It is certainly an attractive time for private equity firms to invest in travel companies under pressure, but picking winners is never a slam dunk.
It’s an investor’s market during the fits and starts of the Covid pandemic, and the easiest time to invest in travel.
That’s the view of Greg O’Hara, founder and senior managing director of Certares, the private equity firm that owns Internova Travel Group, has a joint venture with American Express in their business travel unit, and recently helped lead Hertz out of bankruptcy.
In an online interview Wednesday with Skift founder and CEO Rafat Ali, who was presentat Skift Global Forum 2021 in Queens, New York, O’Hara said his company sometimes fields 5-10 calls per week from CEOs looking for investments.
O’Hara claimed he doesn’t need to make outbound calls any longer sniffing out potential companies to invest in or acquire. “Now we are probably passing on more things that we have ever done before,” he said.
O’Hara said it is easy to find out which are the good companies to invest in, and to structure deals fairly for both the target companies, and investors seeking attractive returns.
Of course, not all investments are winners, and scouting attractive investment targets are definitely a tad more complicated than O’Hara is letting on, although the current market environment may have certainly made things easier for investors.
The interview theme was “Investor Predictions on the Future of Travel.”
Ali asked O’Hara whether he’s down on “buzzy” travel startups. O’Hara replied that “the majority” are overvalued and may not be worth the $5 billion to $15 billion price tag they are trying to command.
O’Hara said Paul English’s Lola, which had a partnership with American Express Global Business Travel, might have made a success out of the business travel startup had the pandemic not dashed its plans.
Certares, the private equity firm and travel industry powerhouse with its joint venture in American Express Global Business Travel, ownership of Internova Travel Group, stakes in Latam Airlines and Azul, and others, recently joined with Knighthead and Apollo to co-lead Hertz’s reorganization and bankruptcy exit.
Will Business Travel Be Back?
O’Hara predicted that business travel would be operating at 75 to 80 percent of 2019 levels by the end of 2023.
“We don’t see any data that would indicate otherwise,” O’Hara said, adding that such a reduction is a massive shift.
O’Hara, who is a Tripadvisor board member, is bullish about subscription travel finding a more solid place in the sector despite hotel chains mounting resistance to the current version of Tripadvisor Plus.
A positive thing about subscriptions is that just about every travel sector is willing to try them, he said. For example, airlines might offer subscription plans to enable frequent flyers to achieve various status tiers, O’Hara said.
On the SPAC, or special purpose acquisition company front, O’Hara argued that the boom isn’t over, although more regulation is in the offing, and there are “silly valuations” that result in companies trading well below their issue prices after a time.
“Most companies should be indifferent to an IPO or SPAC, in my opinion,” O’Hara said.
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Photo credit: Certares Founder Greg O'Hara (right) in discussion with Skift Founder Rafat Ali at Skift Global Forum on Wednesday, Sept. 22, 2021 Skift