Skift Take

As CEO Gareth Williams says, the Ctrip deal means that nothing and everything changes for Skyscanner. The focus of the business and the growth plans will remain in place but getting a wealthy new owner from the world's fastest-growing travel market will bring a multitude of new opportunities.

Ctrip’s pending $1.74 billion acquisition of UK metasearch website Skyscanner happened fast — even as the company was exploring a 2017 initial public offering.

It only took between two and three months – from first meeting to final signing – to conclude the biggest European travel tech deal of the year. Perhaps that’s why the management teams were able to keep it under wraps.

Despite the deal seemingly coming out of nowhere, the signs were plentiful that something big was going to happen at Skyscanner.

One of its biggest investors, venture capital firm Scottish Equity Partners, started tongues wagging when co-founder Stuart Paterson told Business Insider that an IPO in 2017 was part of the plan.

Then a month ago Bloomberg reported that both a sale and IPO were being explored. No names were mentioned and hence the widespread surprise last week when Ctrip announced it would buy Skyscanner.

It’s unclear whether there were other bidders for Skyscanner other than the Chinese online travel agency and that isn’t something that Skyscanner CEO Gareth Williams is willing to discuss.

“We’re not at liberty to go into that area,” he says.

He does however, admit that an IPO was in the works until Ctrip came along.

“Yes, all options were on the table and we’ve been examining that possibility for awhile. In the end we found a strategic partner that it made more sense to go with,” he says.

Speaking to Skift over the phone, Williams sounds relaxed about how the whole process has played out and about his new partners.

“I think they [Ctrip] still have a very entrepreneurial culture; the founders are still involved, Jane [Sun], the new CEO has been doing an excellent job as COO up until that point. [So we have] very good relationships with the senior team, and I’ve been hugely impressed with what they’ve achieved,” he says.

What happens next?

While the purchase price attracted a lot of attention, Williams is keen to stress that many things – such as the headquarters in Edinburgh – will remain the same.

“Well, fundamentally it will be business as usual, the Skyscanner brand is maintained, our culture and our teams are focusing on the same strategy. But over time there will be things that Ctrip has built for the China market, and in due course we will seek to get additional gains from some of those services,” he says.

That could mean adding things such as rail, ground transport and attractions to Skyscanner’s offerings.

The amount paid by Ctrip is a little bit more than the company’s valuation following its most recent round of venture funding. At around that time, the Priceline Group, the owner of metasearch rival Kayak, had explored the possibility of acquiring the company. The fact that this didn’t happen, left the door open for Ctrip to swoop in.

Ctrip CEO Sun told separately told Skift that one of Skyscanner’s investors also needed some liquidity.

In recent years Skyscanner’s revenue growth has slowed, something that its new owners will undoubtedly look to reverse.

“I’m of the strong belief that if we focus, number one, on travelers, and second, providing excellent distribution for real-world travel suppliers, like airlines and hotel chains, that the right profitability characteristics will come as a natural result out of that over time. Our focus is not on bottom line, it’s on a better traveler value, supplier value, and the rest will come out of that,” Williams says.

He adds: “I think we’re not close to having a settled view of how online travel should work in the future. Our focus is on solving that problem, rather than optimizing the current state of what we’ve built so far.”

Williams’s comments show a CEO who is happy to accept that there may come a time when his company has to pivot away from its current strategy. The travel industry is full of businesses that have discovered a way to make money and are therefore reluctant to move away from it even if demand changes.

“Essentially we’re a two sided marketplace, and the forms of interaction for the traveler will be many and varied, and absolutely dominated by a mobile device context. But that will come in many forms, whether it be voice, integration to other platforms, a metasearch experience but with booking experience built in under NDC [New Distribution Capability] and working with OTA [online travel agency] partners. So essentially a two-sided marketplace,” Williams says.

“Metasearch is, as it’s classically understood, is just a partial implementation of a full two sided marketplace,” Williams says.

Direct bookings and the future

Skyscanner began life as an Excel spreadsheet in 2001 when Williams and co-founders Bon Grimes and Barry Smith came up with the idea of creating a flight-comparison website.

Although it has grown in size, its business model has stayed broadly the same.

In recent years Skyscanner, however, has dipped its toe in the water in the area of direct booking. Although this only represents a small percentage of overall business at the moment it would seem like a logical step to grow this area.

“I think most important thing is a fully comprehensive and authoritative range of coverage. Provided we have that; we have a strong role with travelers. Now in addition to that, the convenience of booking within the experience of say the app, is an additional convenience, and it’s what you get outside of online travel. Whether it’s Alibaba and Tmall or Amazon, booking within the experience is completely normal,” Williams says.

Whatever direction Skyscanner gores in in the future, its relationships with airlines will remain crucial.

Rival Momondo has recently become embroiled in an argument with European low-cost carrier Ryanair over some of the online travel agencies displayed in its flight search results.

When asked about how Skyscanner showed results, Williams spoke of utilizing an airline-centric approach.

“Well, wherever technically we’re capable of showing the airline direct, we do so. One of the consequences of that is historically we, and currently,have excellent relations with airlines on the whole,” he says.

Regardless which direction Skyscanner decides to go in following the acquisition, Williams apparently will be the one steering the ship for the immediate future.

“I’m pretty excited about with what the future holds and my contribution to that,” he says.

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Tags: ceo interviews, ctrip, mergers and acquisitions, metasearch, skyscanner

Photo credit: Skyscanner CEO Gareth Williams. His company has been acquired by Ctrip for $1.7 billion. VisMedia / VisMedia

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