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 analysts.

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 Outlet brand.

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."

Flightserv

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 Airtours.

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

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 sites.

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 said.

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 sold.

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 Limone, send e-mail to [email protected], [email protected] or [email protected].

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