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US giants ‘overspent’ on UK companies
US travel giants have been accused of overpaying to help establish themselves in the UK travel secor.
Travelzest chief executive Chris Mottershead used the examples of the $375 million paid by Cendant for ebookers and the $1 billion spent on lastminute.com by Sabre-owned Travelocity.
He also highlighted the $125 million purchase of TV Travel Shop by InterActive Corp in 2002, claiming that latest figures to the end of December last year showed a loss of $46 million, resulting in the closure of the business this year.
Mottershead, in a wide-ranging speech at the Association of British Travel Agents (ABTA) national conference, said: “Although they have grown dramatically over the last few years, ultimately these US companies will struggle in the UK if they aren’t already.
“They may have deep pockets but at some point somebody will question whether they are getting a decent return on the investments.
“They can’t continue to spend the way they have done and sooner or later the chickens will come home to roost. They are buying businesses on turnover, not profit.”
He claimed the reason why a UK company did not acquire ebookers was “it cost too much money and just doesn’t make enough profit”.
Mottershead added: “It looks cheap though when you realise that lastminute was sold to Travelocity for $1 billion – I am intrigued to know what the expected payback on that deal is and if the management who proposed it will live long enough to see it pay for itself.”
He also challenged the “tens of millions” being spent by Expedia on advertising.
But David Roche, managing director of Expedia arm Hotels.com, disputed the accusations, saying: “I can’t accept that we’re dumping money into the market.”
Report by Phil Davies
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