A majority of the brokerage firms that cover Sabre expect its stock price to appreciate, and today’s earnings report for the travel technology giant gave further support to that bullish view.
In 2015, Sabre had a double-digit increase in revenue, over the previous year. (Details, below.) The low price of oil and industry consolidation is enabling airlines to afford to invest in technology that will help implement their longer-term retailing sales strategies -- a trend that benefits Sabre.
Looking ahead to 2016, its Airline and Hospitality Solutions division is forecast to see revenue growth of at least 17%, thanks to an expected bump of 30% in the number of SabreSonic passengers boarded and benefiting from the just-completed technology integration at American Airlines.
The growth forecasts are in happy contrast to some of the market turmoil affecting other companies in recent months.
CEO Tom Klein used a conference call with investors to highlight a few Sabre products, including Dynamic Retailer, which debuted a year ago with Virgin America, and which Virgin Australia, WestJet, and Alitalia have implementations planned in 2016. The tool helps airlines provide more relevant up-sell and retailing offers based on passenger insights, flight attributes, and other factors.
This year, Sabre expects Travel Network revenue growth of around 14%, driven by bookings growth of approximately 15% that is thanks partly to its acquisition of Abacus, the Asian GDS.
Regarding its Abacus acquisition, Klein expects to gain modest ground in market share in Asia Pacific. He looks to Asia with a market-focused share approach of boosting share in countries like India where Sabre thinks it is underweighted.
Sabre expects that, in 2016, its combined APAC operation will see a step-down of margin from 42% to 40%. It will take at least a year to achieve cost-savings via synergies to see possible benefits in 2017, though the company says the merger is going well.
This summer, the company plans to have the next big release of the Sabre Red workspace, with enhancements to the graphical merchandizing capabilities to help agents better sell ancillary products and branded fares. The platform also features agency revenue optimization tools.
The Sabre Hospitality Solutions division also continues to grow thanks to key deals with Wyndham and Four Seasons.
Klein says,
“Our property management system business is nascent, though we think there's a lot of upside. Our central reservation system product is growing quite strongly…. We like our Trust International acquisition in giving us more exposure to markets we didn't have....
"Eventually we expect to have 65% of customers outside of North America.... There's revenue synergies in both directions, by cross-selling solutions into both customer bases."
On Lufthansa’s addition of a fee for tickets that come over third-party distribution channels, Klein said:
“We are talking to Lufthansa on how to use technology to change their relationship with their customers, in ways which they say are core to their strategy….”
“We haven’t seen any impact to our overall bookings in any meaningful way across the board.... We’re either picking up those bookings through codeshare partners or other airlines that overlap with Lufthansa.”
On IATA's New Distribution Capability (NDC), and on this month's news that Sabre has begun to sell American Airlines‘ upgraded seat products using NDC-based technology standards, Klein said:
"There's been a lot of puffery around the idea of NDC, but NDC is a whitepaper... I think other standards will evolve and will do a better job than what IATA has mapped out.... We feel really good about being first to market with an NDC-compliant standards solution."
Sabre has seen some share gains as a back-end technology provider to online travel agencies (OTAs) relative to its competitors. Klein said, "We've seen growth rates from some of the biggest OTAs that are far outstripping the market...."
Klein was open to the idea of additional acquisitions.
"Particularly in the solutions space, if we could add acquisitions that would provide new value to our customers or give us access to customers that we don't have today, then we are an active acquirer.
"We've referred to these as tuck-in acquisitions. Trust is on the larger side of the tuck-in. Some of our acquisitions have been as small as a couple of million dollars.
"We believe we have a platform where if we plug in new services, we can increase the share of wallet of our customers. We can develop globally, deliver globally, and sell globally. There's a lot of boutiques out there that can't get to those bigger markets without being acquired."
Back on Airline Solutions, in 2017, Southwest Airlines is set to roll off, but the company's executives did not discuss that's potential impact.
Klein spoke proudly of last October's smooth execution the largest technology integration in the airline industry's history by switching over American Airlines's system to its SabreSonic community. He says the airline called it the smoothest such transition it has experienced.