Youtravel.com’s ambition to grow by acquisition may be thwarted by companies refusing to sell due to concerns they would not attract full market value in the downturn.
Speaking this week on the annual VIP trip to Corfu for its top trade partners, Graham Nichols, the bed bank’s managing director, was bullish about potential acquisitions.
The firm expects to announce a profit of €1.5 million on a turnover of €115 million at the end of the financial year on October 31, and said it has funds available after Abu Dhabi investors bought out Barclays Capital’s stake earlier this year.
Nichols said: “We constantly look at all routes to market as there are other distribution channels available and if we see something at the right price then we are in a position to take advantage of it.”
John Kent, the bed bank’s founder, added: “We have various options we are looking at together with Aquis [Kent’s hotel chain], for example a business-to-consumer businesses.”
However, Richard Carrick, former Hoseasons chief executive and consultant, said Youtravel may struggle to secure deals, as company owners wait for better market conditions before selling.
He added: “A lot of businesses at the moment are really struggling to grow. If they were minded to sell they won’t do it this year because they’re not going to get best value.”
Carrick said it was unlikely the situation would change in the next year as consumer confidence would suffer when the government’s austerity cuts are announced.
He added that the best targets were likely to be offline businesses that were struggling to implement effective web strategies.
Nichols said Youtravel expected to grow organically over the next 12 months by featuring properties in additional destinations. In particular, he said Abu Dhabi and Qatar were under consideration.
“It is a volume business: margins are low and we have to have high volumes to make it work,” he said.
Youtravel could also be launched in new markets. It is currently operating in Germany, Italy and Norway, and Nichols said setting up in Poland, Croatia and elsewhere in eastern Europe would drive growth.
“International business accounts for 15% of our turnover and we’d definitely like to grow that – I’d like to double it in the next two years.”
However, Nichols remained concerned that UK travel agents were still vulnerable to failure in the current climate, adding that Youtravel was doing everything to protect itself from further collapses.
“We are worried about the next two or three months as certain agents will go in that period and it is about trying to protect yourself.
“We’re very careful looking at agent payment terms with us to make sure that if an agent goes bust that they don’t owe us a lot of money.”