With this deal, Amadeus Hospitality finally has a chance to start selling its enterprise software after years of perfecting its platform-based offering.
The acquisition price was a multiple of about four times TravelClick’s 2017 revenue of $373 million. It was about 17 times the company’s earnings before interest, taxes, depreciation, and amortization for last year of $86 million.
Madrid-based Amadeus has been investing in its hospitality solutions business by building a platform of services.
Its two largest customers are InterContinental Hotels Group (IHG) and Premier Inn. In July, Amadeus said that it has migrated more than half of IHG’s properties to its new guest reservation system and that its work for Premier Inn would shift into high gear next year.
While those large chains were coups, the bulk of the hospitality market is made up of mid-size and independent hotels — where TravelClick has a broad customer reach.
TravelClick said it has more than 25,000 customers — half of which are in North America — that use its central reservation system, guest management tool, and its business intelligence and media software.
“Their property reach is unmatched and potentially gives Amadeus an install base across which to hopefully deploy the productized version of its custom-built IHG guest reservation system,” said Sundeep Chanana, CEO of investment bank Horatio Partners.
The deal approximately doubles the number of properties Amadeus Hospitality software reaches, to 53,000. Up until now, 28,000 properties used at least one Amadeus Hospitality product, though much of that business was for small contracts for its sales and catering management software and its hotel operations management software.
“The combination of our two portfolios will allow us to provide that to hotels of all shapes and sizes across the world,” said Luis Maroto, President and CEO of Amadeus, in a prepared statement.
Adding Business Intelligence
Multiple industry experts said that TravelClick’s crown jewel is its business intelligence service — an offering that Amadeus lacked. The tools help hotels understand any given property’s share of bookings relative to competitors across distribution channels, which can help finetune their pricing strategies.
Amadeus’s platform has had some other gaps in the tools it offers.
Remaining gaps include a full revenue management suite, a full set of loyalty and upselling tools (though TravelClick does provide some), in-room guest interaction services, point-of-sale software, and back-office and human resources management services.
TravelClick, a company founded in 1985 and that now has 1,100 employees, is not without its flaws. If Amadeus decides to keep TravelClick’s central reservation system, iHotelier, it will need to invest in upgrading it to compete in the marketplace, Chanana said.
The same applies for TravelClick’s channel manager, which faces stiff rivalry from vendors like SiteMinder and eRevMax that have larger market shares, other experts said.
Amadeus’ acquisition will mean it will be competing more directly with software vendors Oracle Hospitality and Sabre Hospitality who currently have leads in selling to mid-market chains and independent hotels.
The sale is a victory of sorts for Larry Kutscher, who was brought in by private equity to be a CEO of TravelClick and to make it attractive for suitors.
Kutscher filled some product gaps in customer relationship management, loyalty management software, and email marketing by buying two customer relationship management software providers: ZDirect and Digital Alchemy.
Today’s $1.52 billion price is barely above the $930 million purchase price from 2014 — after accounting for the cost of the additional ZDirect and Digital Alchemy acquisitions and of the investment cost of retooling the company and relaunching key products.
“The market was expecting more transformative deals during TravelClick’s ownership tenure at Thoma,” said Chanana.
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Photo credit: TravelClick provides business intelligence and technology services to hotels, including Loews Hotels and Resorts. Pictured is the lobby of the Loews Annapolis Hotel. Loews Hotels & Resorts