The Business Travel Magazine Dec/Jan 2019/20

TMCs / Consolidation
An acquired
TASTE
Mergers and acquisitions among TMCs continue unabated, but why is it
happening and what does it mean for clients? Gillian Upton reports
Charles Darwin’s theory of natural
selection published in 1869 may
not have had universal acceptance
from many naturalists at the time but his
theory of evolution – that only the strong
survive – couldn’t be a better metaphor
for the world of TMCs today.
To say that there has been movement in
the TMC marketplace is to underplay just
how many travel management companies
have disappeared recently. One industry
observer reckons ten have either been
bought or acquired over the last two years
alone, including HRG, Giles Travel, Hillgate,
Portman, Amber Road, Ian Allan Travel and
Business Travel Direct. We also know that
Diversity Travel will be up for grabs in 2020
– a surprising announcement – and they
certainly won’t be the last to seek a suitor.
“Smaller players who don’t own their own
technology will be vulnerable,” reckons Jill
Palmer, Managing Director of Click Travel.
“I can imagine four or five of those changing
hands in the next 18 months.”
Few believe that further consolidation will
touch the 'big three' – Amex GBT, CWT and
BCD – so the money is on the independents
who need scale to thrive; those with a
turnover under £100million.
“Consolidation raises the bar for entry into
the world of TMCs,” says Tony McGetrick, VP
and Director of Sales and Marketing at BCD.
“It takes a long time and deep pockets.
We’re in 109 countries for example.”
Too many players
At well over 100 in number, there are too
many TMCs operating in the UK, something
not replicated in other countries, including
our continental European cousins in the
larger business travel markets of Germany
and France. A cull is certainly in order for the
health of the entire industry. In Darwinian
terms, only TMCs with favourable adaptations
will survive and that is exactly the
strategies being employed. The step-change
in the market – chiefly around new technology
and distribution flows – is the major
trigger as scale is more important in times
of disruption.
Michael Valkerich, VP Global Customer
Group for CWT, says: “Scale creates
advantages so there is always going to be a
current of acquisitions. The larger players do
better when new changes come along as we
can exert more authority.”
Some TMC owner-managers are reaching
retirement and are looking for an exit route,
while others can no longer support their
business structures, particularly in light of
the huge investment required to develop or
acquire new technology. Some become
financially vulnerable when they lose a large
spending client, the most recent example
being Amber Road when it lost the BT
account. The ever-decreasing income from
the GDS as the airline distribution landscape
evolves is another nail in their coffin.
Dave Bishop, Commercial Director at the
acquisitive TMC Gray Dawes, believes there
are other strategies at play: “Consolidation
can shortcut the R&D route to acquire the
technology required as CTM did when it
purchased Redfern. TMCs can take out a
competitor and change the market
dynamics, as Amex GBT did when it
66 THEBUSINESSTRAVELMAG.com