2009 will bring consolidation and restructuring for the travel industry: report
Published: 13 Jan 2009: A strategic advisory firm has predicted that significant consolidation and restructuring of the travel industry is inevitable in 2009.
According to a report issued by Hudson Crossing, high debt repayment, coupled with reduced enterprise valuations, limited access to capital and lower expected future demand for products and services, make significant travel industry restructuring both necessary and inevitable in 2009.
"As in previous recessions, we fully expect that the current market will not support the breadth of travel firms that were created during the last expansion cycle. We expect 2009 will bring consolidation and restructuring for the travel industry in almost every sector," said Michael W. McCormick, managing partner, Hudson Crossing.
Hudson Crossing summary findings for 2009 include:
- An OTA will change hands: The space for online travel agencies (OTAs) has become crowded and a widely anticipated downturn in consumer spending on travel will force one major OTA into a change of ownership.
- Luxury brands feel the pinch: Once unassailable luxury brands will feel the chill of the economic downturn as more affluent consumers experience an accelerated erosion of their net worth and make downward adjustments to their willingness to spend on travel.
- Venture capital stands aside: Corporations (instead of venture capital) will lead the investment activity. As a byproduct of this acquisition activity, Hudson Crossing expects failures of smaller firms in travel who are in the 3rd or 4th positions in their marketplace with less access to capital and fewer strategic alternatives.
- U.S. airlines survive subsidy-free: The US airline industry, due to reductions in capacity and lower fuel prices, will ride out the current downturn with better than expected performance and without government subsidy.
- Hotel industry hit late: The global hotel industry will manage this downturn better than 2002-2003, but will feel the full brunt of the economy in late 2009.
- Online advertising and media see growth: Online advertising and media oriented businesses will be the sole bright spot in short-term travel investment performance. The current economic weakness has had no effect on online media properties, which continue to see unabated growth in their online visitors.
- The real advent of mobile computing: The long expected rise of mobile computing in travel has been greatly over-hyped. Hudson Crossing expects the advent of two viable mobile computing platforms (the iPhone and BlackBerry Storm) to have a catalytic effect upon the use of mobile travel applications.
McCormick said, "A year of transformation does not equate to a year of failure in travel. Strong companies that embrace opportunities for change will emerge even stronger as they head into 2010 with perhaps even more customers, better products and fresh market strategy."