New York-based Altour, the largest American Express representative agency, has agreed to buy the second largest, the Travel Authority, an employee-owned firm based in Jeffersonville, Ind., with a closing set for Sept. 30.
Altour was No. 19 on Travel Weekly's Power List this year, with 2008 sales of $569 million, whereas the Travel Authority was No. 34, at $278.4 million. With business off in a recession year, the announcement nevertheless characterized current combined sales at "more than $800 million."
Travel Authority President Tom Lumley, who is at retirement age, will continue on the board and take an advisory role. He will be succeeded as president by Lee Thomas, who is currently executive vice president.
Aside from that change, management of the firms will remain the same, and they will continue operations under their existing names.
Lumley said the Travel Authority was "looking at opportunities" after seeing sales drop 30% and after cutting out as much cost as possible "without depriving the customers ... who expect the same services."
He said Amex had helped start the process. "I guess American Express knew Altour was looking to grow and that we were looking for equity. ... It looked at us and said, 'You guys should talk.' " Talks started in late May.
Altour will buy 100% of the stock in the Travel Authority's employee stock ownership plan, which is the latter's retirement plan. Lumley said he expected most of the 230 employee owners to roll over the funds into 401(k)s.
Meanwhile, the buyer's overriding goal is growth. Altour's president, Alexandre Chemla, said, "Our industry is based on buying power; there is no going back." With the Travel Authority, he said, "there are such good economies of scale."
In addition, he said, the Travel Authority has "amazing professional people," and "we fell in love with the technology that we can use." The Travel Authority owns SwiftTrip, a software development company that created the agency's proprietary corporate booking tool.
Altour and the Travel Authority are among the few independent agencies to operate 24-hour call centers for clients; the Travel Authority center is also a service bureau for 25 to 30 agencies, Lumley said.
Chemla said Altour did not buy based on volume but on how a business was run. However, he said he expected Altour to be a $1 billion business by 2010. He said he was pursuing additional acquisitions, which could close this year.
The Travel Authority purchase comes in a busy year for Altour. It joined the Amex rep network in mid-May on terms that included making a number of Altour products available to all reps.
Key among the offerings is an aviation program that encompasses scores of negotiated deals for commissionable, net or bulk-rate airfares. To participate in the air program, agencies give up ARC and become Altour branches.
This summer three additional agencies joined this alliance: Aer Travel in San Diego; Cottonwood Travel in Greeley, Colo.; and Highlands Ranch (Colo.) Travel.
The developments also come in a year when Altour's name turned up on a list of thousands of victims of Bernie Madoff's Ponzi scheme. Chemla said he was "not happy about it," but fortunately the agency's investments were diversified, with "small percentages invested in various places." He said the Madoff losses haven't affected the agency financially, and if they had, "we couldn't do these purchases."
Altour also keeps some resources liquid for things such as acquisitions, Chemla said. "My best return is on my own company," he said.