When travel companies go shopping, they often have market consolidation in mind. But lately, some businesses have been using acquisitions and equity investments as a strategic learning opportunity.
Often the additional goal now is to try to cross-pollinate a startup’s culture and innovations with the operations and thinking of corporate headquarters.
“I’m seeing travel companies increasingly get creative with strategic investments in emerging technology,” said Jen Ford, chief financial officer of vacation rental property management tech startup TurnKey and a former key mergers and acquisitions negotiator for HomeAway. “They’re creating dedicated venture capital funds that are designed to create deep partnerships with private companies.”
“This approach allows the investing companies to tap into and rapidly deploy innovative products and services that delight their customers while maintaining focus on their core competencies.”
To be sure, there are still plenty of traditional mergers and acquisitions. A case in point: In 2017, Accor acquired Mantra, an Australia-based hotel operator, to help the French global giant consolidate its market share in Asia Pacific.
But Accor also ventured into a strategic acquisition, attempting to expand beyond its core competency of lodging. In October 2017, Accor acquired Gekko Group, owner of hotel booking sites that serve 14,000 travel agencies — representing a departure into travel management.
Earlier in the year, Accor made a minority investment in events catering company Potel & Chabot, which runs food service at the French Open tennis tournament and the 24 Hours of Le Mans car race. The deal aimed to inject expertise in creating tailor-made food and beverage offerings at high-end meetings and events hosted at its properties.
Deals like Accor’s only work if the companies do more than just write checks, though.
“A danger that corporate venture capital faces is a temptation to invest in the next bright shiny object without setting up methodical ways of internalizing the insights,” said Katherine Grass, head of innovation and ventures at Madrid-based travel technology company Amadeus.
“In the past few years, we at Amadeus have gotten better at instituting processes to make sure our strategy is aligned with key innovations,” Grass said. “We’ve narrowed our interests to a half-dozen of the most salient themes. We’re also engaging with entrepreneurs more routinely, such as by sorting out collaborations with startups hoping to use our APIs [application programming interfaces, or ways of exchanging data].”
Online travel agencies are in on the trend too. In 2017, Booking.com developed its own mergers and acquisitions practice rather than rely on parent company Priceline Group’s team, with a goal of getting closer to the startups themselves.
It bought and absorbed its first company, Evature, which was an Israeli company specializing in artificial intelligence, or AI, that powers chatbots.
Booking.com CEO Gillian Tans is expecting her team to look closely at artificial intelligence-based innovations. “Today a lot of interfaces for booking require a lot of clicking and typing,” said Tans, while speaking in November at Web Summit, a technology conference in Lisbon.
Natural language search and chatbots powered by artificial intelligence can make booking interfaces easier to use, she said.
Artificial intelligence can help in other areas, too, Tans said. “If you think about it, the two questions customers struggle with today are ‘Where am I going to go on vacation?’ and ‘What am I going to do once I’m there?’ and AI technology can really solve these two questions in a much better way than we have today.”
So expect Booking.com to consider closer relationships with startups that have specialized expertise in artificial intelligence, machine learning, and related technologies.
Trivago, for its part, created a subsidiary in 2017 focused on growing business-to-business services for hoteliers and other suppliers. It also acquired a technology vendor that specializes in analyzing data to identify the desires of its customers and become more sophisticated at proposing relevant, customized offers. Trivago’s business-to-business push differs from its core hotel-search business.
Meanwhile, the largest hotel enterprise software company in China, Shiji, acquired ReviewPro, a Barcelona-based company that gives hotels actionable analytics on guests for sales, marketing, and revenue management — services that the parent company hasn’t offered on its own.
What’s driving the trend in mergers and acquisitions becoming more strategic? Large companies are trying to head off the threat of being overtaken by nimble startups.
Complacency often lulls established players into thinking it is trivial to create a layer of products or services above or below their core competency. A startup may often fill a gap others have left open, and then use it as a foothold for a later land grab.
Looking ahead in 2018, we can expect more creativity in how companies buy and invest.
“I see the rise of a trend within this corporate investing trend, where travel companies are partnering with or launching an accelerator for startups whose products are of strategic relevance to the company, such as JetBlue Technology Ventures and Booking.com Booster,” said Ford of TurnKey. In the past four years, the number of such accelerators and incubators for travel specifically has risen from three to 16.
“Accelerators give companies significant influence while assuming less risk than investing directly in a developing company,” Ford said.