Tui sold market-leading bed bank Hotelbeds to private equity firm Cinven Capital Management and the Canada Pension Plan Investment Board (CPPIB) last week for just under €1.2 billion.
Each company is buying 50% of Hotelbeds, which has a database of 72,000 beds. The bed bank, based in Palma, Majorca, is the group name for an accommodation wholesaler set up in 2001 by First Choice before its merger with Tui. It works with tour operators and travel agencies worldwide and commands about 6% of the global market.
The group also includes Hotelopia, which provides accommodation and Atol cover to easyJet Holidays.
Tui chief executive Fritz Joussen said: “This is a good deal for Hotelbeds and for Tui.” He said there had been “numerous bidders”.
Hotelbeds chief executive Joan Vila said the new investors would leave the group “well placed to invest more strongly in technology innovation and distribution”.
Cinven was previously a leading investor in travel technology firm Amadeus. Partner Jorge Quemada described Hotelbeds as “the largest accommodation distribution network within the B2B bed bank market” and said: “We believe there are considerable growth opportunities through investment in IT, as we did with Amadeus.”
CPPIB managing director Shane Feeney suggested the new owners would look to acquire businesses to combine with Hotelbeds.
He said: “Hotelbeds is a unique opportunity to invest in the leading operator in the hotel accommodation distribution market, with an exceptional track record of organic growth that we will support in driving industry consolidation.”
It was an understanding of the consolidation coming in the sector that led Tui to sell the business.
In advance of the sale, Joussen told an exclusive Travel Weekly dinner: “Hotelbeds is a world market leader, but at the sametime it has only 6% market share. It is a strongly growing, very profitable company – a platform connecting 70,000 hotels to 31,000 sales organisations, online travel agents and travel agencies.
“[But] when you have 6% market share and you are world market leader, you need to be consolidated or you need to consolidate.
“We looked at whether we had high synergies with our core business. The synergies were not very high. They do not more than 10% [of business] with us and we do not more than 10% with them. It’s a non-synergetic, good growth, high-margin business. So if consolidation should take place, if there are hardly any synergies, how do we consolidate?”
He said Tui risked overpaying to acquire businesses if it sought to consolidate Hotelbeds’ position, so he decided to sell the business.
Joussen said: “Hotelbeds was strongly linked with our inbound business. We therefore decided last year to carve out our Tui destinations services activities from Hotelbeds, manage the bed bank as a separate company and initiate the disposal process.
“The future owners will provide the investments required to support the growth path pursued by Hotelbeds.”
The deal is subject to regulatory approval but is expected to go through by September.