TUI has acquired Hotelbeds’ destination management business in a deal giving it an enterprise value of EUR110m.
The deal saw Hotelbeds, which TUI sold in 2016 for EUR1.2bn, become a pure bedbank business, while TUI moved deeper into services and leisure activities.
TUI said that, following the acquisition, the Spanish subsidiary TUI Destination Services would be present with branches and staff in 48 countries and generate sales of EUR700m. The company said it also expected to achieve operational synergies.
The group said that it estimated that the global market for services at holiday destinations was worth around EUR140bn and was currently growing at around 7% year-on-year. At the same time, with up to 350,000 micro-suppliers, this market segment was fragmented on the supplier side and only to a small extent digitised.
TUI Destination Services currently develops and arranges around 4.5 million excursions per year., which, it said, put the TUI subsidiary among the top five providers in this business field worldwide.
TUI CEO Fritz Joussen said: “The global market for these services is growing. Four factors put TUI in an extremely good starting position: our strong international brand, the trust of 20 million customers, the trust of the destination countries through decades of presence and, most importantly, our world-class IT and CRM systems, in which we have invested in recent years.
“The TUI brand guarantees the usual premium service, TUI quality and TUI comfort despite the multitude and complexity of leisure offers and providers at the holiday destination. Our IT and CRM systems guarantee that our guests will only receive offers that are relevant to them. And they get them directly from us, not from third parties. Advice, booking, flight, hotel and leisure activities at the resort come from a single source. The customer has one contact person, that is TUI.”
Hotelbeds will continue to distribute activities, but the group said that the deal would allow it to focus on its B2B bedbank service.
TUI foreshadowed the deal at its first-quarter results in February, describing destination services as a strategic growth area. During the period it handled 3% more guests, generated a 2% increase in excursions and achieved an operating profit of EUR1.1m on turnover of EUR38.4m.
“Here, we see great potential to grow through the strength and comprehensive presence of the TUI brand,” said Joussen. “We know our customers. Our customers know us, and they trust the TUI brand. This should help us develop more and better service offerings and generate additional turnover.”
The deal came as operators and suppliers in the sector have moved more deeply into the services outside the core provision. Most notably, last year saw Airbnb launch Trips, offering local experiences driven by the platform’s hosts.
Speaking as Airbnb’s Open LA event, CEO Brian Chesky said: “You could spend as much time planning your trip as you spend on your trip. We think there should be a trade-off, travel should be magical and easy.
“If you want to have an amazing trip, you end up basically on a research project. You’re in line, you’re lonely, you’re outside, and you’re doing things locals never do.We puts homes, experiences and places together in one place, to be both magical and easy. These are handcrafted experiences which allow you to immerse yourself in the community, organised by city and by passion. These aren’t tours, they are experiences. You immerse.
“You can get a guide book and it will tell you thinks that other travellers tell you to do. They often recommend things that locals would never do. We decided to lead with people, with Insider Guidebooks, so you can discover places through people.” The company’s new app is also offering “meetups” to link guests staying in the same locations.
Chris Lehane, Airbnb’s head of global policy, added: “It’s the next really big chapter for us. It has real potential to fundamentally transform how travel and tourism works.”
The company backed up the launch with two purchases prior to the announcement: Vamo, which specialises in multi-trip, multi-destination planning and Trip4real, a Barcelona-based group it had already been working with.
HA Perspective [by Katherine Doggrell]: Outside the likelihood that the due diligence costs on this deal were nominal, there are clear advantages for TUI in consolidating its services offering. As a traditional tour operator reinventing itself, this is one area where it can claim expertise. After all, why use such a company if, in the back of your mind, there aren’t also lurking thoughts about kids’ clubs and a tour of the local glass blowers?
Much as the hotel guest has become more demanding – they are no longer being told what they want, they are telling hotels what they want, as it witnessed by the frenzy of new brands – those who would offer services will be measured by their originality and the Instagram-ability. Operators keen to swank up their loyalty schemes and encourage points to be burned anywhere but on rooms have got into the habit of offering exclusive experiences as a lure. With ownership out, braggable experience is all.
TUI has the upper hand on companies such as Airbnb, which are coming from a standing start. Airbnb has provided very little colour on Trips since its launch, other than an update in November which said that were 3,100+ active Experiences on the platform across over 40 cities, with guests paying an average of USD55 per booking. AccorHotels, which has itself been getting all over the funnel with its Accor Local product, also offers local tours by local people, but through Cariboo, a specialist in the area. Experience is likely to out in this field.
Additional comment [by Andrew Sangster]: The key point about this relatively small deal is the further solidifying of vertical integration in the TUI offer. Europe’s biggest tour operator wants to ensure it controls the entire travel experience and is investing to make it so.
This is in direct contrast to the general trend among hotels where the bricks, brawn and brains split – separating property from operations and from brand – continues to be the fashion.
There are good arguments for pursuing either approach. But it is interesting that no major hotelier – so far – seems interested in restarting vertical integration.