SAN FRANCISCO -- Although rumored for weeks, news of the Amadeus
acquisition of Vacation.com for about $90 million in cash, stock
warrants and debt assumption, sent shockwaves through the industry,
leaving many scratching their heads over what the CRS hopes to
achieve and what lies ahead for member agencies.
"You have to ask yourself, 'What does Amadeus want to
accompish?' " said Sue Shapiro, president of the Giants
consortium.
If it's to convert agencies to the Amadeus system, the CRS has a
rough road, Shapiro and others said.
Don Gould, president of The Travel Authority, said his network's
preferred CRS vendor is Amadeus, yet, after three years, only 28%
of members are on the system, compared with 26% when the deal was
first struck.
"What is Amadeus getting?" asked Gould. "It's not an easy task
[to convert] agencies from one system to another."
And Gould, who also heads Consortium Marketing Alliance (CMA), a
loose-knit group of eight consortia, believes regional agency
groups have nothing to fear: They will retain their strength and
attractiveness against better-funded competitors such as
Vacation.com.
"There's a lot more value in a local brand established by an
agency than anyone has ever considered," he said.
"Vacation.com is a fine operation and they are good people, but
just developing a brand isn't the answer. If that were true,
[American Express] and AAA would have captured the market a long
time ago."
Others were stunned by the terms of the acquisition.
"It seems like a huge amount of money," said John Kloster,
former president of Midwest Agents Selling Travel (MAST) and now
president of Kloster Associates, a new agency consortium.
The only way that move makes sense is to convert agencies, which
can be tough unless there is an attractive package that is more
favorable than other CRS contracts, said Kloster, who was one of
the first to sign a preferred vendor deal with Amadeus as head of
MAST.
"[With] a purchase price that's $10,000 per agency, obviously
what Amadeus is buying is the right to talk to those agencies and
assume the right to convert them. I don't think there will be any
mass defections, but clearly agencies will want to see something
from the deal that will benefit them."
Norm Sherman, Suburban Travel, Larchmont, N.Y., and a founding
president of Giants, said he is "disturbed" by the sale because
travel agent members who produce the volume the sale is based on
are not profiting from it.
"It is the basic difference between the co-op and a consortium
that is owned by a select few," he said. "Each agent has to ask
himself the question: Is it worth lending his name and his volume
for someone else to become wealthy?"
Agency trade group reaction to Amadeus' acquisition of
Vacation.com was positive.
"This is a testimonial to the positive outlook for agents in the
marriage between brick-and-mortar agents and technology providers,"
said William Maloney, ASTA staff executive vice president. "We
think that it is marvelous that million and millions of dollars are
being invested in a business model that is centered around
agents."
Meanwhile, ARTA president John Hawks played down the
significance of Vacation.com's nearly $30 million debt.
"I think CRSs are used to the concept of the cost of acquiring a
customer," Hawks said. "Looking at the lifetime value [of the
customers] that was probably a cheap price. [The sale] certainly
gives [Vacation.com] a lot of access to capital, which never
hurts."
Joseph Galloway, president of Houston-based Trans-Continental
Travel -- a member of Vacation.com -- said the evolution of the
consortium, which began life as a Web site, validates that agencies
are far from extinct.
"I think what you are seeing is that you need warm bodies to
complete sales," Galloway said. "I think that's what all this
shows," Galloway said. "I think this is very good news."
Several Vacation.com agents called at random said they miss the
close-knit associations of their former regional consortia, all
bought by Vacation.com during a buying spree in 1998 and 1999, and
all said they have seen no business from Vacation.com's
multimillion dollar advertising campaign, designed to generate
leads to agents through the company's Web site.
"My initial reaction is what a shame because the company just
seems getting bigger and bigger," said Derek Cond, president of
R&D Cruises and Tours, Seattle.
Jennifer Wise, manager of All Seasons Travel, Phoenix, said she
was concerned that a sale came so quickly.
"What was the problem? Did they run out of money?" she wondered.
The agency has considered switching to another agency network, but
has decided to stay put and to see what the future holds.
Jim Johnson, owner of Bodet Steamship and Travel, San Antonio,
also was wary.
"I think that Amadeus agencies may get a foot up on other
agencies because it would be easier for them to get up on the
platform. They will have to do something for us (non-Amadeus
agencies) or they would have a revolt on their hands."