Friday, 7 November 2003

Cendant buys huge UK consolidator

The Cendant Corp. — already the most vertically integrated travel company in the USA — further expanded its range of holdings yesterday with its purchase of Travel 2 / Travel 4 , perhaps the largest purely wholesale airline consolidator in the UK (as well as a major tour and land services wholesaler).

Consolidators have long had a much larger share of ticket sales in most other countries, especially the UK, than the USA. Travel agents in the USA have been looking increasingly to consolidators as a way to offer travellers lower prices than are available directly from the airlines, at a higher profit margin than published fares (on which airlines no longer pay commissions to most travel agents). Most USA-based airlines, computerized reservation services (like Cendant’s Galileo division) and travel agencies that have traditionally ignored consolidators, and assumed that the available ticket prices were those published directly by airlines (when in reality there are far more consolidator prices than published fares), are poorly prepared to negotiate or market consolidator tickets.

For all these reasons, it makes sense for a company like Cendant to acquire successful consolidators to expand the range of prices they can offer both to the public and to the travel agents who subscribe to Galileo. Cendant started with Cheap Tickets in the USA; Travel 2 is a logical successor acquisition.

According to the announcment of the purchase, “Cendant Travel Distribution Services will use some of the technology available in its other subsidiaries, such as Galileo … , to significantly enhance the offerings made by Travel 2/Travel 4 to the retail travel trade.” It’s unclear if that means that consolidator prices from Travel 2 will be made available to customers in the USA through or Galileo subscriber travel agencies, or if Travel 2 will still sell only through retail agencies in the UK.

Integrating Travel 2 with the rest of Cendant’s information technology will also make it more difficult for Cendant to evade compliance with European Union customer data privacy laws. As DontSpyOn.US has recently reported , Cendant is planning a unified customer database , including a lifetime “Cendant ID number” for its dossier on each person who touches any tentacle of the Cendant octopus. Cendant provides CRS services in the EU, but has thus far avoided admitting to a direct relationship or responsibility for protecting the privacy, in accordance with EU law, of Cendant customers in the EU. That won’t be possible with Travel 2, as a UK-based subsidiary: if Cendant wants to include any data from Travel 2 in their new central data warehouse, all of Cendant, and especially the central customer database (wherever it is located), will have to be brought into compliance with UK and EU privacy law.

“Terms of the acquisition were not disclosed” in the announcement, “But are not material to Cendant. The transaction is not expected to have a material impact on future Company earnings. This transaction reflects Cendant’s previously announced strategy of identifying “tuck in” acquisitions.” That’s indicative of the scale of Cendant as a vertically-integrated travel Goliath: Travel 2 is “not material” to Cendant, even though Travel 2 serves 200,000 travellers a year and has annual gross revenues of GBP170 million (approx. US$285 million).

Link | Posted by Edward on Friday, 7 November 2003, 08:08 ( 8:08 AM)
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