Managed Travel Services M&A: Direct Travel

Going Beyond the Core

There are millions of small and medium-sized enterprises (SMEs) around the world and across industry sectors. As specialists in their respective fields, these businesses are increasingly choosing to outsource a wide variety of non-core activities and business processes, from accounting and procurement to supply chain management and IT.  

“By outsourcing these important, but non-core, functions, SMEs can gain access to deeper skillsets, better service, more up-to-date technology and approaches, and economies of scale, among other benefits,” notes Derek Lewis, a managing director. “They also free up their staff to focus on higher-order decision-making and growth.” 

Travel is a good example, notes Will Bain, a managing director. “Many SMEs rely on near-constant travel to acquire and retain clients, especially as the benefits of in-person interaction become clearer in the post-COVID-19 world. Yet, very few, if any, have advanced, 24/7 in-house travel management capabilities.”

Businesses spend billions of dollars on managed travel each year, and that spending has rebounded significantly since the pandemic. Ed Arkus, a managing director, says industry revenue is poised to exceed pre-COVID-19 levels by the end of 2025: “Trip counts are up, ticket prices are up, and travel disruptions continue to increase, driving demand for managed travel services.”

Travel also illustrates the opportunity for more advanced providers to pull ahead from the competition, notes Lewis. The space is highly fragmented and not always fully tech-enabled, providing a chance to differentiate with scale and sophistication. “Larger, professionalized travel businesses can achieve economies of scale, provide higher service levels in more geographies, and better integrate technology with human expertise to solve a greater range of client challenges,” he says.

Direct Travel, for example, combines national reach with local presence via 67 locations in North America, earning its position as a leading provider of outsourced travel management services to the SME market. “Direct Travel offers the scale benefits, technology, and diverse offerings of a large agency, plus the personalized service levels and client relationships of a local business,” says Zach England, a managing director.

He adds that Direct Travel has established itself as an indispensable problem-solver for thousands of clients from a wide variety of industry sectors, and that its advanced online reservation system is an important integration point in a complex, fragmented, and unpredictable ecosystem.

“It’s not just the technology and the scale,” says Bain. “Direct Travel has thoughtfully cultivated human expertise and market-leading service levels, so it can quickly and reliably help busy travelers navigate the increasingly difficult task of getting from point A to point B.”

Winning With Scale and Sophistication

With a post-pandemic resurgence underway, the managed travel services subsector gives investors a valuable opportunity to bring scale and sophistication to a space with significant growth runway.

“We’ve learned that in-person interaction is crucial to growing a business, and business travel is the critical enabler,” says Bain. “Few companies can, or want to, manage business travel on their own, and the fragmentation and complexity of the ecosystem opens up considerable potential for sophisticated platforms.”

“Whether for travel or another important, yet non-core, function, SMEs are actively seeking specialized outsourcers,” adds Lewis. “These activities and processes are vital to success and running them poorly can be expensive financially and in terms of employee morale. Finding the right outsourcer is essential to keeping employees happy while managing the company’s cost structure.”

The future looks bright for those outsourcers that, like Direct Travel, can combine technology and human interaction to solve more customer challenges. For M&A investors, now is an opportune time to help these forward-leaning outsourcers pull ahead of the pack through superior scale, sophistication, and service.