investment in travel M&A deals set for take-off
muddied by Covid’s impact. The sector has proved resilient and investors who supported travel businesses through Covid and held them for longer than they may have intended are looking to start [sales] processes. Some PE houses have held assets now for several years.”
PATHWAYS TO GROWTH Many travel businesses remain low-margin, of course, despite the strength of demand. So prospective investors are most interested in pathways to growth and increased profitability. Keys explained: “There is a lot of talk
[among investors] around technology. Generative AI could help businesses tailor experiences to customers to maximise margins. So, investors may look at travel businesses with a technology angle. “Investors look at a business to see
‘What can we do with it?’ or ‘What additional can we do in the next four to five years?’, whether that is scaling a business or expanding to different destinations. A lot of people are interested in experiences now rather than just travel and there seems a trend to travel for events, so an investor might look at what strategic partnerships could be made, partnering with events spaces or sporting venues. The Taylor Swift tour in 2024 had a massive impact on travel with hotels reporting rates that went through the roof. “Better understanding your customers
is a way to improve margin. That is about data and knowing what to do with it. So, we see business partnerships, for example between airlines and retailers, aimed at gathering more customer data. Loyalty and reward schemes are also a smart way of improving a customer database. “Investors want to see a business
has a strong customer base with repeat customers. A good database, which allows a business to target customers appropriately, is a great way of improving margins.” However, Keys added: “How good
travel businesses are with data varies. The most important data for investors is always going to be forward bookings.”
36 Travel Weekly Insight Report 2025
Will Atol reform be high up the government’s agenda? It wouldn’t surprise me if something suddenly comes out about it
‘ATOL REFORM AN UNKNOWN’ Civil Aviation Authority (CAA) proposals for Atol reform have been a concern in the sector and among investors in travel businesses since first being floated in April 2021. Change remains someway off given detailed proposals have yet to be presented after the CAA and Department for Transport confirmed a delay at the start of last year. Keys said: “Investors are looking at
what [financial protection] arrangements companies currently have in place, trying to understand how changes to Atol might play out. It looks as though the CAA will move towards ringfencing cash and investors are working to understand how any changes would impact on funding and working capital. Investors do scenario analysis to look at the potential impacts if cash isn’t available until after holidays have ended. “If an investor already has travel
assets, they are going to be more comfortable. Regulation might put off new investors, particularly as each country has different regulations. But consumers continue to prioritise travel and, so long as they do, the sector is an attractive option for private equity.” Pritchard argued: “Atol reform is
still an unknown. When it was high on the agenda, it came up a lot in M&A conversations, but it has stalled and seems to have lost impetus. Everybody knows it’s coming, but there is a sense in the investor community of, ‘Is it going to happen? Does it matter to us?’ It may well come back to life and have quite a big impact on some businesses. “There is a lot of variety in business
models. Some businesses already have trust accounts or similar. Others are at the other end of the scale and, while the regulator has driven them to have more funds tied up in bonds, there is potentially still a capital gap which will need to be filled if there is Atol reform.” He noted: “Government ministers have
said they are aware the industry wants certainty on reform. But the government has quite a big agenda. Will this be high
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