Mergers and acquisitions (M&A) look set to run-rife in business travel following 18 months of turmoil amid the COVID-19 pandemic. US corporate travel giant TripActions announced the acquisition of high-end UK-based travel management company (TMC) Reed & Mackay, and AMEX Global Business Travel is also planning to acquire Egencia from Expedia Group. In the current climate, consolidation is inevitable as companies look to either thrive or survive.

The business travel industry has become overcrowded

As businesses have scaled, so have TMCs. Corporate clients, once worth millions in revenue, are worth a fraction of the value now. Many industry commentators have argued that this is just a temporary shift. However, many TMC clients have adapted to the pandemic by becoming more efficient and innovative, developing new ways to communicate, leading to a reduction in travel demand. As a result, global business travel trips have fallen 63% overall in 2020, according to GlobalData statistics. This drop is higher than any other form of tourism within the travel sector and includes both domestic and international trips.

The adaptation of businesses to communication technologies such as Zoom, Microsoft Teams and Citrix has helped companies maintain employee engagement, collaboration and partnerships throughout the pandemic, resulting in many companies questioning their corporate travel budgets. According to a recent GlobalData poll (close date 21 April 2021), 43% of companies said their corporate travel budgets would ‘reduce significantly’ in the next 12 months, highlighting that many businesses will stick to using communication technologies, instead of using precious capital for flights and other travel expenses.

The reduction in traveller demand has resulted in an overcrowded marketplace where TMC’s are fighting for survival. These companies now have some tough decisions regarding their futures, and consolidation may be the most sustainable option for survival. We may see some small and medium size enterprises (SMEs) merge to give themselves more purchasing power in the industry. Alternatively, some of the major players could start to merge as they look to reduce costs, increase sales and revenue.

Consolidation is a necessity in the travel industry

Consolidation occurs so a business can become a leader within an industry. When a company buys out another company, it reduces the number of competitors and enlarges its client base. However, in the current climate, revenue, efficiency and cost reduction are the key motivators for M&A. The increase in overall revenue will give merged TMC’s more influence in the industry, allowing them to control pricing, take on smaller niche markets and generate more leverage with its suppliers.

Unfortunately, there are two possible losers in this angle – the customers and employees. Consolidation is often followed by redundancies caused by duplicate assets, services and administrative departments. From a customer perspective, they have less choice, which results in reduced consumer power. This is because competition empowers consumers to negotiate better price and service value points. However, consolidation is very much a necessary part of the travel industry. In a post-COVID world, TMC’s will need to have as much influence as they can in a fledgeling, uncertain sub-industry in travel.

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