most energetic, with 43 percent preferring active vacations.
There is next to no difference between men and women when it comes to relaxing.
—Men are potentially very slightly more lazy in their holiday choice than women, with 60 percent of men preferring a relaxing vacation.
—Meanwhile 58 percent of women prefer a relaxing vacation.
—For active holidays, however, men and women stand neck-and-neck at 35 percent each.
For those with children under six years old in the household, or those with children aged between six and twelve,
—Just under two thirds (62 percent) favor relaxing vacations and just over a third favor active ones.
—For people with teenagers in the household, relaxing holidays become slightly less popular, falling to 57 percent, while active holidays rise to 39 percent.
Internationally, the biggest differences we are when it comes to age groups.
—Teenagers are the most inclined to favor active holidays, with 43 percent selecting this and 51 percent preferring a relaxing holiday.
—The preference for active vacations then drops steadily with each age band, ending with those aged in their fifties, and those aged 60 or over, with both standing at just one third (33 percent) favoring active holidays.
—The age group with the highest percentage saying they prefer relaxing holidays is not the oldest two age groups; it is those aged in their forties, standing at 64 percent. Compare this to those aged 60 or over, where 57 percent say they favor relaxing vacations.
Among nations,
—Italy (45 percent), France (44 percent) and Spain (43 percent) lead in having the highest percentage of their online population who prefer active vacations where they do and see lots of things.
—In contrast, Brazil (71 percent), South Korea (66 percent) and Japan (also 66 percent) lead for having the highest percentages preferring a relaxing vacation where they take it easy.
Is it Important to Stay Connected while on Holiday? Based on the results of another survey that covered 22 countries, it appears that travelers from the UK—it is the largest overseas source market for the U.S. inbound tourism industry—prefer to disconnect while on holiday. For Chinese travelers, more than travelers from any other key source market. We prepared the following table based on the survey’s results.
UK Operator Notes—New Investments, New Names, New Products
—The Shanghai, China-based conglomerate Fosun last week increased its stake in Thomas Cook Group to 11 percent. The move followed Fosun’s action in March when it boosted the percentage of shares it holds in Europe’s second largest travel group increasing to from one percent to 10 percent. Fosun, which owns Club Med, took an initial 5 percent shareholding in Thomas Cook for £91.8 million ($118 million) two years ago. This was largely seen as paving the way for Thomas Cook to access the fast-growing Chinese market over the medium term.
—Super Break is launching a new logo, look and feel, starting with the release of its latest UK Short Breaks brochure. The new look has been designed to reflect the company’s move to focus on “experience-led, packaged products.” A key component of the new look is the use of brackets to symbolize the elements that build a personalized trip. The aim is to make it easier for agents to highlight products that can be added to a break—which are all pre-bookable and commissionable. The operator will also launch its biggest ever TV campaign later this summer.
—Southall Travel has unveiled plans to launch dedicated student travel and sports travel businesses. Appearing last week at a Barclays Travel Forum in London, Kuljinder Bahia, the company’s owner and managing director said the student travel brand would be launched within three months. The new venture is ready to go, he explained, but the group was struggling to find a good domain name. The sports division will be launched soon afterwards and already has a name—ST Sports—he added.
—easyJet has joined Get Your Guide and launched a new partnership offering customers tours and excursions alongside its flights, offering customers more than 16,000 activities across Europe. Get Your Guide claims to be the world’s largest online platform for booking tours, attractions and activities. At easyJet, its products will be available through a dedicated site—activities.easyJet.com—and within the easyJet app. Most of the tickets are paperless, so customers simply scan a QR code at the tour or activity to gain entry. Push notifications will also act as a reminder of the booking. Get Your Guide will also add more tours to easyJet’s destinations to encourage travelers to add them at the time of booking.
HODGE PODGE: Shifts, Shakeups and Occasional Shaftings in the Tour and Travel Industry
Louisiana CVB head Sues to be Reinstated after Accidentally Live-Streaming Nude Video of Herself on Instagram. Lynn Dorsey has filed in Webster (Louisiana) District Court seeking reinstatement to her job as executive director of the Webster Parish CVB. The CVB, meanwhile, has been moving forward with the process for selection of a new executive director. Dorsey lost her job in February following an incident last December in which she accidentally live-streamed a nude video of herself over the CVB’s Instagram account. In her suit, Dorsey alleges irregularities in a January meeting of the CVB’s board during which she was placed on leave, as well as the February meeting in which she was dismissed.
Paul Wait is leaving his post as CEO of GTMC and is joining Southall Travel Group in September as chief operating officer. Wait has been with GTMC since January 2013. Previously, he served Virgin Atlantic Airways for 12 years, leaving the company as general manager. Wait was also vice president, sales, for American express for 28 years.
Copa Airlines has just announced the hiring of Mariana Trevizan as the new sales manager for São Paulo and inland Brazil. Copa, the flag carrier for Panama, is based in Panama City and serves as a major connecting point between flights from South and Latin America and the USA. It serves Boston, Chicago, Fort Lauderdale, Las Vegas, Miami, New Orleans, Orlando, San Francisco, Tampa, Washington, D.C. and beginning Dec. 11, 2017, Denver. A 17 year veteran of the travel industry, has previously served with Etihad Airways, South African Airways and British Airways.
Anja Keckeisen, CEO at HolidayCheck unit in Germany, has suddenly resigned from her job, effective at the end of June—for family reasons. She will be replaced by marketing director Christoph Ludmann. The Swiss-based HolidayCheck Group includes the Holidaycheck portals in Germany, Austria and Switzerland as well as Zoover in the Netherlands.
