Public, Private, and Back Again: Has the Investment Community Tired of Travel or Only Just Begun?

"The king of private equity is expected to go public."

As reported in The Wall Street Journal on March 17, 2007, The Blackstone Group, the lucrative partnership that has grown rich taking public companies private, is in advanced stages of planning an initial public offering of roughly 10% of its management company, according to people familiar with the matter.

Is this the peak of the market for private equity?
Are the big bets in travel finished? Or just begun?

Blackstone owns Extended Stay, Meristar, LaQuinta, Galileo, Worldspan, Orbitz, Gullivers Travel Associates and LXR Luxury Resorts as part of its $43 billion collection of assets. But has it saturated its taste for travel and hospitality assets?

How about Texas Pacific Group? TPG was a formative travel investor with early positions in Continental Airlines, Ryanair and Hotwire.com. TPG's huge appetite for travel continues today with potential acquisitions of Sabre, Qantas, Alitalia and Harrah's underway simultaneously. Will TPG continue to hunger for more?

And what about venture capital? Carlyle led the $6 million Series B round in Viator in November 2005 - and a subsequent $4 million follow-on round in June 2006. Was that a signal of renewed VC investment in travel and tourism? Or just an anomaly?

Just as soon as some are going private, others are going public. Expedia is now a stand-alone company (again) and Travelport plans to return Orbitz to the public markets later this year. Who is next?

These questions loom large in the marketplace for the remainder of 2007. However, we expect these trends to continue and even accelerate. The economy remains robust and the outlook for travel (both leisure and corporate) is strong, with the U.S. travel market expected to hit $260 billion this year. International markets are becoming ever more vibrant and continue to show tremendous growth, fueling a world travel market that is likely to reach a trillion dollars by the end of the decade. Travel assets will continue to generate excitement with investors at all levels.

Tom Botts is a Founder and Partner at Hudson Crossing.

Phocuswright is proud to announce a new partnership with Hudson Crossing, a newly-formed strategic advisory firm devoted to helping business owners raise the financial performance of their travel, tourism and hospitality assets. Hudson Crossing employs a simple yet robust five step process that is grounded in strong analytics and backed by Phocuswright research.

Hudson Crossing's team of experienced industry executives bridges the gap between plan and performance, helping companies achieve important growth metrics through business assessment, course correction and translating strategy into outcome. The result is improved speed to market, which enables clients to unlock the full potential of their business model.

For more information about Hudson Crossing, visit hudsoncrossing.com.