INVESTMENT IN TRAVEL


overseas growth capability. It’s going to vary by the type of business, the sub-sector it’s in, the state of evolution of the business, its growth aspirations and how digitally enabled it is. “A lot of businesses will trade to


private equity again. Travel is a bit of a darling for private equity because of its resilience and the cashflows. But there could also be some strategic acquisitions where a business is the right fit for a buyer looking to have a hold in the ە 8. RU EURDGHQ RXW VWUDWHJLFDOO\ Pritchard suggested: “The question


for any business looking to transact in the next 12 months will be what is a new acquirer going to do with that business over the next four to five years that allows ە"VGUDZUHWID LW WR VHOO WKH EXVLQHVV RQ Both Dhillon and Pritchard foresee


further consolidation in corporate travel. Dhillon noted: “We’ve seen plenty of consolidation on the corporate side. There are synergies. In effect, you’re acquiring customers when you ە FRQVROLGDWH LQ FRUSRUDWH WUDYHO Pritchard agreed: “There is more consolidation to come, particularly as corporate travel has been slower to recover. While 2023 was undoubtedly better with more people travelling on business, corporate travel is more impacted by sustainability issues. The big corporates have all set policies around people travelling. There has been a bounce-back. But will people travel as often? Will they combine trips? That is going to drive consolidation in business travel as corporates look ە IRU FRVW VDYLQJV DQG HIILFLHQFLHV He argued: “It’s a little different on


the leisure side. Consolidation in leisure travel tends not to work that well. If businesses buy in the leisure sector, it will be because there is a strategic ە RSSRUWXQLW\ LQ SDUW RI WKH PDUNHW Dhillon insists recognition of travel’s


resilience will outweigh any perception of risk among investors. He argued: “Travel continued through Sars, wars, the financial crisis. Covid was obviously different because everything stopped.


RISING geopolitical risks were a greater concern to UK chief


financial officers than inflation and high interest rates at the turn of the year (Figure 47)


FIGURE 47: RISKS TO BUSINESS IN 2024 Average ratings by CFOs on scale of 0-100


Rising geopolitical risks Inflation


Rising interest rates Weak UK economy High energy prices


Effects of climate change Labour shortages


Weak US economy Supply chain disruption Poor UK-EU relations


Weak eurozone economy


Weak emerging economies Pandemic


34% 22% 36% 42% 63% 53% 51% 56% 54% 48% 53% 47% 43%


% age point change YoY


-2 0


-7


+7 -8


0 -3 4 -1 -9


+5 -4


-8


0 10 20 30 40 50 60 70 80 %


Source: Deloitte CFO Survey, Q4 2023


When we’ve done deals, we’ve looked back 10-15 years at how businesses coped with shocks and you see some flattening out. You don’t see big falls. “That view isn’t going to change. PE


investors will continue to be interested in travel. However, they will think harder around the leverage required in reaction to the CAA’s Atol reform if cash is ring-fenced. That area will need ە PRUH ZRUN IRU 3( WR EH FRPIRUWDEOH Dhillon pointed out: “Two or three businesses have been mentioned in the media as early transactors in 2024. I wouldn’t be surprised if other businesses in private equity hands start thinking about transacting, more towards the back half of 2024, especially when we have VRPH YLVLELOLW\ DURXQG ERRNLQJV IRU


ە


Pritchard suggested: “We’ll see some transactions in the first half of 2024, but we might see more in the transaction pipeline as people gain more confidence about 2024 and some visibility on 2025 bookings. Some businesses will want to demonstrate 2023 wasn’t a one-off. There are more discussions going on in the sector and more companies thinking about ە ZKHQ D WUDQVDFWLRQ PD\ EH DSSURSULDWH


Travel Weekly Insight Report 2024 37


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