Why investors love the “Experiences” sector

I have been in Mexico City for less than 24 hours and I find myself at a wrestling match. 

Just yesterday morning I was sat at my desk in London. Now I am half a world away, in a dimly lit hall, surrounded by chaos and very shouty Mexicans watching two large, Luchadors pretending to beat the hell out of each other.

It is the kind of immersive, transformative experience that only travel can deliver and though my holiday has only just started, I can already barely recognise myself.

I mean this both figuratively but also literally, as I am wearing a Mexican wrestling mask.

This is the first of several “experiences” I have booked during my trip but Im already hooked. Not only have I spent the afternoon chatting with a group of very friendly people from all over the world, I have learned about the rich history and traditions of this crazy sport. I have also designed and made the mask I am wearing. A fact I am proud of, even if its a bit more “gimpish” than I was aiming for.  

Whilst I may be new to the Tours and Activities idea, it is certainly not a new concept. It’s easy to see why it has attracted so much attention of late, and is widely considered to be the fastest growing part of the travel industry. Many travel agents are finding it ever harder to compete in a world where commoditised hotel and transport products are driving down overall commission rates and driving up customer acquisition costs. The Tours and Activities sector represent a valuable opportunity for agents to differentiate, and customers are willing to pay for a unique experience.

There has also been a flurry of investment activity in recent years. Trip Advisor acquired Viator back in 2014. Airbnb launched its own platform back in 2016. Berlin based Get Your Guide and Hong Kong’s Klook raised huge amounts of Private Equity funding in 2017, while TUI Group acquired Milan’s Musement in 2018. Yet despite this, the sector remains highly fragmented. Globally, Tours and Activities is said to represent £150bn of annual spend but the the vast majority of sales are still generated off-line, and booked with local independent operators, in destination.

Given these conditions, we can expect to see a lot more activity in the coming years, as traditional operators, investors and platforms seek to use their strength and agility to assert their dominance.  

Back in Mexico City, it’s a similar story in the wrestling ring.

Written by Martin Alcock for  TTG Magazine’s 29 April edition.

The return of Bolt-on (acquisitions)

If you were trying to sell a travel business twenty years ago, you only needed to make 2 phone calls. Corporate giants Thomas Cook and TUI Travel may have been the only buyers in town, but they were both incurable shop-a-holics. It was just a question of who to call first.

For better or worse, Thomas Cook and TUI’s acquisition splurge came to an abrupt halt around 2008. A ferocious global financial crisis hit like a tornado, and corporations across all sectors battened down the hatches and turned inwards looking for a Safe Place From the Storm.

When the dust settled, Thomas Cook and TUI became business sellers instead of buyers. Newly installed management teams reclassified their predecessor’s acquisitions as non-core indulgences, and offloaded them in an effort to repair their battered balance sheets.

In recent years, its been Private Equity funds that Cant Get Close Enough to travel. A torrent of Private Equity money has flowed into the sector, something we have covered in more detail here.

But if recent deal activity is anything to go by, there are definitely signs that corporate buyers are coming out of their shells and looking at acquisitions once more. Arguably the second most popular Bolt-on of all time, is making a comeback.

Broadly speaking, these Bolt-on acquisitions fall into 2 broad categories:

New Love

The first is a direct consequence of all that Private Equity investment. Private Equity funds seek growth in order to deliver a return to their investors. One way of delivering growth is through a buy and build strategy.

In almost all of the 20 or so Private Equity travel transactions we have advised, the debt financing package has included an Acquisition Facility. This is an auxiliary credit line provided by the lenders, and reserved specifically for the purpose of acquiring a portfolio of complementary businesses.

Here are just 4 recent examples:

Bridgepoint backed Cruise.co in 2016. Shortly thereafter, cruise.co entered the German cruise retail market by investing in Kreuzfahrtberater (KFB) a German cruise retailer in 2017.

After Inflexion purchase Scott Dunn in 2015, the group sought international expansion through the addition of Aardvark Safaris in the US in 2016 and Country Holidays in Singapore in 2018.

Mobeus Equity backed Ski Solutions in 2017. Shortly thereafter they added Wilderness Scotland, a domestic adventure tours business, to their portfolio of ski and cycling products.

