Q2 deal activity shows green shoots for industry despite an otherwise challenging consumer environment, says Grant Thornton’s Nicola Sartori
Research from our recent Cut Back Economy report (in conjunction with Retail Economics) perhaps explains the positive change. Its survey of over 2,000 consumers revealed that, even in tough times, holidays remain a priority for discretionary spending – surpassing clothing, electricals and household goods. Where people are finding times tough, we’re also starting to see a change in how cash-strapped consumers are travelling. Younger generations, for example, are saving money by choosing off-peak travel, last-minute booking and short-haul destinations.
Confidence in the post-pandemic travel trade is further demonstrated by research from the trade association UKinbound, which represents 300 UK tourism businesses. Its data shows that two-thirds of UK tourism firms expect revenue and booking levels for Q3 2023 to be the same or higher than before the pandemic.
Travel M&A activity in the second quarter of 2023
Deal volumes driven by positive rather than distressed M&A
There were 10 announced deals in the UK travel sector in the second quarter of 2023 – exactly matching Q1’s tally. This figure is considerably lower than in the same quarter last year (18 deals). But, as a proportion, the number of ‘positive’ M&A deals, rather than stressed or distressed deals in the sector, has increased this quarter.
Private equity v trade activity
Trade sales still dominate deal activity, accounting for 80% of transactions. The two that involved private equity (PE) completed towards the end of the quarter when there was more visibility on the start of the travel season. This shows the beginning of renewed confidence in the sector by the investor community.
Q2 private equity deals
In June, private equity firm Perwyn supported a management buyout of Monaco-based online cruise booking firm Cruiseline from Tikehau Capital Advisors. Cruiseline operates in France, Spain, Italy, Colombia, Mexico, Argentina and Chile, and will use the investment to expand into new geographies.
In July, private equity firm Livingbridge announced that its Livingbridge 5 fund had exited its investment in Direct Ferries, the world’s largest ferry ticketing business. At the same time, it announced a follow-on investment alongside Intermediate Capital Group (ICG), the founding family, and management.
Elsewhere in the M&A environment, we’ve seen a trend in follow-on investments as investors stick to what they know in uncertain times.
Trade buyers expand luxury offerings through acquisitions
The luxury travel sector remains – to some extent – protected from economic fluctuations. Our Cut Back Economy Report revealed that only 5% of the UK’s most affluent households intend to cut back on holidays, compared with 50% of the least affluent. In travel sector M&A, this is reflected by a strong appetite for luxury travel assets.
In June, US chain Hyatt Hotels completed its acquisition of luxury-hotel booking platform Mr & Mrs Smith for £53 million in cash consideration. The website was founded in 2003 by Tamara and James Lohan as an upmarket “travel club for hotel lovers”. The transaction expands Hyatt’s footprint in the luxury space and gives it access to over 20 countries where it’s not present.
Also in June, Wayte Travel Management acquired Quintessentially Corporate Travel Management (QCTM). QCTM was the corporate travel arm of concierge service Quintessentially, which bills itself as “the global authority in luxury lifestyle management”. The acquisition grows Wayte Travel’s business by over 50%, creating a stronger presence and staff base in London.
Overseas hotel investors target major cities
- In Q2, three of the four hotels deals involved overseas buyers snapping up properties within high footfall cities and areas:
- In May, German hotel company RIMC Hotels & Resorts acquired Liverpool’s 30 James Street Hotel from administrators
- In June, Ireland-based Dalata Hotel Group acquired the Apex Hotel London Wall in a £53.4 million deal
- In May, Bahrain-based institutional investor Blacksand acquired Travelodge Gatwick Airport Central Hotel in a deal worth £40 million
Preparing for takeoff?
With a marked uptick happening in buyer and seller conversations, we expect deal volumes to increase after the key summer season offers more visibility on travel uptake, and anticipate a much stronger Q3 and Q4 in terms of M&A in the sector.