The merger and acquisition activity within travel space is always interesting and never without a bit of drama, and this past week was no different. Apple Leisure Group (ALG) announced it had “signed a definitive agreement to join forces to create an integrated leisure travel and technology solutions company.” This is a huge move with a lot of implications. I wanted to weigh in with 2-cents from those without any skin in the outcome, and provide my insights as to what this merger means for many in travel.
For over 20 years Apple Vacations and The Mark Travel Corporation, two tour operator titans, have been battling it out for market dominance. That fight ended on April 2, 2018, when Apple Leisure Group purchased their competitor. This will send a shockwave throughout – not in the next 3-6 months. But come the 4th quarter and beyond expect a sea change. Here are my thoughts.
Travel Advisors: For years, both Apple and TMTC have pumped millions of dollars in support of travel professionals in the form of incentives, training, product shows rewards – you name it. ALC has, in my opinion, locked up this channel and here’s the impact it will have:
- Less commission and incentives: Many savvy agents that would position one company against the other in order to up their commissions will need to come up with another plan. The commission and incentive game will only go down from here on out.
- Consumer direct will be the focus: Now that the competitive space has narrowed, I would expect a push toward consumer direct business. And it’s easy to see why – they have locked up the agent channel so in order to grow they will press on consumer direct. The numbers support this, there’s just more profit in taking a consumer direct booking vs. an agent booking.
- Less agent support for a more confusing portfolio: There will be less training and overall agent support. Again, now that have secured a big share of agents, they will focus their attention and strategic efforts in other areas. That said, I do believe those agents that can drive business to Secrets or Dreams properties stand to do very well. That said, I believe there are opportunities for additional revenue streams for smart and aggressive agencies. I’ll get to that in a minute.
Hotel Chains: This area will experience significant fallout from the merger. ALG will put pressure to drive more business to their owned properties. And those agents that can deliver will benefit. And as a result, chains like: Excellence, Karisma, Palace, Riu, Hard Rock, Barceló, and others will need a plan to fill their rooms. And this is where the opportunity emerges. In the past, hotel chains went to tour operators with co-op dollars. But the game has changed. Travel agency groups and consortiums need to view themselves as the delivery vehicle for room nights. And I believe those agencies that can adopt that mind shift could open up a new way of operating that could deliver new revenue streams.
Trade Publications: For this group, dollars are going down. I can’t foresee a scenario where the dollars to any of the publications would go up. If I were a sales rep in that space, I would be concerned about the future.
CVBs and Other Government Entities: These groups just found extra dollars. Here’s what I mean. Let’s say CPTM (Mexico’s Tourism Board) would give $500,000 in marketing dollars each year to both Apple and TMTC. Going forward, why would they continue to invest a million dollars? $700,000 or $800,000, sure…but not the full million. Now, with that savings, CVBs could use those “new found” dollars to invest in other areas like training, PR and brand development.
And finally, there’s a little side piece called Trisept Solutions – the technology engine behind The Mark Travel organization. Henry Harteveldt, founder of Atmosphere Research Group, calls Trisept the key to the entire merger. In his words, “Essentially, Apple Leisure Group bought Trisept Solutions and got the rest of Mark Travel as a gift with the purchase.” Whether this is true is certainly debatable. There have been plenty of rumors floating around regarding the problems with ALG’s technology solution. But moving forward, I believe now that ALG has control of this technology, they will use the channels within Trisept (VAX and Xcelerator) to promote and push their own product forcing the other hotel chains to find alternative ways to promote their product to agents.
These are just my thoughts. Agents and hoteliers let me know what you think. A year from now, I will revisit this post for an update as to how many of these predictions actually materialized.