The market was thrown into shock at the report that Nigeria’s leading online travel agency (OTA), Wakanow, might be in some financial crises due to huge debt burdens and foreign exchange losses. This unconfirmed report suggests that Wakanow might be up for sale! If this is the case, then I believe that this is the beginning of consolidation within that space.
Let me also mention that most online businesses in Africa are positioning for good exits with leading global players. By this, I that mean Jumia, for example, will do everything to stay alive so that when Amazon or Alibaba finally thinks that it is time to make an acquisition in Africa, it would be the “only” option. That’s why they will continue to spend to retain their leadership position, though they are EBITDA negative. The same goes for the OTAs; everyone seems to be positioning for a booking.com or Expedia exit.
Travelstart on the Rampage
I have observed frantic efforts from Travelstart especially to make itself look bigger than it is by “buying GMV”. What do I mean by this? As per accounting standards, if you own more than 50% of a business, that business qualifies as a subsidiary; hence, the parent company is expected to report the subsidiary’s numbers as part of its own.
A good example is the recent acquisition of SafariNow by Travelstart. From the announcement, Travelstart acquired majority of the business, but will not combine its business with SafariNow, which will continue to operate as an independent company. However, when Travelstart is reporting its own income statement, it will report the whole of SafariNow’s GMV as part of its own, though it does not own 100% of the business.
The idea is this: if Booking.com wants to acquire a player in Africa for instance, it might want to acquire the biggest player. So, the bigger Travelstart can make itself look, the better.
The Nigerian Context
Back to Wakanow. Travelstart might be looking to acquire over 50% of the perceived troubled Wakanow, to boost its own GMV and further position itself for a massive exit to a bigger global player.
Within the Nigerian market, there are 3 major (if not only) players – Wakanow, JumiaTravel and Hotels.ng. We are all aware of the transformation to JumiaTravel from Jovago. I will however focus on Hotels.ng (“Hotels” or “HNG”).
Hotels.ng’s Business Expansion / Backward / Forward Integration
From recent announcements by the CEO of HNG, the business has practically moved from an online hotel listing platform (“OHLP”) to becoming a full-fledged online travel agency, with presence in major African countries including Ghana, Kenya Rwanda, Tanzania, etc. The interesting thing about HNG is that it is about the only OTA that started as an OHLP. Hence, it has a unique competitive position since the biggest OTAs are looking to boost their hotel listing business.
Last year, I would have described HNG as the leading Nigerian OHLP; however, HNG is now a pan African OTA, eespecially after the announcement of its pan-African businesses – fly.africa and hotels.africa.
So, how will all these shape up?
Travelstart will continue its GMV acquisition strategy.
Jumia, I believe, will be open to a merger or an acquisition of its JumiaTravel business. The recent sale or transfer of its classified real estate listing business to tolet.com.ng and the acquisition of Afrobaba gives this indication.
HNG will look to consolidate its position especially with its recent and massive pan-African expansion drive. HNG I believe will also want to strengthen its position in Nigeria, especially if Wakanow is acquired. However, if Travelstart is the acquirer, we can safely bet that it will be a GMV acquisition rather than a full acquisition.
TravelBeta will also want to expand its share of the outbound flight traffic especially with the struggles of Wakanow.
Current offline travel agencies will develop their own online strategies, while keeping their offline businesses. If Wakanow does not come out of its struggles, the distrust of online flight bookings will be compounded, thus boosting the offline businesses a lot further.
I am not sure when Booking.com and Expedia will decide to make an African entry, but one thing is sure: there are a few potential acquisition targets. While Travelstart will lead on the flight booking side, Hotels.ng, I believe, will lead on the OTAs corner with its huge hotel listing backend.