Is Investor Certares on the Road to Becoming a Next-Gen Travel Powerhouse?

Online Travel This Week

If you are familiar with the online travel rollup track record of Barry Diller at IAC and Expedia or, for history buffs, Henry Silverman at Cendant, then in its broad outlines Certares founder Greg O’Hara’s ambitions at his private equity firm may seem familiar, albeit with plenty of twists.

After investing $325 million in Tripadvisor’s parent company a year ago, participating in the debut of a $500 million travel-oriented blank-check company in December, and co-sponsoring a pending $4.2 billion reorganization of Hertz earlier this month, Certares on Wednesday agreed to invest about $47.6 million (euro 40 million) in convertible bonds issued by the controlling shareholder of a French travel agency.

The investment, part of a $154.7 million (euro 130 million) fundraising by the Voyageurs du Monde group, which includes a couple of adventure tour operators, gives Certares three non-voting seats on the board and about a 30 percent minority stake in the company. Interestingly, Certares just seeded G Adventures with growth capital, although the tour operator claims no equity was involved.

When it comes to travel agency investments, in addition to online travel company Tripadvisor, Certares is a joint venture partner in American Express Global Business Travel, and owns Travel Leaders Group. Here is a list of Certares’ investments.

So Certares’ bets are far from being purely in online travel; they are very much a hybrid, combining online and offline assets.

Voyageurs du Monde is a a France-based public company that generated $33.5 million in earnings in 2019.

Henry Briance, who was Certares’ point person in negotiating the Voyageurs du Monde deal, the private equity firm’s second in France in the last couple of years, said each deal has to stand on its own merits. But Certares, as a minority party in many of its investments, during negotiations tries to come to an understanding with majority shareholders and management about ways in which its portfolio companies can mutually benefit from these investments.

Voyageurs du Monde, Briance said, had two sets of businesses, namely adventure tour operators and high-end travel agencies, that Certares liked as part of a travel recovery story. The French travel agency group, he added, has “natural” opportunities to expand through acquisitions in Germany, Austria and the UK.

With particular expertise in travel agencies and tour operators, Certares “senses opportunity and wants to capitalize on it because it won’t last forever,” said Seth Borko, Skift senior research analyst. “This is a great time to be making high- conviction bets on high quality companies to lead a travel recovery.”

Borko pointed out that Certares investment in the French travel agency is more of a portfolio play, and its overall approach isn’t a classic roll-up strategy because many — but not all — of its investments are minority stakes.

Unlike Diller’s IAC and Expedia, which eventually collected dozens of online travel companies ranging from Hotels.com to Tripadvisor, Hotwire, and Ticketmaster, and Cendant, which bought Orbitz, Galileo, Wyndham, Super 8, and Avis-Budget, Certares is not operating many of its holdings.

Certares is, though, making moves to leverage some of its far-flung travel assets, such as wholesale hotel inventory from Travel Leaders, or Internova, for Tripadvisor’s use.

“The challenge for Certares will be how they execute,” said Henry Harteveldt of Atmosphere Research Group. “If they execute well on linking business units together — where it makes sense to do so — and growing each business unit’s own sales, Certares could become the most powerful travel company.”

Harteveldt wonders whether Certares will fill gaps by buying or investing in lodging providers, hotel bed banks, or airline consolidators, for example, adding that there is plenty of room for Certares to grow.

As the private equity firm grows more powerful, however, “it could cause some suppliers to become very scared.”

While Expedia Group today is busy shedding brands for efficiencies’ sake, Certares is piling on assets from a wide array of sectors. Perhaps the strategy is buy now, consolidate, and then get busy with spinoffs later.

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