Last year closed with the announcement of two
acquisitions in December: Corporate Travel Management (CTM), No. 14 on the
Travel Weekly 2015 Power List, furthered its growth in North America by
acquiring No. 39, Montrose Travel, for $34.3 million, while Flight Centre
Travel Group (FC USA), No. 8 on the Power List, cemented its position in
student and youth travel with its acquisition of StudentUniverse, which
specializes in student travel, for $28 million.
Consolidation has been an industrywide theme for
several years, and it’s not likely to change soon. Last year Expedia acquired
Orbitz and Travelocity, and the year started with Frosch’s acquisition of
In 2014, Direct Travel acquired Peak Travel, and CTM
acquired U.S. Travel. Even more large-scale combinations occurred in 2013 and
The world of smaller agencies has also seen its fair
share of acquisitions.
Bob Sweeney, the president and CEO of Innovative
Travel Acquisitions, said the acquisition market for agencies is strong right
now. Niche agencies provide at least 50% of Innovative’s income, he said.
He attributed the number of acquisitions to mostly
“age-driven reasons.” As baby boomers continue to mature, they will
increasingly look to sell their agencies, he said. Additionally, low interest
rates have been a boon to buyers, Sweeney said.
Mark Pestronk, a travel industry lawyer and Travel
Weekly’s Legal Briefs columnist, agreed that boomers eyeing retirement drive
consolidation as do “buyers who think that their incremental revenue will
increase when their volume increases” and said agencies consolidate in order to
hit higher commission levels.
Pestronk said the higher rate of consolidation seen in
recent years will continue for at least another two years, but beyond that it’s
difficult to tell if the trend will last. But based on the retiring baby boomer
theory, Sweeney predicted the rate of consolidation will continue for 10 years,
inasmuch as the youngest of the boomers are in their early 50s today.
Corporate firms are more popular among buyers,
Pestronk said, “because the most profitable agencies for the past 35 years have
been corporate agencies.”
Sweeney agreed. “When a corporate-focused agency says,
‘I’m ready to sell,’ it attracts quite a bit of attention,” he said.
The right fit
Montrose had not listed its business for sale,
according to President Joe McClure, but it had been courted by several
companies over the past few years.
“When you look at the opportunities that are available
to us, or the threats that are lurking around the corner out there, we have one
of three options,” he said: continue to grow organically (Montrose has never
acquired another agency), start acquiring agencies or be acquired.
According to the 2015 Power List, Montrose’s split is
88% business travel, 7% leisure and 5% other.
CTM felt like the right fit, he said. McClure and his family
will remain in their current positions; Julie McClure is the CFO and Andi
McClure-Mysza is the president of the company’s host agency, MTravel.
Montrose will remain with Ensemble Travel Group “for
the immediate future,” Ensemble co-president Libbie Rice said.
For CTM, the acquisition “creates greater scale in the
U.S.,” founder and managing director Jamie Pherous said.
Pherous said he believed the acquisition would move
CTM into the top 12 travel management companies in the U.S. Based on figures published
in last year’s Power List, the combined 2014 sales stood at $1.84 billion.
In addition to the geographic attraction of its
location in California, Montrose also has a well-established loyalty division,
which CTM hopes to leverage in the U.S. and globally.
While Flight Centre tends to grow organically
elsewhere, the company has a history of acquisitions in the U.S., according to
Dean Smith, president of Flight Centre Travel Group, Americas. In late 2007 it
purchased Liberty Travel, a bricks-and-mortar powerhouse in the New York metro
area that at the time was No. 10 on the Power List.
Flight Centre is attracted to niche businesses like
StudentUniverse because it fills a space that Flight Centre
had not previously occupied. While Flight Centre has student travel brands in
other markets, this marks its first in the U.S.; StudentUniverse’s proprietary
technology, including its age-verification system, was also attractive, Smith
Atle Skalleberg, CEO of StudentUniverse, will remain
at its helm, with his management team and employees in place. He said his
company has experienced solid growth in North America, as well as “phenomenal”
growth in other markets, such as Asia and Europe.