Dealmaking momentum is expected to continue in the new year after a banner 2021 for private equity. In our outlook for 2022, we see several themes that are expected to play a significant role in PE investments: workforce management, infrastructure, ESG, home healthcare, business travel and new technologies, like cryptocurrency. We also predict that supply chain disruptions will continue to provide PE with opportunities. See below for a sector deep-dive on business travel.

In early December, with stocks whipsawing amidst news of a fast-spreading Covid variant, the outlook for the travel/tourism sector suddenly went from brightly sunny to damp and unsettled.

Still, even as the very first Omicron cases were being reported across the U.S., the sector got a booster: American Express Global Business Travel (GBT) said on Dec. 3 that it was going public via a blank-check company backed by Apollo Global Management. A B2B travel platform in a time of pandemic-bred uncertainty and technologically driven disruption, GBT garnered a valuation of about $5.3 billion.

One day earlier, Grab, the Southeast Asian food delivery, rideshare and travel “super app” went public in the largest-ever merger involving a special purpose acquisition company (SPAC). After its first close, Grab was valued at $34.6 billion. A few weeks earlier, SiteMinder, which provides software for hotels seeking to connect their back-end systems with various online booking sites, went public in a deal that valued the Sydney-based tech darling at $1.9 billion.

“B2B deals are hot,” said Dennis Schaal, an analyst at Skift, a travel sector market research provider. “And they should continue to be in the year ahead.”

Illustrative of this trend picking up momentum: Booking Holdings – its portfolio of consumer-facing brands includes Priceline, KAYAK and OpenTable, among others – this past November snapped up GetaRoom, a hotel wholesaler and distributor, as well as ETraveli Group, a flight tech/connectivity company. Each acquisition, reportedly, was price-tagged in excess of $1 billion.

David Lewin, Senior Partner, Novacap

“These are back-end, behind-the-scenes B2B plays,” Schaal said. “We think, after going on nearly two years of constraints, travelers will be willing to pay up for better experiences in 2022 and beyond,” explained David Lewin, senior partner at Novacap, a Montreal-based private equity manager with $8 billion in committed assets.

Novacap last fall led a deal, alongside Caisse de dépôt et placement du Québec (CDPQ), to take a stake (undisclosed) in Plusgrade, a B2B travel tech platform that helps airlines, railroads and cruise ship companies enhance their “upgrades” game, nudging customers to spend more.

“Leisure upselling is going to be an opportunity,” Lewin said. Perhaps. But with Covid considerations back at the fore, no one in the travel space can really say what the next 12 months might bring Still, the recent pace of deals suggests long-term optimism.

Business travel market experts expect business travel to recover to pre-pandemic levels, though there is uncertainty around the timing. Some analysts expect at least an 80 percent recovery by 2023, reflecting a $1 trillion opportunity; AmEx GBT is scenario-modeling for a 70 percent recovery.

A few days after the announcement of GBT’s massive SPAC deal, a company spokesman underscored how the presence of Zoom among its new investors should be viewed as a harbinger of a new paradigm ahead.

“[GBT], in addition to being the largest business travel company, is the largest meetings and events company,” the GBT spokesman said.

“Zoom’s investment brings our companies closer and presents a substantial opportunity to perfect hybrid events. This isn’t a hedge on a hybrid future; it represents our collective confidence that hybrid is the future of events.”

Leisure travel bookings are back on the rise, albeit at varying levels, depending on the trip-type and also geography. In terms of niche, some of the areas that are thriving include adventure, experiential and wellness – think surf camps, Antarctic tours and yoga retreats – particularly among a certain kind of traveler who is young, vaccinated, disinclined to save for the future and determined to gain some semblance of certitude about the rules of engagement.

“People just want to know, ‘what do I have to do to get there, what do I have to do to get home, what’s required,” explained Greg O’Hara, founder of Certares Management, a New York private equity firm that invests in travel and tourism, hospitality, business and consumer services.

It’s been seven years since Airbnb booked a $450 million funding round that valued the lodging app at approximately $10 billion. It took another few years for the real estate industry – agents, landlords, property managers, portfolio owners, tenants – to even begin to transform their domain into a digital marketplace.

Portland-based Vacasa is a vacation rental management platform, aligned with Airbnb and Vrbo and 100 other channel partners, but geared toward serving luxury property owners. This past summer, Vacasa revealed it was on pace to grow 2021 revenues north of $750 million. And on November 30, Vasca shareholders approved a deal to go public through a business combination with TPG Pace Solutions, a special purpose acquisition company (SPAC), in a deal valuing the Pacific Northwest company at roughly $4.5 billion. Vacasa’s investors included Silver Lake, Riverwood Capital, Level Equity, Altos Ventures, Adams Street and NewSpring Capital, which collectively along with the company’s founder, Eric Breon, retained an 88 percent stake.

Meanwhile, lodging startup Sonder, which specializes in turning ordinary apartments into chic short-term rentals, in October announced updated terms to a SPAC deal backed by The Gores Group, valued at around $1.9 billion.

O’Hara, having just helped Hertz emerge from bankruptcy, conveyed a sense of cautious optimism about the travel space even as the pandemic took its latest turn.

The next 12 months could be active in certain niche businesses that fit the times. O’Hara says riverboat cruise companies could be in play. The best-known is Viking (particularly among public television viewers) and Ama Waterways, one of Certares’ holdings, is also considered a category leader. At least a dozen or more of these companies in a rising market could be viewed as targets from strategic buyers or, if the tide turns, value investors.

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