Consolidation among travel agencies was intensifying even before the pandemic. And now, more than a year into the Covid-19 crisis, with tight margins, scarce cash, and buyers and sellers both seeking to bolster their competitive positions through mergers, it has become an active market for agencies that have the capital and willingness to grow through acquisitions.
Last week, two major acquisitions were announced. Frosch International Travel (#14 on Travel Weekly’s 2020 Power List) has acquired Valerie Wilson Travel (#36). Additionally, American Express Global Business Travel (GBT, #3) announced plans to acquire Egencia, the business travel arm of the #1 Expedia Group, pending regulatory approvals.
The acquisition of Egencia 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.
This trend is unlikely to stop in the near future, according to Robert Joselyn, CEO of Joselyn Consulting Group.
He predicted that the agency stacking will only end “when someone turns on the revenue taps.” While domestic travel is a lifeline for many right now, Joselyn said he believes consolidation between agencies of all sizes will continue at least into early 2022.
“Consolidation was already happening, but the pandemic will influence it even more,” said Lorraine Sileo, principal analyst at Phocuswright and founder of Phocuswright Research. “It’s a buyer’s market as companies shed unprofitable businesses or those that don’t integrate. The need to continue investing in technologies like artificial intelligence and machine learning and [to promote] health and security [and reduce friction] has already raised the bar for travel agencies, so volume and leverage play an even bigger role.
“For Expedia, she intends to stick to her knitting in the leisure area,” she said.
Consolidation is natural as industries mature, said Jack Mannix, principal of Jack E. Mannix & Associates. Price competition has become an important factor in the field of business, which often leads to a reduction in expenses.
“Even in ‘normal’ times, deep-pocketed big guns like AmEx can see the benefit of consistent business growth and reduced expenses as a percentage of sales,” Mannix said.
Reducing spending has become even more critical over the past year as the pandemic has dramatically reduced demand, he added.
Regarding Frosch and Valerie Wilson Travel, Mannix said the two are “extremely successful companies whose founders have spent 30, 40 or more years building their businesses” and are ready to take advantage of the benefits that consolidation offers. while enjoying the comfort of a second-generation heads.
Two family businesses merge
Frosch’s acquisition of Valerie Wilson Travel brings together two New York-based family 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 vice – executive president.
Valerie Wilson founded her eponymous travel agency in 1981 and remains its CEO. His daughters, Jennifer Wilson-Buttigieg and Kimberly Wilson Wetty, remain co-presidents of the brand. They will join Frosch’s management team. Wilson-Buttigieg’s husband, Brian Buttigieg, was the agency’s chief financial officer; with the acquisition, he was named chief operating officer of Valerie Wilson Travel and general counsel to the Frosch management team.
Eventually, the two brands will move into a downtown building that Frosch is in the process of 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 just because people have used a lot of resources in this last period, but because it’s gotten more complicated.”
Both brands hope to allocate additional resources to areas such as technology, which, in turn, will help attract high-end corporate clients and quality independent contractors (ICs) focused on luxury travel.
“There’s something about endurance in New York and the endurance of two family businesses in New York,” Wilson-Buttigieg said. “It’s a hotbed of entrepreneurs. It’s a hotbed of competition. We’re putting ourselves in the best possible place to attract the best CIs.”
To advisors currently affiliated with either agency, Bryan Leibman said, “You’ve just been upgraded from business class to first class suite.” They will benefit from more technology and buying power, with the same families running the agencies, he said.
“Both brands separately are so focused on family culture,” Wilson Wetty said. “Although we are great, we have competed at world level, we have both always been very focused on our people, our relationships and our integrity.”
Long-term GBT, Egencia goals
GBT CEO Paul Abbott said in a statement that the deal with Egencia would bring “the industry’s leading digital business travel platform” into the GBT fold and subsequently strengthen Egencia with technology, GBT’s content and enterprise capabilities.
As part of the deal, Expedia would become a shareholder of GBT and enter into a “long-term strategic business agreement”, the companies said.
Ariane Gorin, president of Expedia Business Services, said in a statement that the move will help Expedia streamline its business.
“At the same time, a significantly expanded long-term accommodation supply agreement with Expedia Partner Solutions would enhance GBT’s Supply MarketPlace and contribute significantly to Expedia Group’s goal of propelling businesses across the ecosystem,” added Gorin.