With its vision of becoming the focal point in the travel eco-system, expect Amadeus to continue with its intense pace of Mergers & Acquisitions activity as well as drive innovation within the group by investing in start-ups through its Amadeus Venture Fund.
Luzarraga: Record number of transactions the last 12 months and expect the intensity to continue.
Visiting Bangkok last week, Alex Luzarraga, vice president of corporate strategy for Amadeus IT Group, told WIT that the role of strategy planning had gained more importance because of the big trends sweeping travel as Amadeus expands its interests beyond its core distribution business to airlines, hotels, airports and destination content.
The last 12 months has been a record year in transactions with up to eight deals finalised. They include Navitaire, the low cost airline hosting platform, for $830m. It also bought Netherlands-based Itesso BV, a hotel PMS provider, and US-based HotelSystemsPro, to add to its 2013 acquisition of Newmarket, a hotel IT specialist, for $500m back then.
In April, it bought US-based Air-Transport IT Services, Inc. (AirIT) – AirIT’s solutions are used by 30 of the top 50 busiest airports in the US.
“The next 12 months will also be an intense period for M&A as we move into the full travel chain – hotel, accommodation, airport and destination content,” said Luzarraga.
He is confident the success rate of integration will be “quite high”. “We are not serial acquirers – we looked at 40-50 companies very carefully before buying what we did.”
Criteria it looks at include team, product (is there enough differential) and long term sustainability. “We like light models – we don’t want to bring in organisations with a lot of legacy.”
Asked if he had any role models for successful M&A strategies and integration, he said, “You have to look at the very active acquirers such as Concur, Priceline and TripAdvisor and you really need a few years to tell if the integration is successful or not. It is always challenging to acquire different technology for different countries in a speedy manner – that’s why we want to be more conservative.”
The missing pieces he’s looking at? He cites “payments, shared economy, local destination content, hotel and airport.”
In 2014, Amadeus acquired i:FAO, which provides Cytric, described as “Europe’s most widely used cloud services for planning, booking, managing and expense reporting business travel”.
“Travel expense management and mobile – that space will evolve,” he said.
On the shared economy, Luzaragga said, “We are observing this area. Properties need to manage their inventory and prices and the penetration of IT is very low. These platforms have a lot of importance at a local level – for example, guided tours – that can connect with the traditional travel ecosystem.”
To drive innovation within the organisation, it’s set up a venture fund to invest in start-ups and Asia is the only region to have a Bangkok-based team to explore and invest in travel start-ups. Bangkok also operates the Amadeus NEXT initiative “to work with start-ups in Asia and we’ve held Start-Up weekends and hackathons. The idea is to engage in conversations with start-ups, which occasionally could end in investments, typically minority stakes for between $500,000 and $1m funding. Our focus is not to be a large shareholder but it’s so we can be exposed to their interests and trends.”
He likened it to an “incubator with smart money”. So far, no investments have been made in Asia.
In Europe, it’s invested in Olset, a company that promises higher conversions using personalisation; BookingPal, a cloud-based travel technology service that connects professionally managed vacation rental units to OTA’s, property listing and vacation rental portals; Yapta, a pioneer in airfare price insurance services for travellers, and Evature, an Expert Virtual Agent.
It’s also invested in Cabify which allows passengers to book high end vehicles with drivers by using their smartphone, PC or phone calls with real time confirmation. Currently, services are available in 6 cities in Spain and in the capital cities of Mexico, Chile and Peru.
“We do not use financial indicators as parameters for investing in these companies. Our first focus is learning from them and be close to trends. Of course we don’t like to lose money – but so far, all our investments have been positive – they are financing themselves.”
Asia is now a key area of focus and Luzaragga said a number of trends are interesting in the region around smartphone penetration, local and destination content and payments. “Mobile and local content is very strong in Asia.” He also said Virtual Reality was an area of interest in content.
As to why a start-up should take Amadeus money over the many VC funds that are now established in Asia, he said, “We help them understand global needs. Start-ups typically grow very fast in their own market in the beginning but we can help them scale globally with our technology and thousands of developers. We can also connect them to a network of point of sale.”
He said that with innovation happening on the boundaries – with the development of cloud and open systems – large companies have to open themselves to change. “We have to change, get fluent in having conversations with external entrepreneurs.
“The biggest difference between a large company and a start-up is where the knowledge sits. With an entrepreneur, it sits in his head; with a big company, knowledge has to be shared. Any acquired company cannot rely on a single person, it has to have value that goes beyond a single person.”
Having said that, he acknowledges that some of the most successful and valuable companies have been founded by single visionaries. “We would have to find a way to capture their value and intelligence without risking our money,” he said.
More news on the investments made by Amadeus Venture Fund so far:
BookingPal: https://www.mybookingpal.com/press/series_B_funding
Evature: https://www.evature.com/
Yapta: http://www.amadeus.com/blog/06/12/amadeus-ventures-nurtures-future-innovation-travel-business/
Cabify: http://www.amadeus.com/blog/14/08/amadeus-ventures-cabify/
Photo credit: iStock
