Navigant International last week confirmed it bought Little Rock, Ark.-based World Wide Travel Service, bolstering its position as the second-largest corporate travel agency. The October purchase followed the mega deal between American Express and Rosenbluth International and smaller corporate agency consolidation by the likes of Adelman with Rifkin and NFT with The Travel Team.
This activity is occurring before the traditional end-of-the-year time for agency mergers and acquisitions, and there's more to come. "Navigant once again is in the acquiring mode," said Paul Shamon, vice president of marketing and communications for Englewood, Colo.-based Navigant.
First reported by BTNonline, Navigant's acquisition was a bit of a surprise for some financial analysts, although they noted Navigant had just announced the refinancing of its debt. Until last week, the company was saying that paying debt was a higher priority than making acquisitions.
Other agency executives also are in the midst of frenetic consolidation discussions. "I don't think there will be any more consolidation," joked TQ3 Travel Solutions president Jack O'Neill at the National Business Travel Association convention in August. Another panelist responded by saying, "Here you go, Jack," while mimicking the passing of a marijuana cigarette, suggesting agency executives would have to be on drugs to miss the pressures to consolidate.
"Most of these acquisitions are being made on a performance basis," said Innovative Travel Acquisitions broker Doug Haugen. "Based on what business sticks around or comes in the door, I might pay you a percentage of those earnings that come in for a certain timeframe. Still, a lot of agencies out there are in the 'hanging in there' mode, but the values and numbers of agencies are continuing to go down."
"As the economy gets better, Navigant feels a little better about getting back on the acquisition trail," said Sidoti & Co. analyst David Gold. "Every metric going in and out of the third quarter showed nascent signs that corporate travel is starting to recover, which makes us feel very optimistic about 2004." Gold said Navigant is saving millions of dollars in interest expenses, thanks to the recent restructuring of its debt, "which is nice."
The company's optimism showed in its most recent earnings report, despite lower year-over-year net profits. "We are prepared to take advantage of improvements in the economy, which we believe will further strengthen corporate travel and related transaction levels," said chairman and CEO Ed Adams. Transaction levels approaching those seen in 2002 seem to indicate that the industry is past its spring 2003 trough. Navigant officials added that the volume recovery has continued into this month.
Speaking to analysts, Navigant officials said it would be 2004 before it detects fallout from the Amex-Rosenbluth deal. According to Adams, the company is bidding on new business worth $2 billion in air sales.
The World Wide Travel Service buy brings together volume that more definitively lodges Navigant as the second-largest corporate agency. In 2002 rankings published in BTN's Business Travel Survey
(BTN, May 26), Navigant was bigger than WorldTravel BTI as measured by transactions, but not by volume. However, the combined 2002 WWTS and Navigant ARC volumes eclipsed WorldTravel BTI's $3.6 billion. All figures are self-reported.
WWTS did not return calls last week, but an Oct. 7 message on its Web site indicated that "we have partnered with Navigant International." The message told clients that their WWTS contacts will not change, and its management remains intact. "As a result of this partnership, we will now have access to significantly increased resources and the negotiating strength of a multibillion-dollar business," according to the site.
Like Navigant, WWTS processed about three-quarters of its 2002 reservations using Sabre. A Radius member for about the next five months, WWTS said it had 350 full-time employees at the end of last year.
WWTS for 2002 reported the highest online adoption of any corporate agency, with a rate of 51 percent. The agency supports third-party products as well as its own QualityAgent, and it has additional technology that overlaps with some of what Navigant gets from its Aqua Software Products subsidiary, such as quality control tools.
How the pair will treat their technology will be an interesting question going forward. However, WWTS did say it will join Navigant in rolling out its NaviSphere technology infrastructure next year.
Navigant last month said an online booking engine it bought earlier this year, formerly known as Powertrip
(BTNonline, May 28), would be branded Passportal.com. The booking engine will be tested next quarter and launched next summer as part of NaviSphere, which will integrate Navigant's AlertFLYR, ReportFLYR and InvoiceFLYR products, as well as quality control, profile management and security tools, officials said.
Aimed at the midmarket, the Passportal booking tool will access fares through global distribution systems, Aqua's Web search tool and other sources. "We're in talks with all the airlines as far as looking into the most direct way of getting their inventory," said Navigant's Shamon when asked about access to Southwest Airlines.
He said only the basic engine of what is being built resembles the old Powertrip. Navigant is spending upward of $2 million per quarter on information technology.
"Passportal fees will be competitive with other online booking engines that are available, and as customers choose more services, the fees will increase," said CFO and COO Robert Griffith. He noted that Navigant paid for WWTS partly with stock, partly with cash. "If you look at travel booking as a continuum, you can have touchless for $5 and a full-service transaction that might be as high as $50. In that $5, there are third-party revenues from hotels, car and others that we and the online competitors retain."
Travel management technology also is a key factor in recent, smaller agency consolidation announcements. Ansonia, Conn.-based Rifkin Travel Inc. in September announced its merger with Milwaukee's Adelman Travel, which reported 2002 sales of $144 million. The companies said Rifkin has annual sales of more than $15 million. In January of this year, Adelman combined with Windsor, Conn.-based Professional Travel Corp., a $20 million agency.
"Through Adelman, we will be able to provide our clients with additional resources, including technology that provides automated booking, quality control and reporting advantages," said David Rifkin, president and CEO of Rifkin Travel. He will remain with the combined company as a senior vice president working from the Ansonia office.
"With the addition of Rifkin Travel and our recent sales successes, we should see over 30 percent growth in sales this year," added Adelman president and CEO Craig Adelman.
In Buffalo, WorldTravel BTI affiliate The Travel Team last month announced the acquisition of Amherst, N.Y.-based NFT Travel, adding 70 employees to The Travel Team's 105 and doubling its transactions. The Travel Team, which did not disclose precise figures for the transaction, said that it expects more growth along the lines of 75 new employees over the next three years.
"By growing the company through acquisitions, we expect to increase our buying power, enabling The Travel Team to provide valuable services to our clients, such as exclusive fares, preferred seating, wait list clearances and merchant model pricing on hotels," said president Jean McDonnell Covelli. "We also expect to realize greater operational efficiency as we continue to grow, thereby allowing us to make further investments in the technology and services that large national and international clients demand." Rich Products Corp., also in Buffalo, owns The Travel Team.
NFT's principal owner and president Brian Deters was named vice president of sales and marketing for The Travel Team.
In the online world, Expedia parent InterActiveCorp last month said it acquired Anyway.com, which it called the third-largest online travel site in France, for about $62.7 million. Anyway.com was a wholly owned subsidiary of Canadian packaged tour operator Transat A.T. Inc.
"Strategic acquisitions of foreign companies is definitely part of this trend," Innovative Travel Acquisitions' Haugen said.