TMCs and the busy summer transfer market

by Business Travel iQ | 15 August 2019

You may have been keeping close watch on football’s multimillion deals in the last month but travel management companies have been equally busy

Summer is often a quiet time in the world of business travel but the last few weeks have been unseasonably busy when it comes to the world of TMCs, with a number of acquisitions being announced.

This week, American Express GBT announced that it was acquiring a controlling stake in Dubai-headquartered Kanoo Travel. The Middle East company has been a key partner for American Express for a number of years and has operations in the United Arab Emirates, Saudi Arabia, Qatar, Bahrain and Oman

Nabeel K. Kanoo, president of Kanoo Travel, said: “GBT’s global clients, many of whom we already service, stand to benefit from a more consistent global offering because of this joint venture. Our own clients in the Middle East will profit in the long term from having access to GBT’s total travel and expense eco-system, proprietary technology and global reach.”

The two will operate as a joint venture of which Amex GBT will hold 65%.

Elyes Mrad, GBT’s Managing Director, International, said: “The creation of the joint venture will enhance how we service those clients and their travellers by combining Kanoo’s region-specific expertise with the backing of GBT’s global scale and technology.”

On 5 August, BCD Travel announced the acquisition of Milwaukee-based Adelman Travel. The company, founded in 1985, has sales of $675 million and 300 employees.

The company had joined the BCD Travel Affiliates partner program two years ago.

Craig Bailey, BCD Travel’s Americas president, said of the acquisition, “Our financial strength affords us the opportunity to grow our company with moves like this one that benefit our clients, employees, partners and affiliates. It fits perfectly with our strategy of growing organically through investments in products and services and through acquisitions of successful companies that share our company values and culture.”

The announcement follows the early July acquisition of a majority stake in Japan’s Hitachi Travel Bureau (HTB), BCD’s partner in the country.The company has 280 employees and annual sales of US$330 million.

“Our majority ownership of Japan demonstrates our aggressive acquisition strategy,” said John Snyder, president and CEO of BCD Travel at the time. “We’re growing in markets where demand for corporate travel services is increasing and where our clients want us to be.”

At the end of July, Reed & Mackay announced that it had acquired Business Travel Direct, the business travel arm of the Ickenham Travel Group.

Fred Stratford, Group CEO, Reed & Mackay, commented “Our focus has always been on strategic growth, built both organically and through acquisition where there is a natural and strong alignment to our core values.”

“After 49 years with this amazing business and team, this is now a fantastic opportunity for our clients, colleagues and partners, and brings with it a range of additional benefits. Our clients can look forward to receiving the same great service, delivered by the same award-winning teams in the same locations, but now with the backing of a truly global TMC,” said Peter Reglar, CEO, Business Travel Direct.

We see three key drivers of what is happening in the TMC space this summer – disruption from new start-ups, disruption to traditional models of distribution and the need to invest in tech.

Venture capital money has been flooding into the sector – notably the half a billion dollars invested in TripActions. This sends a clear message that investors feel that there is scope for newcomers to supplant legacy players.

Traditional TMCs are therefore looking to acquire both volume and reach in global markets. Acquiring stakes in companies which are already partners is a relatively low-risk route to do this.

The second driver is the changing distribution landscape. We saw last week how buyers are increasingly expecting to embrace NDC and other direct channels but do not expect to pay for it. TMC business models will be further squeezed.

Bulking up to achieve economies of scale is also driving consolidation. The increasing requirement for TMCs to invest in technology is also driving this consolidation. TMCs need to offer consumer-grade tech and it does not come cheap.

Do not expect these latest summer signings to be the last.

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