Skift Take

Amadeus deserves credit for making strides in reducing its dependence on its original core business of airline distribution. Few companies in any industry succeed in diversifying. But work remains to be done. Plus, the company may not be doing enough to capture Asia's potential as a market.

After 30 years of operation, travel technology group Amadeus is slowly moving toward its goal of having a broad and deep line of businesses.

In the second quarter, revenues from distributing airline content to agencies, Amadeus’s flagship service, accounted for 56 percent of its overall revenue of $1.58 billion (€1.42 billion).

That figure shows the company has been diversifying. As recently as the second quarter of 2017, distribution made up 62 percent of Amadeus’s top line. Back in 2010, distribution tech accounted for 76 percent of revenue.

The company’s distribution unit continues to grow, though weakly. In the second quarter, distribution grew 3.8 percent year-over-year to $888 million (€797.1 million).

That weakness underscored why the company needs to grow its other lines of businesses. In the second quarter, the revenue for those newer businesses increased 30.7 percent year-over-year to $698 million (€626.6 million).

In the second quarter, Amadeus generated revenue of $1.58 billion (€1.42 billion), up 14 percent from the same period a year earlier. The company didn’t disclose a profit figure for the quarter. But its earnings before interest, taxes, depreciation, and amortization for the quarter was $656 million (€588 million) — up 9.1 percent from a year earlier.

Hotel and Vacation Rental Sector

One driver of Amadeus’s diversification came last year when it bought TravelClick, a hotel technology company, for $1.52 billion. The deal closed in October 2018. TravelClick’s software analyzes data to help hoteliers drive the right level of demand to individual properties.

This month, TravelClick had its first major project launch since the acquisition with the debut of its alternative accommodations solution, which analyzes how local short-term and vacation rental property supply and demand is affecting hotels and any rental properties hotel groups may operate themselves on the side. The tool claims to help hoteliers optimize occupancy and rates to be competitive in a particular Zip code or postal code, for example, by analyzing data it pulls from third-parties on 27 million properties worldwide.

“That product aims at the transient business, but we plan to offer the business intelligence to users of our tools for handling group inventory, too,” said Joe Youssef, executive vice president, marketing and corporate development for hospitality at Amadeus, in a June interview. “We’re working on making all of our key functionality available across segments and products, or more transversal, than the way they used to be.”

Outside of TravelClick, Amadeus’s star hospitality product has been its sales-and-catering management tools, whose sales have grown annually at unspecified double-digit rates.

Airline Tech Growth

Amadeus’s services for airlines and airports, such as through sales of passenger service systems, has continued to grow, too.

Last month, Skift reported that Amadeus bought airport baggage automation service provider ICM Airport Technics, a Sydney-based company.

On Wednesday, Amadeus revealed that the purchase price was $46 million (€41.3 million).

Since then, Amadeus’s most notable recent product news came in late July. Alaska Airlines said it was implementing a new Amadeus Revenue Management system, which will be fully deployed by the middle of next year.

“It will result in better revenue performance in our 2020 and beyond,” said Andrew Harrison, Alaska Airlines executive vice president and chief commercial officer, during an earnings call. Alaska is the fifth-largest U.S. carrier and could prove a valuable reference customer for the travel tech giant.

The sale was notable because Alaska doesn’t use Amadeus for its core passenger service system. But the carrier still believed Amadeus’s technology could help it and work well with its enterprise software. Up until now, Amadeus has only sold its revenue management services as an add-on to customers using one of its passenger service systems.

Like many carriers, Alaska needs a precise view of traveler demand for routes. Amadeus’s technology may help the airline refine its so-called origin-and-departure model, which is a view of passengers’ real travel demand. For example, a flight between Anchorage, Alaska, and Billings, Montana, might be popular partly because some passengers are interested in making onward connections to, say, the oil fields of Prudhoe Bay, Alaska. Amadeus’s analysis of data pulled from multiple sources could make forecasting demand for various fares more precise.

The Asia Question

Travel’s future growth will be driven most by the Asia Pacific region. Is Amadeus grabbing enough of that market?

In some experts’ eyes, Amadeus may not be doing enough to capture the rising growth in Asia. In the first half of 2019, global travel agency bookings processed via Amadeus amounted to 307.8 million, of which the Asia-Pacific had a 17.8 percent share. Amadeus global passengers boarded totaled 947 million in the first half of this year, with the Asia-Pacific accounting for 32.9 percent of that.

Executives have countered that the picture is more nuanced. Last year, Amadeus generated more of its group-wide revenues in Asia-Pacific than in North America.

Its distribution segment view in Asia is also okay, the company argued. During an earnings call Wednesday, CEO Luis Maroto told analysts that his company had taken an additional one percentage point of share of the Asia Pacific distribution market in the first half of the year. But that one percent growth figure excluded India, where all of the distribution companies have seen fallen sales due to regional aviation industry turmoil. Excluding India from Asia Pacific figures is missing an important piece.

Amadeus, which employs more than 19,000 people, is based in Madrid. Some observers suggested that the group may need to move more top-level executives to Asia to ensure the region gets an adequate hearing at company strategy sessions.


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Tags: airline innovation, alaska airlines, amadeus, earnings, gds. global distribution systems, travelclick

Photo credit: Amadeus, the global provider of technology solutions for the travel industry, has its research and development center near Nice, France at Sophia Antipolis, France. Amadeus

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