Australia-based Flight Centre Travel Group, which has been engaged in slow, strategic growth in the United States for the past decade, closed out 2018 with a play for a stronger foothold on the West Coast by acquiring the U.S. operations of Casto Travel.
"We really had somewhat of a strategic need to make sure that we grew the business in the Silicon Valley in the [San Francisco] Bay Area with an organization that already had quite an establishment there and a lot of relationships and a lot of roots and a great reputation for service," said Charlene Leiss, president of corporate brands at Flight Centre Travel Group USA.
Dean Smith, president of Flight Centre Travel Group Americas, said the company has made a number of acquisitions in the Americas recently. It notably acquired Liberty Travel, its primary U.S. leisure brand, and Gogo Vacations in 2008.
"But in the last couple of years, we've been quite active on the acquisition front," Smith said, including the purchase of StudentUniverse in Boston, Olympus Tours in Mexico and Les Voyages Laurier du Vallon in Quebec. Flight Centre also acquired the itinerary management company Umapped last year.
The company is No. 6 on Travel Weekly's 2018 Power List, with 2017 sales of $16 billion.
On the corporate front, Flight Centre has grown over the years by acquiring Garber's Travel Service in Boston, Bannockburn Travel Management in Chicago and now Casto.
"In addition to that, we've had pretty significant organic growth across our businesses, as well," Smith said. "We're very positive around the position that the Flight Centre Travel Group has across the Americas and the U.S. in particular, and it's been [built on] both acquisition and organic growth. Particularly the corporate segment has been our fastest-growing segment, and that's part of the reason why Casto happened."
Flight Centre expects to close the acquisition next month. Casto will operate under FCM Travel Solutions, one of the group's primary corporate brands, and for the time being will retain its name, Leiss said.
Leiss said FCM Travel Solutions is Flight Centre's large-market, multinational, corporate brand, which operates in 99 countries. Corporate Traveller is the group's other primary corporate brand, serving small to medium-sized enterprises in 20 U.S. cities. While FCM Travel Solutions has grown through acquisitions, Corporate Traveller's growth has been organic.
Flight Centre has plans for continued growth in the U.S.
Leiss said the group is in all the major U.S. markets now as well as a number of secondary markets, and it is looking to grow based on client needs. Flight Centre, she added, is also advancing the technology platform it offers corporate clients, especially small to medium-sized enterprises, which are increasingly looking for more advanced offerings that include things like loyalty and "gamification" (the application of game-design elements and principles).
On the leisure side, Smith said, "We are actively looking for any independent agency groups that could be available to join us, so that would probably be our strategic view for acquisition growth there."
Liberty Travel's host agency, Independent by Liberty Travel, is already realizing growth. Smith said that Independent, introduced last year, has "well over" 500 independent contractors (ICs) in the U.S. and Canada, split fairly evenly between the two countries, and he said that at launch last February, it had about 60 agents. Smith said the host is "somewhat selectivist" with the ICs it lets join, as "it is a service-based offering and not a price-based offering."
"We see a huge opportunity in leisure for customers who value service over price," Smith said, adding that while StudentUniverse is an online player, Flight Centre's other leisure brands, Liberty Travel and Travel Associates, are not. "We don't intend to be an online player. We really are looking for customers who want that human touch."
While Flight Centre is not "aggressively acquisitive," Smith said he does expect future acquisitions to continue at about the current rate of one or two per year.
Flight Centre's main competitor in the U.S. market is Travel Leaders Group, according to Jack Mannix, founder of the consultancy Jack E. Mannix & Associates. Both companies are diversified and offer both corporate and leisure services, he said, and both have been part of the rampant consolidation the industry has seen in the past two decades.
Companies with diverse brands have some inherent advantages over others, he said, such as economies of scale.
"I think there's a clear advantage there," he said. "Does it render everybody else uncompetitive? No, I don't think so, but it certainly gives them vertical and horizontal integration that's got to be advantageous for them."
Atmosphere Research Group founder Henry Harteveldt also pointed to Travel Leaders Group as a competitor, along with American Express Travel and Signature Travel Network. Globally, Harteveldt pointed to competition from Thomas Cook and TUI Group.
"In the U.S., I strongly suspect the Flight Centre brand is not as well known as brands such as Signature or Travel Leaders," he said. "On the other hand, what I would say is the brands they own — for example, Liberty — certainly would be very well known in the communities where they operate."
Harteveldt praised Flight Centre for letting acquisitions keep their names, saying, "They're not allowing corporate ego to get in their way when it comes to branding."