Consolidation among travel agencies was heating up even before the pandemic. And now, more than a year into the Covid-19 crisis, with margins stretched thin, cash in short supply and buyers and sellers both looking to strengthen their competitive positions through mergers, it has become an active marketplace for agencies that have the capital and drive to grow through acquisitions.
Last week, two major acquisitions were announced. Frosch International Travel (No. 14 on Travel Weekly's 2020 Power List) acquired Valerie Wilson Travel (No. 36). Additionally, American Express Global Business Travel (GBT, No. 3) said it plans to acquire Egencia, the corporate-travel arm of No. 1 Expedia Group, pending regulatory approvals.
The Egencia acquisition comes on top of GBT's purchase of another top Power List agency, No. 15 Ovation Travel, in January. And in September, Corporate Travel Management, which is No. 11 on the list, acquired Travel and Transport, No. 13.
That trend is unlikely to stop in the near future, according to Robert Joselyn, CEO of the Joselyn Consulting Group.
He predicted the rollup of agencies will only end "when somebody opens the faucets on revenue." While domestic travel is a lifeline to many right now, Joselyn said he believes consolidation among agencies of all sizes will continue through at least early 2022.
"Consolidation was already happening, but the pandemic will influence even more of it," said Lorraine Sileo, Phocuswright senior analyst and founder of Phocuswright Research. "It's a buyer's market as companies shed unprofitable businesses or those that don't fit in. The need to keep investing in technology like artificial intelligence and machine learning and [to promote] health and safety [and reduce friction] has already raised the bar for travel companies, so volume and leverage play an even bigger role.
"For Expedia, it intends to stick to its knitting in the leisure space," she said.
Consolidation is natural as industries mature, said Jack Mannix, principal of Jack E. Mannix & Associates. Competition on price has become a big factor in the corporate arena, which often leads to expense reduction.
"Even in 'normal times,' the big guns with deep pockets like AmEx can see the benefit of constantly growing the business and reducing expenses as a percent of sales," Mannix said.
Expense reduction became even more critical in the past year-plus as the pandemic severely reduced demand, he added.
With regard to Frosch and Valerie Wilson Travel, Mannix said both are "extremely successful companies whose founders have spent 30, 40 or more years building their business" and are ready to take advantage of the benefits that consolidation provides while enjoying the comfort of second-generation leaders.
Two family businesses merge
Frosch's acquisition of Valerie Wilson Travel brings together two New York-based, family-owned businesses that have been in the industry for decades.
Frosch, founded in 1972, was acquired by Richard Leibman in 1977. He remains Frosch's chairman, while his son, Bryan, is the agency's president and CEO and his daughter, Lara, is executive vice president.
Valerie Wilson founded her eponymous travel agency in 1981 and remains its CEO. Her daughters, Jennifer Wilson-Buttigieg and Kimberly Wilson Wetty, remain co-presidents of the brand. They will join Frosch's executive leadership team. Wilson-Buttigieg's husband, Brian Buttigieg, was the agency's CFO; with the acquisition, he was named COO of Valerie Wilson Travel and general counsel for Frosch's executive team.
Eventually, both brands will move into a midtown building Frosch is renovating.
The acquisition, Bryan Leibman said, will create more resources for both brands.
"We need resources today," he said. "This industry is going to continue to consolidate. It's going to need more resources, not only because people have used up a lot of resources in this last period of time but because it has become more complicated."
Both brands hope to allocate additional resources to areas like technology, which will, in turn, help attract premium corporate clients and quality independent contractors (ICs) focused on luxury travel.
"There's something about the staying power in New York, and the staying power of two family businesses in New York," Wilson-Buttigieg said. "It's a home of entrepreneurs. It's the home of competition. We are putting ourselves in the best possible place to attract the best ICs."
To advisors currently affiliated with either agency, Bryan Leibman said, "You have just gotten upgraded from business class to the first-class suite." They will benefit from more technology and buying power, with the same families leading the agencies, he said.
"Both brands separately are so focused on the family culture," Wilson Wetty said. "While we're big, we competed on a global level, we've both always been very much focused on our people, our relationships and our integrity."
Long-term GBT, Egencia goals
GBT CEO Paul Abbott said in a statement that the Egencia deal would bring "the industry's leading digital business travel platform" into the GBT fold and will subsequently strengthen Egencia with GBT's technology, content and enterprise capabilities.
As part of the deal, Expedia would become a shareholder in GBT and enter into a "long-term strategic commercial agreement," the companies said.
Ariane Gorin, president of Expedia Business Services, said in a statement that the move would help Expedia simplify its business.
"At the same time, a greatly expanded, long-term accommodations supply agreement with Expedia Partner Solutions would enhance GBT's Supply MarketPlace and meaningfully further Expedia Group's goal of powering businesses across the entire ecosystem," Gorin added.