Corporate travel may be in the deep freeze while the global pandemic persists, but deal-making is heating up in the sector, which has seen a spate of startup acquisitions and distribution partnerships in recent months.
The particulars of each deal vary, but taken together, the reshuffling embodies the intersection of two of the most powerful forces currently affecting the industry: financial turmoil arising from corporate travel's standstill; and the onus on legacy providers to reposition their value proposition to clients—pressure that began well before Covid, but has taken on increased urgency since the onset of the pandemic.
Over the past six months, a series of corporate travel startups—most launched within the last few years and billed as digital-driven disruptors—have been acquired by established industry players.
The buying spree began in late April, with business spending management provider Coupa purchasing corporate travel app developer ETA. In June, Flight Centre Travel Group nabbed enterprise-targeted online booking tool provider WhereTo, while corporate travel savings and incentive specialist Rocketrip in September was bought by Mondee Holdings, a consortium of travel technology, service and content providers.
Mid-October saw American Express Global Business Travel acquire 30SecondsToFly, whose AI-driven booking and support chatbot was used by several travel management company partners, including Flight Centre, which also owned 10 percent of the company. American Express GBT will integrate 30SecondsToFly's technology into its booking tool, mobile app and other messaging channels, but as of mid-October had not decided whether it will continue to support 30SecondsToFly's pre-acquisition TMC partners, according to the company.
Meanwhile, flight disruption and rebooking specialist Freebird was taken off the broader corporate travel market entirely in August, going under the umbrella of credit card issuing bank Capital One, which said it would sunset Freebird's standalone products.
A Buyers' Market, But Not a Fire Sale
The shutdown of essentially all corporate travel in the wake of Covid's onset earlier this year was a gut punch to the industry as a whole, but was an even more devastating blow to many younger, smaller companies—particularly those that were more dependent on transaction revenue than venture capital reserves.
WhereTo was one such provider, according to company founder and CEO Ryan Wegner, who said the pandemic "decimated" his firm's revenue and brought negotiations with several prospective enterprise clients to a screeching halt. Faced with those headwinds, WhereTo had two options, according to Wegner: "either hibernate and let go of a huge amount of our company or get acquired."
But the financial uncertainty stemming from the brutal business conditions of the Covid era "does not mean that every company is a fire sale," noted Amex GBT executive vice president of product and strategy Evan Konwiser.
"A lot of savvy teams realize that if you're going to find a home, this is a better time to be more serious about that than you had in the past," said Konwiser, himself a former startup founder who still keeps a close eye on the startup scene in his position at Amex GBT.
Providers such as WhereTo, 30SecondsToFly and Freebird all in recent years had demonstrated staying power and proof of concept that their respective services offered significant value for end-users—and thereby for more mature companies seeking to bolster their own offerings, Konwiser added.
From the perspective of a proven startup weighing its next move, Covid may simply serve to accelerate the timeline of what would have been an eventual sale anyway, Konwiser added. "Certainly, the pandemic created an environment where the risk/reward of going to a bigger company flips to ‘let's do it' versus, ‘Maybe we wait another year,'" said the Amex GBT product chief.
Proven Concepts
Meanwhile, from the buyers' perspective, the recent acquisition targets each presented a compelling business opportunity to add capabilities that were complementary to existing offerings, observers noted.
In the case of Amex GBT's acquisition of 30SecondsToFly, that meant bolstering the TMC's ability to provide omnichannel automated travel booking and management support to clients—a capability expected to be at a premium moving forward.
"Covid has spurred the need for more automated communication," across multiple channels, said travel industry consultant Norm Rose, who has been a longtime advisor to 30SecondsToFly. "So, there is definitely a good fit of what was needed versus what [30SecondsToFly] supplies… and it fit in very well with GBT's view of where things are going for the industry."
Of course, the unsettled state of the industry at the moment may have helped Amex GBT add those capabilities at a more attractive price that would have been possible pre-Covid, Rose conceded.
