TUI Group is selling its Hotelbeds Group, which includes Hotelbeds, Pacific World and Intercruises, to UK private equity firm Cinven Capital Management, which had previously invested in Amadeus, and Canada Pension Plan (CPPIB) Investment Board.
A highly profitable business, the deal fetched around 1.2 billion euros and is expected to be completed by end-September subject to regulatory approvals.
Pacific World’s chairman and regional managing director, APAC of Hotelbeds Group, Herve Joseph-Antoine
The sale is expected to remake the bedbank business as the new ownership expects considerable growth opportunities through further investment in IT, tapping growth in Asia and other markets, and consolidation in the wholesale accommodation market, which remains highly fragmented.
Another major bedbank, GTA, is also banking on a new parent to make further investments along similar lines as its current owner Kuoni Group goes through the process of being sold to Swedish private equity firm EQT.
Cinven had invested more than one billion euros in R&D during its ownership of Amadeus, generating a return of seven times, a statement pointed out. It fully realised its investment in Amadeus in November 2011.
The statement said Cinven/CPPIB are buying Hotelbeds Group because of:
• Strong financial performance with double digit total transaction value growth in the bedbank business over the last five years;
•Strong underlying market growth supported by an expected increase in global hotel bookings;
•Hotelbeds’ highly experienced, proven management team, led by Joan Vilà, CEO, with an outstanding track record of driving organic growth in both its hotel supply and customer base;
•Market consolidation opportunities in Europe, Middle East, Asia and the Americas given market fragmentation and potential for further margin improvement through economies of scale;
•Opportunity to improve bedbank distribution via travel agents and tour operators – particularly in emerging economies – via investment in its sales and contracting team, as well as investment in R&D and IT systems to improve customer efficiencies and services.
Vilà, who will remain CEO of Hotelbeds Group, commented: “The bedbank segment continues to grow fast and with the backing of Cinven and CPPIB we will be well placed to invest more strongly than ever in technology, innovation and distribution. We look forward with anticipation to supporting the growth of our trade partners in this next stage of our development.”
Contacted by TTG Asia, Pacific World’s chairman and regional MD APAC of Hotelbeds Group, Herve Joseph-Antoine, said: “We expect to drive further important growth for all brands within Hotelbeds Group, but at this stage of the transaction process this is early to provide more specific details.”
For such a profitable, sunrise business, TUI’s decision to sell Hotelbeds has baffled industry members for months. Some speculated that TUI was simply cashing out while others said the Hotelbeds Group did not sit well with TUI’s vertical integration strategy.
Fritz Joussen, CEO of TUI Group in a statement confirmed both factors as influencers: “Following its transformation in the past few years, TUI Group has had a clear strategic agenda, covering the complete value chain from distribution via flight all the way to group-owned hotels and cruise ships as well as destination services. The group seeks to further strengthen this positioning.
“We combine the economies of scale of a global player with the strengths of our local markets and companies and their customer focus. We will use the disposal proceeds to continue our growth path, in particular in terms of content, and strengthen our balance sheet.”
– More insights in our Bedbanks report, TTG Asia, July issue