MANCHESTER, England -- MyTravel Group, a former powerhouse of
cruise, tour and retail brands, shed about a third of its
U.S.-based travel businesses in a move to raise capital for the
U.K.-based travel conglomerate.
CruisesOnly, which calls itself "the world's biggest cruise
agency," will be sold with other cruise businesses to retail and
package provider National Leisure Group (NLG) for $110 million.
Tour operations SunTrips and Vacation Express, which lost a
combined $10 million during MyTravel's 2002 fiscal year, were
slated to be sold to Flightserv, a division of eResource Capital
Group, for $16.5 million.
Travelocity said it would acquire the assets of World Choice
Travel, a consolidator and distributor of hotel rooms, in order to
boost its own merchant hotel operation.
MyTravel will receive about $186.5 million in cash through the
sales, which it said it will use for "working capital." The three
separate deals are expected to be completed by the end of the year,
pending shareholder approval, financing arrangements and, in the
cruise sector, antitrust approval.
National Leisure Group
Woburn., Mass.-based NLG was the winner in a bidding process to
acquire a significant piece of the retail cruise pie: The former
MyTravel cruise businesses sell from 8% to 10% of the total
worldwide cruise product, according to MyTravel and industry
The package includes CruisesOnly and 1-800-Cruises, with six
call centers; the CruiseOne franchise operations; the home-based
Cruises Inc.; Ship 'n' Shore, which sells land tours in Alaska,
Europe, the Caribbean and the South Pacific; and meetings and
incentives company Landry & Kling.
NLG estimates that the combined businesses will serve more than
a million customers in 2003 but declined to further comment on the
acquisition until it closes in mid-November.
Scott Barry, a cruise analyst with Credit Suisse First Boston,
said the group could do close to $1 billion in cruise revenues
annually. The MyTravel cruise businesses made an $11.8 million
operating profit for the fiscal year that ended in September.
NLG creates vacation and cruise packages for giants like Orbitz,
Priceline and Yahoo. It also provides technology and private-label
fulfillment services, while selling travel under its own Vacation
Henry Harteveldt, a senior analyst at Forrester Research, said,
"National Leisure Group has, obviously, been a strong offline
wholesaler, and its strategy is to figure out a way to get into the
Web by aggregating not only content ... but Web sites that it can
use to get new travelers."
Vacation Express and SunTrips never turned a profit when the two
tour operations were in the MyTravel fold. SunTrips was acquired in
1997 and Vacation Express in 1998, when MyTravel was known as
But Flightserv believes it can operate the pair at a profit.
"We have an excellent plan," said Cary Evans, Flightserv's
executive vice president. "We're going to have a far more
aggressive marketing campaign to focus on travel agents."
Evans also spoke of new products, new personnel and the
advantage of proximity.
"Some things do well under the umbrella of a huge company, some
don't," he said. "Obviously, [MyTravel's] strategy did not pay off.
We're closer to home. A tour operator has to be flexible to respond
to the marketplace."
MyTravel will continue to act as a purchasing agent for hotel
rooms and ground services for the operator.
Travelocity's piece of MyTravel Group will be World Choice
Travel (WCT). Sabre, Travelocity's parent, signed an agreement to
purchase WCT for $50 million, although Sabre said tax deductions
will bring the cost down to about $37 million.
Sabre said the acquisition will generate $13 million in net
revenue and earnings of approximately $3.5 million (before
interest, taxes, depreciation and amortization) in 2003.
Michelle Peluso, Travelocity's chief operating officer, said WCT
has some 1,700 online affiliates that operate about 2,300 Web
Adding WCT affiliates gives Travelocity the opportunity to grow
its merchant hotel program. Currently, only 10% of WCT's hotel
sales are of merchant rates; the rest are published rates, Peluso
The sale of MyTravel Group businesses also could have an effect
on Worldspan, which said in a Securities and Exchange filing that
MyTravelGroup is its second-largest traditional GDS customer.
Worldspan declined to comment on what will happen to its
MyTravel Group account now that parts of MyTravelGroup are being
MyTravel continues to operate several additional U.S.-based
businesses, including AutoEurope, D-FW Tours, ABC Corporate
Services, Lexington Services and Resort Escapes.
The company said it was "pursuing a program of disposals of
noncore businesses" in order to generate additional working
capital. A MyTravel spokesman said the company wouldn't comment on
whether any more brands were to be sold.
The group, which lost about $93 million during its 2002 year,
sold several German and Polish subsidiaries earlier this month.
In Europe, MyTravel operates Sun Cruises, a four-ship cruise
line; two airlines with a fleet of 52 aircraft; 80 principal
vacation brands; and 93 hotel and resort properties.
Jerry Limone contributed to this report.
To contact reporters David Cogswell, Rebecca Tobin or Jerry
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