Sabre’s Travelocity to push for #1 position with acquisition of UK Lastminute.com

Sabre’s Travelocity arm has made a bid for lastminute.com, UK’s second most popular travel web site, valuing the company at almost $1.1 billion.

Highlighting the continued consolidation in the travel industry, analysis by Hitwise, a leading online competitive intelligence service, reveals the wisdom behind the deal.

Whilst Travelocity is the second most visited travel agency website in the US, the firm has struggled to gain a stronghold in the UK. “Continued fierce competition and shrinking margins have led firms to pursue scale as the road to profitability,” said Simon Chamberlain, General Manager of Hitwise UK. “Expedia has been extremely successful in the UK, competing with Lastminute.com as the favoured online travel agency among UK consumers. Travelocity has enjoyed a similar position in the US and the acquisition of Lastminute.com may present the most efficient path to better market penetration in the UK market.”

· Travelocity is the 2nd most visited Travel Agency website in the US, whilst Lastminute  is the 2nd most visited Travel Agency website in the UK for April 2005.

· Expedia is the leading Travel Agency site in both the UK and US, but the combined forces of Lastminute and Travelocity could, over time, present a viable challenger to this leadership.

· Travelocity’s dominance in the US market is underlined by its brand strength. Hitwise search intelligence data shows that “travelocity” is the term which sends the largest volume of visits to Travel Agency websites in the US (2.82% of searches), followed by “expedia” (2.35% of searches) for the 4 weeks ending 7/5/2005.

· In contrast, “travelocity” is the 23rd most popular search term sending visits to Travel Agencies in the UK. For volume of searches, “lastminute” is a stronger brand in the UK than Travelocity but “expedia” has a significant lead on this measure.

Sabre’s offer came as lastminute.com revealed a half year pre-tax loss of $83 million compared to a loss of $73 million in the same period a year earlier.

Total transation values were up by 57% to $950 million. Gross profits in the six months to March 31 increased to $154 million from $103 million a year earlier.

The company said unique visitors rose in the half year by 71% to 1.69 million purchasing 3.6 million items, an increase of 49%.

The $1.1 billion deal is estimated to make a windfall for joint founders Brent Hoberman and Martha Lane Fox, with Mr Hoberman’s share valued at $48 million and Ms Lane Fox’s at $23million, according to the BBC.

Lastminute.com chairman Brian Collie said the offer from Sabre was considered “very carefully”, adding: “While we acknowledge lastminute.com’s future prospects, we believe that this offer represents an excellent opportunity to deliver significant, certain value to sahreholders now and to build an even stronger business for the future.”

He added: “The combination of Lastminute.com and Sabre Holdings creates a world scale business with even greater capability to work with global airlines and hotel ad car rental groups to offer unbeatable deals to our customers in Europe and the US.”

Sabre Holdings chairman, president and CEO Sam Gilliland said: “The anticipated acquisition of lastminute.com directly supports Sabre’s strategy of extending our role as a travel retailer focusing on merchandising content, packages, and growing our international points of sale, while broadening the products and services we offer to all customers through our travel distribution platform.

“We’re extremely pleased with the prospect of having lastminute.com, with its highly-regarded brands and well-established customer base, as a part of Travelocity, including Travelocity Europe. We expect this combination would provide us greater opportunity to profit from the fast-growing European online segment.  We look forward to working with lastminute.com’s strong team to create further value for our suppliers, our customers and our shareholders.” 

Lastminute.com CEO Mr Hoberman will become CEO of the combined lastminute.com and Travelocity European operations, reporting to Michelle Peluso, president and CEO of Travelocity. Damon Tassone, currently president of Travelocity Europe, will become Deputy CEO reporting to Mr Hoberman. The takeover is due to be concluded by the end of July.

Mr Hoberman said: “Today’s offer from Sabre is an endorsement of the achievements of everyone at lastminute.com. Over the past seven years, we have built a business from scratch into one of Europe’s leading travel and leisure groups, with over seven million customers and total transactions worth $1.85 billion for the financial year ended September 30, 2004.

“Today’s interim results are a further demonstration that the growth and entrepreneurship at the heart of lastminute.com is continuing strongly, with total transaction value of 57% for the first half of 2005 and a doubling of our order book since the first quarter of 2005. I am looking forward to the opportunity of running the combined lastminte.com and Travelocity buisnesses in Europe.”

Ms Peluso said the combination of Travelocity and lastminute.com would create “the leading position in european online travel”.

She added: “Toegther we would have strong positions in the UK, France, Germany, Italy, Scandinavia and Spain. Lastminute.com’s diverse mix of flights, holidays, hotels, car hire, and non-travel, ties closely with Travelocity’s strategy of continuing to expand our range of offerings to consumers beyond basic air travel.”

Travelocity is to evaluate its brands country by country, with lastminute.com being positioned as the leading brand in most countries. Travelocity is likely to run multiple brands in Europe.

Sabre said it had identified “a number of areas for cost savings and revenue synergies” to Travelocity, adding: “Areas of opportunity include streamlining marketing spending across brands, centralising operations and administrative functions, consolidating platforms, sharing technologies and supplier relationships”.