What would happen if Saber launched its hotel software unit?

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

“We don’t comment on rumors or market speculation,” a spokesman said when asked if Saber had entered into talks this year about selling its hotel 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. Oracle Hospitality’s current leader, Alex Alt, was previously president of Saber Hospitality Solutions. Former Oracle Hospitality leader Greg Webb was a vice president at Saber.

Perella Weinberg Partners (PWP), financial adviser to Saber on $1.1 billion covered and swappable bond offerings in the depths of the pandemic, may have suggested an asset sale, according to speculation. A PWP spokesman declined to comment.

An asset sale would give Saber additional capital firepower. But there’s no outward sign that the company can’t handle its debt load. The added benefit of putting it on the line could be that Saber could assess the value of the unit to help internally justify a larger investment.

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

Rating agency Moody’s reaffirmed in August a stable outlook for Saber’s ability to repay long-term debt due in 2024. Moody’s forecast that Saber could 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 any sleep. A sale is unlikely. Some longtime analysts and industry watchers were puzzled by the idea of ​​the transaction, which would be quite unusual for public companies without an activist investor involved.

An asset sale would reduce Saber’s core competency to airline and travel agency services, away from diversification. For years, the company has planned to grow by providing technology services that cover the travel lifecycle of the typical corporate traveler, not just providing technology to travel agencies and airlines.

A strategic question for Saber would be that if it were to leave hospitality, would it only have low-growth distribution services and IT services for mid-growth airlines?

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

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

Such acquisitions suggest a continuing 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 the connectivity of all SynXis products will have improved.

Anecdotal reports have found that hotel customers are happy with Saber’s products for e-commerce, property management and connectivity.

Why a sale might make sense

Saber’s hotel business hasn’t seen much 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 providers serve the hotel space: IDeaS, Mews, Cloudbeds, Cendyn, Amadeus, Shiji and Yanolja have all claimed significant customer gains in the pandemic uptick as many hotels have embraced digitization.

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

One source speculated that Saber began considering selling assets from its hotel software business after Kurt Ekert became the company’s chairman 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 to go public in 2014. Travelport is Saber’s smallest company and only focuses on travel distribution, not technology services. of hotel information. Ekert most recently was a director of the corporate travel management company CWT.

Anecdotal reports have found that many technology providers are frustrated by Saber Hospitality’s interactions with third-party developers. While Saber has expanded the data sources it offers, it does not appear to have made revisions to provide developer support tools. Critics say it should adopt processes to become more agile and responsive to third-party developers who want to sync third-party software with its central reservation system, booking engine and other technologies. Integrations are vital for Saber to expand its popularity with hotels because hoteliers will want their various third-party systems to work well with each other.

However, Saber faces difficult strategic decisions. One is how much money you want to invest in hospitality. A host of well capitalized hotel tech players looking to bite into the various parts of their 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 rooms to guests and other operational tasks. In essence, Saber’s Property Hub is competing with other products on the market from seemingly better-funded players.

For the real estate center and its other hotel products to return 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. It can be inferred that all those steps are part of the C-suite plan. However, uncertain market conditions and an internal fight for resources could alter the calculations.

Why Oracle might want to buy Saber technology

The argument for how Oracle would benefit from acquiring Saber’s hospitality services is stronger than the argument for why Saber would sell its technology. Or, for that matter, how you might attract other strategic buyers that might come up.

Saber’s flagship products are its SynXis central reservation system, 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 make direct bookings through their websites and apps.

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

Purchasing Saber’s central reservation system and reservation engine would give Oracle best-in-class tools and fill gaps in its suite as it looks to compete globally with new players increasingly pushing for reservation platforms. end to end.

A sale would surprise

Since Sean Menke became CEO of Saber in late 2016, he has led a strategic revamp that has streamlined the organization, downscaling some ambitions and ramping up others. The growth of hospitality has been a key pillar in his plan.

In the coming year, Menke and Ekert, the company’s chairman, have to weigh an uncertain macroeconomic outlook, with a possible recession in the US fueled by interest rate hikes to fight inflation and a possible financial shock in Europe that affects supply and demand due to the energy crisis. .

If the travel industry takes longer than expected to recover, you will need to examine projects for their strategic value, as your company’s flagship businesses may take time to return to full profitability.

Saber has built a strong set of products with leadership positions in the market. However, broader strategic decisions at the parent level could cloud the picture. An asset sale remains unlikely, but not unthinkable.

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