Stuart MacDonald :: Bad call: Blackstone buys Cendant's Travelport for $4.3b

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Bad call: Blackstone buys Cendant's Travelport for $4.3b

by Stuart MacDonald on Fri 30 Jun 2006 01:38 PM EDT | Permanent Link | Cosmos

More later, but this is great news for Cendant and bad news for Blackstone. Online 3rd party sites and associated plumbing aren't coming back any time soon.

Update: The potential for Cendant in the travel space had always been that the synergies of having a vertically integrated entity - like a European style tour operator - would pay off. By combining a host of suppliers (Avis, Budget, Wyndham, Ramada, Super 8, Travelodge) and the plumbing to distribute them (the Apollo CRS, Orbitz, CheapTickets.com and even trip.com before them) costs would be reduced and margins fattened up and down the chain. Sadly, that just never happened.

With this breakup and the creation of a pure distribution arm, any hope of that seems out the window. Of course, CRSs and online resellers aren't going away anytime soon, but there sure is every indication that they are struggling to stave off declines in growth and margins.

I guess the good people at Blackstone can see something I don't, or they have other plans. Or perhaps just wringing more cost out means that this can spin out a nice enough ongoing income annuity through the decline that they are fine with it.

But it sure isn't a growth play.

Tags: orbitz, travelport, blackstone, cendant

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Re: Bad call: Blackstone buys Cendant's Travelport for $4.3b

by sternthinker on Tue 04 Jul 2006 11:19 AM EDT | Profile | Permanent Link

I am led to understand (by you) that the huge 2002-2005 profits of the main travel portals (Orbitz, Expedia, etc.) were instigated by desperate vendors (hotels, airlines, etc) who jacked up sales commissions as post-9/11 demand for travel services fell like a stone.

Is Blackstone betting on a reprise?

Re: Re: Bad call: Blackstone buys Cendant's Travelport for $4.3b

by Stuart MacDonald on Thu 06 Jul 2006 03:15 PM EDT | Profile | Permanent Link

If they are, it's a bad bet. To be clear, the HUGE driver for the growth in online travel in the late 90's and early 00's was category adoption in total. Folks started doing something that they never did before, for the first time. 9/11 just made it harder for competitors (suppliers mostly) to participate fully because they were struggling for existence. That's not happening again. And during the next downturn, you will have suppliers much better prepared to fight for business directly, rather than having 3rd parties do heavy lifting for them, so the likelihood is that they will offer the deals etc themselves vs. cranking up margins for 3rd parties and letting them benefit. Of course, this won't be the case for all, but in general that's what you are more likely to see.

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