Travel & Hospitality SaaS M&A Priorities Shift

Current Travel & Hospitality Technology M&A Landscape

Travel and Hospitality deals shifted in Q4 2023 away from big mergers and into smaller deals. In the travel technology space, there has been a decreased appetite for larger all-in-one platforms buying up complementary players to consolidate a fragmented market. Mergers and acquisitions seem to be within narrower subverticals. For example, automation software providers merging with other automation software companies or marketing software acquiring other marketing software providers.

Why the Shift to Smaller, Strategic Acquisitions, and Alliances?

The property management software space is stabilizing into a complex ecosystem where companies are required to integrate and partner with other software vendors to enhance the functionality of their products. Given the extensive number of point solutions within the industry like price optimization, turnover management, insurance, etc., and how fragmented those solutions have become, consolidation across categories remains disadvantageous as it could possibly cannibalize their existing business. For example, if a property management platform is partnered with multiple online traveling agencies (OTAs) like Booking.com and Vrbo, why risk access to those channels by purchasing and integrating their own OTA?

In addition, the M&A market overall faced difficult financing conditions due to high interest rates and inflation. According to KPMG’s Q4'23 M&A trends in travel, leisure, and hospitality report, M&A deal values and volume were subdued last quarter as buyers were unwilling to pay the high asking prices or borrow the large amounts necessary for purchase. Buyers concentrated on smaller or innovative deals that expanded their market or segment.

Companies have also explored new forms of partnerships to expand distribution and tap into new customers. The strategic alliance between InterContinental Hotels Group and Iberostar Hotels & Resorts offered 70 Iberostar resorts as a new brand within IHG’s portfolio. MGM Resorts and Marriott International signed a licensing deal to provide specific MGM properties via Marriott’s booking channels. This creativity is a result of companies wanting to continue growing while waiting out the constraints of the current M&A environment.

What’s the M&A Outlook for the Rest of 2024?

SaaS companies have the advantage of being asset-light, reducing the risk of heavy capital expenditure for buyers if financial headwinds continue. However, considering the big picture, the M&A outlook seems to be promising for the rest of 2024 with anticipated Federal Reserve rate cuts. The broader economic sentiment is also optimistic with the stock market at all-time highs.

Taking 2023 as a whole, global travel M&A still surpassed pre-pandemic levels with 423 deals compared to 389 deals pre-pandemic, according to Cambon Partners and VIDEC’s Travel M&A Database. An Amadeus “Travel Technology Investment Trends” survey of 1,253 travel technology decision makers forecasted a 14% increase in travel technology investment for 2024. And Deloitte’s 2024 survey of 1,500 corporate and private equity dealmakers also signaled market optimism, key performance metric resilience from corporations, and signs of potential rebound despite the soft M&A market.

All these factors point to continued dynamic M&A activity for software companies in travel and hospitality for the rest of the year.

Which Segments are Seeing More M&A Activity?

Travel technology overall is looking healthy and active, with the aforementioned survey by Amadeus of 1,253 travel technology decision makers projecting average technology spend to increase in 2024 as follows:

• Airports: 17%
• Corporations: 15%
• Hotels: 14%
• Airlines: 13%
• Travel agencies: 13%
• Travel payments: 12%

Priorities driving the uptick in technology investments include things like airlines transitioning to modern retailing, airports implementing biometrics, and increased personalization from the hospitality sector.

To focus more narrowly on our property management expertise, there has been heightened activity in the turnover management segment with software designed to help properties manage their cleaning, maintenance, and operations. As well as continuing activity in payments and guidebook integrations.

What can Founders Do to Make Themselves More Attractive for a Potential Investment?

More than how a particular sector is performing, the microeconomics of your own company is the best thing to focus on to attract investments. If you’re meeting your KPIs, your staff are happy, and your operations are efficient, then you’re already doing your best to prepare for a purchase. These key metrics for running and selling a SaaS business are a good benchmark for what metrics you should be focusing on and prepared to discuss. And, if you have been hitting these KPIs and seeing good growth, ask yourself if you should keep winning or make moves to sell into growth.

This material and the opinions contained herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.

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