Travelstart is taking a logical next step in expanding from its core leisure travel business into corporate travel through an acquisition.
Founded in 1987, Club Travel is one of South Africa’s leading travel brands, evolving from a high-street favorite to a key player in the corporate and government travel markets.
As such, it’s a good match for leisure-focused and tech-savvy Travelstart.
“Travelstart is strong in the consumer segment, and we want to bring consumerization to the corporate and government sectors, where Club Travel is an emerging star,” said Stephen Ekbergh, Travelstart’s founder and CEO, in a statement.
For Club Travel, access to Travelstart’s technology is likely the sweetener to the deal.
“I saw a few years ago that we have to become a technology company selling travel, and I have huge admiration for what Travelstart has done in the online leisure space,” said Wally Gaynor, founder and managing director of Club Travel. “In partnership on the corporate and government side, we want to disrupt the market with technology. We spend a fortune on technology, so combining our spend with Travelstart’s makes sense. Together we can move a lot quicker.”
While Travelstart leads on tech, Club Travel Group has more expertise in “the normal day-to-day running of a travel business, maximizing revenue from various suppliers,” Ekbergh said.
Under the deal Thebe Tourism Holdings will sell its majority stake to Travelstart, with Club Travel Group continuing to operate as a stand-alone company. However Thebe and Travelstart will also jointly invest in and own Club Travel Corporate, a division of the Club Travel Group.
That’s a key benefit of the deal, allowing Travelstart to tap into the Club Travel Group’s broad-based black economic empowerment (B-BBEE) credentials.
In a bid to redress the country’s economic imbalances, much corporate and government spend in the South African market is channeled toward businesses with good B-BBEE ratings. Combined, the annual corporate and government market is worth upward of $1 billion, offering a rich new vein of travel bookings for Travelstart to tap.
While not disclosing the value of the acquisition, “the shareholders on that side seem very pleased with the deal,” said Ekbergh.
The deal is subject to approval by South Africa’s Competition Commission.
It’s been a busy few weeks for Travelstart, headquartered in South Africa, with both new investors and acquisitions.
In late May Travelstart announced that Boston-based investment firm HarbourVest had purchased a sizable share in the company, buying up the stake once held by South African mobile operator MTN.
While the value of the transaction has not been disclosed, media reports estimate it to be in the region of $80 million. UK-based Amadeus Capital Partners “was and is the lead investor for Travelstart,” explained Ekbergh. Amadeus invested $40 million in Travelstart in 2016.
While the sale is linked to MTN divesting its non-mobile assets, Travelstart has welcomed an investor with global exposure, said Ekbergh: “What’s important for us is having an active dialogue with the investment community. We want to know what’s going on in the world, and by doing that we get better. We find out what our competition is doing, what are the new emerging technologies. The bigger and more active the investor the better we are as a company.”
The new investment also opens doors to capital for future expansion, said Ekbergh: “HarbourVest is an active investor and could provide us with capital for further acquisitions in the future. So instead of us having to go to market for further capital, we have an investor we can turn to.”
And Travelstart certainly has an eye on expansion. In addition to announcing the Club Travel Group deal, in 2017 it purchased a majority share in accommodation booking website SafariNow.com.
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Photo credit: Pictured is Travelstart's headquarters in Cape Town, South Africa. The online travel agency is expanding into managed travel. Travelstart