DUBAI-based Dnata, which has been buying UK travel companies, has made its first foray into Asia by acquiring a stake in Bangkok-based Destination Asia (DA) for an undisclosed sum.
Dnata has been on the prowl to buy a travel company in Asia for over two years now, as part of its plan to expand its Travel Services Division by investing in overseas markets. Until now, its acquisitions have been in the UK market, where it bought tour operators Stella Travel Services and Gold Medal Travel Group, online travel agency Travel Republic and cruise specialist Imagine Cruising, as well as increasing its stake in Hogg Robinson Group.
Members of the executive management of DNATA and DA
According to sources who spoke on the condition of anonymity, Dnata was also in talks with Diethelm Travel and Exotissimo for a purchase, and that it had hoped for a full takeover rather than just a stake. DA’s CEO/group managing director James Reed, in an interview with TTG Asia e-Daily, declined to reveal whether Dnata now holds a majority stake, or the price of the equity stake.
But varying rules and regulations in the 11 countries DA operates in, the shareholding structure of the company – DA has no fewer than 36 shareholders and they operate as “family” by buying into each other – and bright future prospects as Asia continues to grow, might be factors that have prevented a full Dnata ownership.
While DA welcomes a new owner which Reed described as “a match made in heaven”, the M&A may upset the cart for a few DA competitors in the region.
DMCs such as Go Vacation Thailand and Destination Services (part of Hotelbeds Group), for example, handle Emirates Holidays in Thailand and Singapore respectively and this account might go to DA.
As well, Stella and Gold Medal send clients to Asia, accounts that could also go to DA although a source pointed out that this was not necessarily a given as DA might lose its other UK clients in the process. Some Tour East offices in the region are handling Stella’s Travel 2 and Travelbag accounts, as well as Dnata Holidays, while Destination Services also handles Gold Medal apart from Emirates Holidays.
Reed, along with Bob Guy, DA’s managing director Singapore-Malaysia who handles several UK accounts, declined to comment on this issue. The deal was just signed over the weekend in Bangkok.
When contacted, Judy Lum, Tour East senior vice president sales & marketing international market, said: “Like all the other M&As that we have seen over the years, I am quite sure that we will be put through an account consolidation exercise to enable Dnata to achieve the best deals from their ground agents. This will happen sooner or later, even without the stake in DA, with Dnata having acquired so many strong brands. With the latest development, it is no doubt that DA will now have the advantage. Nevertheless, it is left to be seen if Dnata will put all its eggs in one basket. Competition will always keep us on our toes.”
Reed said DA would continue to run the business. “We had been approached by other companies in the past but they wanted to change parts of the business model because of who they were and they didn’t share the same philosophy,” he said.
“Dnata and us had collectively looked at the business opportunities in Asia and both of us recognised that the strengths DA has are unique. You don’t just buy a licence, that’s a technical thing, you buy the people, connections, contracting, relationships with NTOs and local airlines, and so on.”
When asked if DA could continue to grow without an acquisition, Reed said: “We’ve been able to grow, but the business is changing so quickly with the increasing role of IT and online distribution. We realised with their size, Dnata’s online booking and operations systems are world-class and we want to bring that (into DA).”
As for Dnata, Iain Andrew, senior vice president of Dnata’s Travel Services, said in a statement: “Our stake in Destination Asia opens the door to business opportunities in new markets, and will strengthen Dnata’s position as a global player in travel.”
Reed said it was inevitable for Asia to be “the centre of the world’s travel industry by 2020” due to the economic clout of its middle class who desire to see the world. “Along with this is a growing need for corporate meetings, company incentive programmes, training seminars and international but Asia-focused conferences. Dnata and Destination Asia have the perfect and ideally complementary support services to grow this still embryonic market,” he said.
The deal marks a personal triumph for Reed who, along with Pornthip (Addie) Hirunkate, started the company in late 1996 with nine staff in Bangkok. This has grown to 33 offices in 11 countries and 688 employees.
Addie said: “Jim and I started Destination Asia in late 1996 with nine staff in a cramped office. All we had was a desire to make the best DMC in Asia…I believe that the partnership with Dnata will enable us to expand our services and develop new programmes and new sites for the needs of the young generation who are now ‘exploring’ Asia.”
Paul Levrier, managing director of Destination Asia Vietnam, added: “I met Jim in 1995 and was immediately drawn to his vision for a pan-Asia DMC. I was given the task, along with Nicole Naylor, to open and develop Destination Asia Vietnam which at that time was at an embryonic stage of inbound tourism development. There were no international hotels and only basic infrastructure. But Jim gave me the resources I needed and I am proud to see the amazing growth from that chanced meeting back in 1995.
“Dnata will assist us in offering new services for our broad international clientele, especially in online bookings and real-time access to product development, especially eco-tourism.”