WELCOME to the Weekly Wrap. This week there was one standout story that deserves a bit of unpacking. I would like to do that but from a slightly different angle.
What do Sun Country Airlines, Regent Seven Seas Cruises, Oceania Cruises and The Venetian in Las Vegas have in common? They have all had or have Apollo Global Management as an investor.
And now it looks all but certain (finalisation is due towards the end of the year) that The Travel Corporation (TTC) will join them, after the news on Wednesday morning Australian time that the group and 18 of its brands had been acquired.
As of 31 March, Apollo had approximately US$671 billion of assets under management.
The industry is rather au fait with TTC, but what about Apollo?
Apollo mission
Apollo has a significant history in the travel industry, although it’s not a well-known name to anyone who doesn’t have a few years notched up in travel.
That history could point to potential behaviours when it comes to the acquisition of TTC, so let’s pull just a few major examples apart.
In December 2017, funds affiliated with Apollo Global Management acquired Minnesota-based Sun Country Airlines, at the time the largest privately-held fully independent airline in the United States.
It quickly moved to change the model of the airline, dropping first class, adding various fees and operating it more like a standard small to medium-sized airline.
In late 2019, Skift reporter Brian Sumers wrote, “So far, under Bricker and Apollo, results have been encouraging. In the first quarter, Sun Country produced an operating margin excluding special items of 23.8 percent, highest among the 11 major US airlines tracked by…Skift Airline Weekly.”
Jude Bricker, CEO of Sun Country at the time, said that the airline’s earnings were supportive of an IPO.
Just two years later, in 2021, and despite being in a pandemic, Apollo took the leap, and Sun Country was listed. A brave move, although having won serious business including operating 12 cargo aircraft for Amazon Prime, there was method to the apparent madness.
The Amazon Prime deal alone brought in US$17 million in revenue in the first nine months of 2020.
On 19 March 2021 the airline opened on the NYSE (SNCY) at US$33.04 and peaked at US$41.90 on 16 April.
Today, the airline sits at US$12.89, having dropped as low as US$9.22, although the stock seems to be hotting up with a number of analysts rating it as “buy”. The point here is more that Apollo had an interesting strategy and pivoted the airline, and it did so with Jude Bricker remaining as CEO.
Cruising into profits
Prior to Sun Country, Apollo had been particularly active in the cruise market. In 2007 and 2008, it made significant moves that established it as a leading player. It acquired Oceania in 2007 for a reported US$850 million, took on Regent Seven Seas Cruises (a dollar amount on that transaction is hard to track down) and invested in NCL Corporation by purchasing 50% for US$1 billion.
During this period, it created Prestige Cruise Holdings and placed Oceania and Regent Seven Seas under it.
Fast-forward to September 2014 and Norwegian Cruise Line Holdings announced it had acquired Prestige for total transaction consideration at closing of US$3.025 billion.
After slowly selling off stock, by December 2018, Apollo had cashed out completely of Norwegian Cruise Line Holdings, although they still continue to work together.
Apollo has other tentacles in the travel industry, most notably the Venetian Resort Las Vegas, Hilton Grand Vacations, and American Express Global Business Travel.
It’s worth noting that, as with Bricker at Sun Country, business unit leaders tend to remain in place when Apollo makes acquisitions. Regent’s president, Mark S. Conroy, remained with the business until January 2013, while Oceania’s leader Frank del Rio went on to be the President and CEO of NCLH, a position he didn’t relinquish until the middle of last year, becoming an industry legend in the process.
Interestingly, this wasn’t quite the case with The Venetian, with Patrick Nicholas taking over from George Markantonis as CEO four months after the takeover, although the latter was kept on board as a special advisor.
On the contrary
Apollo describes itself as having a contrarian investment approach, and that is certainly what happened in the case of Sun Country and the Venetian. Contrarian investing is essentially going against the grain of the market.
Think selling off Sun Country and purchasing the Venetian in the pandemic when most wouldn’t think making moves on travel industry assets was wise. Zig when others zag, in other words.
As one finance expert told me when speaking about Apollo off the record, “Apollo tends to make really big transactions, and contrarian investors are generally the ones that make the money”.
The other item worth noting is the selection of businesses (18 in all) that Apollo has taken as part of the deal. Eighteen “leading brands” but no mention of exactly who they were (Travel Daily is chasing that information) other than confirmation of a small number including Contiki and Uniworld, but also the admission that “certain brands are not included in the sale”.
It’s been mentioned by some commentators, most notably Skift’s founder Rafat Ali, that TTC is in need of “digital reinvention and cohesive strategy” with brands under the umbrella that have had mixed results.
Apollo has historically not shied away from making significant investments in its acquisitions. With the Venetian, for example, it’s embarking on a US$1 billion capital plan and highlights digital transformation and procurement enhancements as obvious opportunities.
It will invest in a vision for TTC and its 18 brands that is likely to be something a little bit different to what the average travel industry punter thinks it should do with them.
As an aside, there seems to have been a lot of pondering, on LinkedIn especially, as to what the Tollmans will do now and why the next generation doesn’t want to take on TTC, but there are still businesses they will run and therefore businesses to hand down. They just aren’t TTC anymore.
Moving forward, it would be wise to keep an eye out on Apollo and TTC, but also on Brett Tollman and the family.
The rest of the week
I’ll briefly touch on the main points of the rest of the week as I’ve now taken up a fair chunk of your Saturday morning.
The NTIA nominees were revealed on Wednesday, and you can read all about that here. Ensemble Travel Group and Helloworld partnered to supply local agents across the network with access to its luxury hotel program, and Qantas launched direct flights to Paris this week – it took a whole bunch of agents with it as well.
Meanwhile in cruising, Philly is back on the cards for cruise, while a battle is brewing on the custom fees front over in New Zealand.
And if you haven’t heard, there are now well over 150 people registered to attend our new event, Travel24, on 8 August in Sydney. It’s going to be a great conference with fantastic speakers. If you haven’t already, grab your tickets now.
Have a great weekend.
Damian Francis
Publisher
Damian.francis@traveldaily.com.au
