The paperwork required as preparation for the proposed Sabre IPO is where the real devil in the detail lies.
The S-1 filing with the US Securities and Exchange Commission tells us where the company feels it is in relation to the overall travel industry, as well as its competitors.
When it comes to competitive strengths it talks about the "broadest portfolio of leading technology solutions in the travel industry" listing Travel Network and Airline and Hospitality Solutions as addressing needs across the "entire travel lifecycle."
What Sabre thinks that means for the industry is being able to offer scale and efficiency as well as helping it to develop huge expertise and anticipate the requirements of customers.
It's worth noting here that since going private the company has bought a number of technology or service providers including SoftHotel (2011), F:WZ (2010), Flightline Data Services (2010), Caladris (2010) and EB2 (2008) – all for undisclosed sums.
And, while we're at it, Sabre has also made a string of acquisitions alongside the purchase of Lastminute.com, including Zuji ($35 million), SynXis ($41 million), Dillon Communications ($30 million for remaining 49% interest) and Site59 ($44 million).
As you would expect there's lots of BIG statements in the filing such as each of the businesses being a leader in its respective area and that it is the "leading GDS provider" in North America, Latin America and APAC with 58%, 58%, and 40% share of GDS-processed air bookings, respectively, in 2012, it claims.
Airline Solutions it describes as the second largest provider of reservations systems and Hospitality Solutions again, the leader, in hotel reservations - handling 26% of third-party CRS hotel rooms via the GDS in 2012.
GDP growth and regions where air traffic is increasing such as Latin America, MEA and APAC are expected to contribute to Sabre's Travel Network growth while the company says its Airline Solutions technology is 'weighted towards faster-growing LCC/hybrids'.
Further strengths, it says, lie in its resilient and diversified business models because much of the company operates on a transaction-based business model tied to travel transaction volumes. Its multi-year supplier contracts further boost its stability with terms of anything from three up to seven years depending on the area of the business.
And, it is also diversified with 41% of revenue from outside the US in 2012 and, it claims, none of its travel buyers or travel supplier customers accounting for more than 10% of revenue for the nine months ended September 30, 2013.
And, what's on the cards in terms of its tech strategy:
Promises to continue to invest in 'innovative' products such as data analytics and business intelligence (eg Sabre Dev Studio, Hotel Heatmaps), mobile (TripCase relaunch...) and workflow efficiency (Sabre Red, TruTrip)
All of this is nicely supported/boosted/rounded off/out by what Sabre sees as travel industry wide technology trends which will only "further technology innovation and spending" and play into the company's hands/positions it well.
- Outsourcing to make for a more cost effective and advanced solutions. Furthermore, SaaS and hosted solutions mean shared development, lower implementation costs, increased scalability and 'pay-as-you-go' models.
- Mobile, expected to account for more than 30% of travel sales by 2017 according to Euromonitor Travel technology with figures from SITA showing 97% of airlines investing in mobile technology, distribution companies are positioning themselves to take advantage of the trend.
- Personalisation, both the ancillary and mobile trends play into this one with travel suppliers increasingly looking at ways to improve the travel experience by tapping into customer data and preferences.
- And, finally personalisation segues nicely into data and analytics with technology providers looking to draw on their huge data resources to provide the necessary analysis and business intelligence for better decision making, more efficient operations and competitor benchmarking.
And, what of the risks?
Travel, like no other industry, is susceptible to a huge amount of risk from just about every quarter. There are the external threats such as adverse weather, terrorist attacks and economic downturns. And there are those that are closer to home for a company such as Sabre including:
- Its reliance on revenue from transaction volumes which although recurring is not a contractual commitment to recur annually.
- Revenue is also susceptible to financial instability of suppliers and industry consolidation
- Factors that affect demand for travel such as fuel prices, environmental issues, safety concerns
- Changes in regulation
- Its dependence on the maintenance and renewal of contracts
- pricing pressure from suppliers seeking to decrease their own costs
- Alternative distribution models such as direct distribution, IATA NDC and metasearch
- Reliance on third party distributors and joint ventures to push GDS services in some regions
- Competition from other GDS players
- The possibility that the company's strategic agreement between Travelocity and Expedia may not pan out or may not reap the expected results
- Reliance on third party technology providers
To end on a slightly lighter note, here's a few things you may not know about Sabre:
- The GDS processed more than 1.1 trillion system messages in 2013, with nearly 100,000 system messages per second at peak times.
- Employs 10,000 people in 60 countries including global technology teams which are made up of 4,000 employees and contractors
- Sabre Travel Network (the GDS) includes content from (approximately) 400 airlines, 125,000 hotels, 50 rail carriers and 16 cruiselines
- Sabre Travel Network has 28 planned airline contract renewals in 2014 and 24 in 2015. In 2013, it managed to renew 24 out of 24 renewals
- The company derived the majority of its business from the US 62% and Europe, 17% for the nine months ended September 30, 2013.
NB: Wall St. signpost image via Shutterstock