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[FRANKFURT] Global mergers and acquisitions in tourism more than doubled in value in 2014 as low borrowing costs and growing competition fueled the busiest year in seven for deals in the industry.
Purchases of hotels, travel-services companies and tour operators announced in 2014 totaled US$64.4 billion, more than twice the value in any of the previous six years, data collected by Bloomberg show. Last year's 596 announced deals included Anbang Insurance Group Co's purchase of the landmark Waldorf Astoria hotel in Manhattan and Blackstone Group LP's acquisition of the Cosmopolitan of Las Vegas hotel and casino.
The pace of dealmaking may not slow much this year. The increasing clout of online travel agencies and other Web-based services is threatening the earnings of hotels and tour operators, pushing them to become bigger and go digital.
"In tourism there are great opportunities because it is a growing market, but it is also very competitive, and competition is growing," said Angelo Rossini, a tourism analyst at Euromonitor International.
"This is a period of very fast changes for the industry due to the arrival of online and mobile travel."
Last year was the busiest by number of deals and total value since 2007, when Blackstone bought Hilton Worldwide Holdings Inc for US$26 billion at the height of the real estate bubble.
Among deals involving online or mobile services, Sabre Corp announced plans to sell lastminute.com, and Accor SA, Europe's largest hotel operator, bought Wipolo, a mobile app allowing users to plan trips. Accor was among the most active buyers last year, also acquiring three hotel portfolios for US$1.3 billion.
Companies that survived 2008 and 2009, two of the worst years for the industry, today have more cash, benefit from lower borrowing costs and enjoy an economic recovery that feeds them a rising stream of tourists as they seek new sales channels.
Online travel agents and intermediaries such as Priceline Group Inc and Expedia Inc are pushing down room prices and taking commissions from hotels, while enabling travelers to organize trips individually, poaching customers from tour operators. TUI AG and TUI Travel Plc merged, and a group led by Fosun International Ltd. agreed to buy French resort operator Club Mediterranee SA.
Bank of America Merrill Lynch was the most active financial adviser for such deals, with a market share of 9.9 per cent, followed by Lazard Ltd at 9.2 per cent.
The spree may continue. Accor, owner of the Sofitel and Ibis brands, plans to spend 225 million euros through 2018 to improve its digital presence. Kuoni Reisen Holding AG of Zurich on Jan 14 said it seeks to divest its tour operator business with 2.2 billion Swiss francs (US$2.6 billion) in revenue.
"Kuoni was not able to compete successfully in tour operating, a shrinking market," Mr Rossini said. "Five years ago that was their core business. It shows how incredibly fast the industry is changing."