Cendant’s recent sale of Travelport to Blackstone has been widely reported including in the New York Times earlier this month. What has not found much mention is the rationale girding Blackstone’s strategy. With cavernous financial pockets, the private equity group is on a acquisitive tear that sometimes defies logic. Despite its unblemished record so far, Blackstone’s acquistion of Travelport and its motley collection of somewhat discrete businesses must surely have merger watchers sratching their heads.
While observers on the sell side have rightly greeted the news with a collectiive sigh of relief, that emotion is not lacking within Travelport either. As the New York Times article notes “Relief is pretty rampant at Travelport, too. The unit, which does about $2.5 billion in annual sales, is actually a hodgepodge of 20 acquisitions that Cendant has made over the last five years.” Whatever Blackstone’s inscrutable reasons for the acquisition, the writing on the wall for online intermediation has nothing but grim warnings for those in the business. Hotels and Airlines, two industries that have the highest costs derived from intermediation, have actively and aggressively pushed proprietary sites often at the cost of a Galileo or an Orbitz. Whatever their raison d’etre for the pricey buy, this is a declining business. Can the much vaunted Blackstone have actually faltered? Only time will tell but market omens certainly don’t favor the buyer.