Platinum Equity backed the corporate carve out of European Vacation Rentals (James Villa, Hoeseasons, cottages.com) from the Wyndham Corporation in 2018. Within months, the group had moved to add Mulberry Cottages, a luxury rental agent, to its stable of brands.

How Am I Supposed To Live Without You

The second category is a returning confidence of larger corporates to make strategic acquisitions again. During 2018 we’ve seen and worked on a number of examples:

On The Beach (OTB) are no strangers to growth through M&A having acquired rival Online Travel Agent, Sunshine.co.uk in early 2017. When they acquired Classic Collection, a more traditional luxury tour operator in mid 2018, eyebrows were raised and caps doffed in equal measure. It is certainly a bold move, and it gives OTB access to higher-margin product as well as a high street distribution network.

DER Touristik UK (formerly Kuoni UK) acquired Journey Latin America in 2018, to bolster its expertise in the Latin American region.

G Adventures acquired Tru Travels, a South East Asian competitor with a younger client base and an innovative distribution model. This follows their 2016 acquisition of the more traditional Travelsphere, Just You and Swan Hellenic brands enabling the group to appeal to a broad range of demographics.

 

Once In A Lifetime

The return of the Bolt-on, just like the ongoing Private Equity travel infatuation, represents a really positive signal for the travel industry. It sends a clear message to investors, lenders and the entrepreneurs of tomorrow that the sector is successful, innovative and back-able. Above all though, if you’re a travel business owner looking to exit, or secure investment, and you treat your business with Time, Love and Tenderness there are many more options open than in years gone by. It’s a seller’s market.

 

TTC advises Travel Counsellors on their secondary buyout by Vitruvian Partners

 

2 June 2018

TTC were honoured to support Steve Byrne, Simon Shaw and the Travel Counsellors management team in their secondary buyout by Vitruvian Partners from Equistone Partners Europe.

Founded in 1994 by travel entrepreneur David Speakman, Travel Counsellors is a leading travel company delivering personal and bespoke travel services. From its global headquarters in Manchester, the company operates a franchisee model, with more than 1,800 self-employed Travel Counsellors working flexibly from home. Travel Counsellors has expanded internationally, adding operations in Ireland, the Netherlands, Belgium, South Africa, Australia and the UAE.

In October 2014, Equistone backed a management buy-out of the business led by CEO Steve Byrne. Since then, the business has continued to experience rapid growth, with annual total transaction values growing by £130m to £512m. Statutory turnover and profit have also seen strong growth over the period, growing by an average of 17 per cent and over 20 per cent per annum respectively.

In 2017, the company was awarded the Best Customer Focus Award in the UK National Business Awards, and has been named in the Sunday Times HSBC International Track six times, including in each of the last three years.

Vitruvian Partners, which has previously backed travel businesses Skyscanner, JacTravel and OAG, as well as a number of technology-enabled marketplaces including listed technology company Just Eat, will continue to invest in and build on Travel Counsellors’ success bringing its wide sector and technology experience together with the company’s differentiated business model and culture.

TTC Director Martin Alcock said “Having worked with Travel Counsellors over a number of years, including advising on the 2014 buy-out by Equistone, we were delighted to provide regulatory support on this transaction. We wish the management team well in the next chapter of their exceptional growth story.”

TTC advises Wyndham Worldwide Corporation on their sale of European rentals businesses

 

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9 May 2018

TTC supported Wyndham Worldwide Corporation (WWC) in the successful completion of its previously announced sale of its European vacation rentals business to an affiliate of Platinum Equity, LLC, a leading global private equity firm, for approximately $1.3 billion.

The industry-leading European vacation rentals business is the largest manager of holiday rentals in Europe, with more than 110,000 units in over 600 destinations across more than 25 countries. The business operates more than two dozen local brands, including cottages.com, James Villa Holidays, Landal GreenParks, Novasol and Hoseasons.

TTC Director, Martin Alcock said “This was a large and complex corporate carve out transaction requiring consent from a number of European regulatory bodies. We worked collaboratively with the teams from Kirkland & Ellis International and Latham & Watkins to ensure the transaction was structured to ensure we could deliver those regulatory approvals within the very tight completion timetable.

We wish the European management team good luck in their new relationship with Platinum Equity and we look forward to continuing to support them in future.”