"Were they able to obtain 30SecondsToFly maybe at different terms than they would have in a non-Covid world?" said Rose. "Probably, but that's about as much as I'll say."
Meanwhile, Flight Centre's acquisition of WhereTo likely was driven by competitive forces that had been in place well before the onset of Covid, including the push by TMCs to offer their own integrated online booking tools that complement their other agency services, Rose noted.
That approach—embodied in recent years by purpose-built integrated platforms from the likes of TripActions and AmTrav—since has been adopted by the major legacy TMCs, all of which have made strides toward building out their own OBT platforms.
"Therefore, Flight Center may have felt like they were at a deficit by not having their own integrated booking system," to offer clients, Rose speculated—adding that WhereTo's enterprise-focused OBT platform would be a good fit for Flight Centre's roster of large corporate clients.
Partnership Path
But the recent spate of deal making involving startups hasn't been limited to acquisitions. Some younger companies have instead been exploring new distribution channels.
For example, small- and midsize enterprise-focused travel management and expense specialist TravelBank in August kicked off a new TMC partnership model with the announcement that the company's technology platform would power a new "gray-label" booking and expense management tool designed for TMC World Travel Inc.
TravelBank said it was exploring a variety of models for working with additional TMCs, including technological partnerships, reseller deals and other structures.
And in September, off-channel travel booking capture provider Traxo launched its new "Traxo for TMCs" program, with Fox World Travel as its first TMC partner. Traxo says other TMC deals are in the pipeline, including at least one major travel management player.
Upside Business Travel also has made a strong foray into TMC partnerships, with the unmanaged and lightly managed-focused OBT recently striking reseller deals with Omega World Travel, Short's Travel, Hess Corporate Travel and Hunter World Travel and eyeing future alliances with more regional U.S. TMCs.
Beyond providing a booking tool, Upside's value proposition to partner TMCs includes the potential to tap into Upside's revenue model of marking up wholesale discounts from end suppliers—a pricing structure that could help TMCs move away from transaction fees.
New Demands Mean New Opportunities
Whether revamped revenue models or new tech-based tools and capabilities, the startup sector has much to offer established TMCs, which have in recent years been compelled to redefine their value proposition to clients beyond simply providing booking and trip management functions.
That pressure was evident in pre-Covid deals like Amex GBT's multi-year alliance with SME-focused travel and expense management provider Lola and Flight Centre's January investment in browser-extension specialist Shep, which at the time provided notifications when travelers attempt to book off-channel. That startup has now shifted its value proposition.
By giving rise to new demands and priorities among travel buyers, Covid-19 has given TMCs a fertile opportunity to demonstrate value by serving those needs, which include robust duty-of-care functions and richer data capabilities to manage spending and calculate return on investment for travel.
While some larger TMCs will focus on building out their own services in those areas, the current buyers' market likely makes acquiring startups at a discount an attractive method of adding those capabilities for many.
Meanwhile, smaller and regional TMCs are apt to become fertile distribution channels for innovators and specialty service providers via reseller deals or other partnership forms, observers note.
"There is a tremendous new opportunity with mid-market TMCs," said John Rizzo, CEO of travel management provider Deem, which has inked partnerships with Short's and Direct Travel in recent months.
That because many of those TMCs' clients are re-examining their travel programs and technology-based services—and, with actual travel still largely grounded, have significantly more time to devote to that undertaking.
"There is a massive need to think about [travel] programs and broaden the aperture around business travel and the value added," said Rizzo. "And because travel managers have more bandwidth now, they're starting to look in more depth into metrics they hadn't seen before."
That in turn has given many travel managers a clearer view of how their program is working—and what tech-based improvements need to be made.
"Now that there's more time to look at what's really going on, there's more knowledge and understanding of what's happening with technology," Rizzo continued "And that is causing people to look more openly at change."