Last week's announcement could be a sign that the good times are coming back for specialist travel businesses, says Ian Brooks of Gail Kenny Executive Recruitment
Tui’s announcement that it plans to sell its Specialist Holidays Group (SHG), which will be renamed Travelopia, will have ramifications throughout the travel sector in the UK.
Industry commentators predict that a private equity firm will be the favoured buyer, following the trend set by the recent agreement for Cinven and the Canada Pension Plan Investment Board to buy Hotelbeds, also from Tui.
Hotelbeds, the market leading beach bed bank, is largely run from Palma Mallorca, so the impact on staffing for the UK market is relatively neutral.
However, Travelopia is made up of a plethora of different businesses, many of which are based here in the UK.
Tui’s investment strategy changed quite a few years ago when they reined in on buying up specialist travel businesses and started focusing on mainstream and investing in resort properties to create differentiated products, such as the highly successful Sensatori concept.
Its mainstream business is hugely centralised, for example they only need one website, and one technology platform.
The specialist businesses, however, are far more disparate. It has been reported that there are over 50 brands within SHG, so logically means 50 different websites, which is significantly less efficient to run.
The higher costs in specialist businesses, however, are compensated for by the gross margins which tend to be higher.
The challenge for the new business will be how much they are able to centralise, without losing the individuality of each of the brands. I can see the new business investing in technology and it’s digital assets.
Unleashing Travelopia and providing it with funding from private equity could also spark the beginning of an aggressive acquisition trail once the group is under new ownership.
Prior to the start of the recession in 2007, Tui was very acquisitive in the niche sectors. So too were Thomas Cook, along with other collectors of specialist travel businesses in this epoch, such as Travelzest and Westin & Oriental.
It was a good time to be an owner of a specialist travel business if you could demonstrate margins in the high twenties.
Maybe the good times might be coming back, who knows, but you can bet that with smart people like Will Waggott signing the cheques, they are unlikely to over pay over the odds.
This potential acquisition spree coupled with new funds for growth within existing brands in the Traveltopia stable should only mean good news for job creation here in the UK.
Travelopia already has a strong senior management team in place, but the business was constrained by headcount restrictions as Tui invested in mainstream.
Once a buyer is confirmed, Travelopia is sure to become an exciting place to work, with growth plans on the agenda and funding to match.
The UK travel industry continues to change and evolve, and never a dull place to be.
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