What if Saber put its hotel software unit into play

Travel tech company Saber this year discussed an asset sale of part or all of its hotel software services unit internally to Oracle, which also has a hotel software business, according to multiple people. familiar with business.

“We don’t comment on rumors or market speculation,” a spokesperson said when asked if Saber had entered into talks this year about selling its home unit. Oracle, a potential buyer, did not respond to requests for comment.

Saber, based in Southlake, Texas, and Oracle, based in Austin, Texas, have been on each other’s radar. Current Oracle Hospitality CEO Alex Alt was previously president of Saber Hospitality Solutions. Former Oracle Hospitality executive Greg Webb was previously vice president of Saber.

Perella Weinberg Partners (PWP), a financial adviser to Saber on $1.1 billion secured and exchangeable note offerings during the depths of the pandemic, may have suggested an asset sale, according to speculation. A PWP spokesperson declined to comment.

An asset sale would give Saber additional firepower. But there are no outward signs that the company cannot manage its debt. The added benefit of putting it on the line could be that Saber could assess the value of the unit to help justify additional in-house investment.

“We noted on our recent second quarter 2022 earnings call that Saber ended the quarter with a cash balance of approximately $1 billion and we continue to expect free cash flow to turn positive. in the fourth quarter of 2022,” a spokesperson said. “This generation of free cash flow will in turn help us achieve our deleveraging goals.”

Rating agency Moody’s in August reaffirmed a stable outlook for Saber’s ability to repay its long-term debt due in 2024. Moody’s expects Saber to begin repaying debt in the first half of 2023 without negatively affecting its liquidity position. .

The case against a sale

Customers and employees don’t need to lose sleep. A sale is unlikely. A few analysts and longtime industry watchers were intrigued by the idea of ​​the transaction, which would be quite unusual among public companies without an activist investor involved.

An asset sale would reduce Saber’s core competency to services for airlines and travel agencies, moving away from diversification. For years, the company planned to grow by providing technology services that span the travel lifecycle of a typical business traveler, not just providing technology to travel agencies and airlines.

A strategic question for Saber would be that if it left the hotel business, would it only have low-growth distribution services and medium-growth IT services for airlines?

Saber has made recent investments to expand the capabilities of its hospitality business. Earlier this year it bought Nuvola, a provider of tools to help hotels manage tasks and interact with guests online.

In June, Saber announced the launch of Saber Hospitality’s Synxis Retail Studio, a commerce product designed to help hotels sell rooms and services in a personalized way to guests.

Such acquisitions suggest continued interest in the company’s hotel customers.

Saber said in June that by the end of the year it will have moved the entire SynXis platform from data centers to Google Cloud. He said that next year he will have improved the connectivity of all SynXis products.

Anecdotal reports have revealed that hotel guests are satisfied with Saber’s products for e-commerce, property management, and connectivity.

Why a sale can make sense

Saber’s hotel business hasn’t seen strong growth recently. The company said in February that it served “more than 42,000 hotels,” the same number it claimed in 2019. The apparent lack of high growth contrasts with how several other technology vendors serving the hotel space – IDeaS, Mews, Cloudbeds, Cendyn, Amadeus, Shiji and Yanolja – claimed significant customer gains in the pandemic rebound as many hotels embraced digitalization.

Saber appears to have high repeat customer rates, reporting satisfied customers. So, the apparent growth problem may be a relative lack of marketing by Saber, as the company’s various units compete for scarce dollars.

A source speculated that Saber began considering an asset sale of its hospitality software business after Kurt Ekert became president of the company in January as part of a strategic review. Ekert was executive vice president and chief commercial officer of Travelport years ago, where he helped guide the company through its IPO in 2014. Travelport is Saber’s smaller peer company, and it focuses solely on travel distribution – not IT services for the hotel industry. Ekert was most recently the head of business travel management company CWT.

Anecdotal reports have revealed that many technology providers are frustrated with Saber Hospitality’s interactions with third-party developers. Although Saber has expanded the data feeds it offers, it does not appear to have made any revisions to provide developer support tools. Critics say it should adopt processes to make itself more nimble and responsive to third-party developers who want to sync external software with its central reservations system, booking engine and other technologies. Integrations are essential for Saber to expand its popularity with hotels, as hoteliers will want their various third-party systems to work well with each other.

Still, Saber faces tough strategic decisions. One is how much money he wants to invest in hospitality. A slew of well-capitalized hotel tech players are looking to bite into the various parts of its business.

For example, Saber has a multi-year hill to climb to refine its cloud-based property management system, SynXis Property Hub, which helps limited-service hotels assign guests to rooms and other operational tasks. Essentially, Saber’s Property Hub competes with other products in the market from seemingly better-funded players.

To bring the real estate hub and its other hospitality products back to high growth, Saber may need to increase its marketing spend, invest in new products, make more acquisitions, and also improve its interactions with developers. All of these steps can be inferred as part of the C-suite plan. Still, uncertain market conditions and an internal struggle for resources could cloud the calculations.

Why Oracle might want to buy Saber’s technology

The argument that Oracle would benefit from acquiring Saber’s hosting services is stronger than the argument that Saber would sell its technology. Or, for that matter, how it might attract other strategic buyers who might surface.

Saber’s flagship products are its central reservation system SynXis, which helps hotels distribute their rates and inventory to call centers, online travel agencies and other third parties.

Saber’s booking engine is also popular. Tens of thousands of hotels have added the company’s tool to help take direct bookings through their websites and apps.

Although Oracle has products that play in the same spaces, these are not of the same caliber, according to industry participants. Rather, Oracle’s fame lies in its property management systems, which hotels use as central databases to maintain master records of guest data and to assign guests to rooms. More than 40,000 properties, many of which are high-end hotels, use its systems.

Buying Saber’s central reservations system and booking engine would give Oracle best-in-class tools and fill gaps in its suite as it seeks to compete globally with rookie players pushing new increasingly towards end-to-end platforms.

A sale would surprise

Since Sean Menke became CEO of Saber in late 2016, he has led a strategic overhaul that has streamlined the organization, reducing some ambitions while increasing others. Hospitality growth has been a key part of its plan.

Next year, Menke and Ekert, the company’s chairman, must weigh an uncertain macroeconomic outlook, with a possible US recession driven by interest rate hikes to fight inflation and a possible financial shock in Europe affecting supply and demand due to the energy crisis. .

If the travel industry is taking longer than expected to recover, they will need to review projects for their strategic value, as their core business activities may be slow to return to full profitability.

Saber has built a solid set of products with leading market positions. Yet broader policy decisions at the parent level could cloud the picture. A sale of assets remains unlikely but not unthinkable.

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