Skift Take

Today’s edition of Skift’s daily podcast looks at the latest in Spirit’s takeover, Colombia’s tourism revamp, and Wyndham’s revenue strategy.

Rashaad Jorden

Good morning from Skift. It’s Thursday, July 28 in New York City. Here’s what you need to know about the business of travel today.

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Episode Notes

Spirit Airlines announced on Wednesday that the company’s shareholders voted to end its planned merger with Frontier Airlines. That stunning move paves the way for Spirit to accept JetBlue Airways’ offer for the Florida-based airline, reports Editorial Assistant Rashaad Jorden.

Spirit and Frontier agreed this February to merge in a deal valued at the time at $6.6 billion, including debt and liabilities, that would have created the fifth largest airline in the U.S. However, JetBlue put forth an unsolicited offer in April to buy Spirit, with JetBlue CEO Robin Hayes arguing that a JetBlue-Spirit combination was necessary to create a competitor to the four largest U.S. airlines. A JetBlue-Spirit deal would also create the U.S.’ fifth-largest airline. JetBlue has since sweetened its bid for Spirit three times, with its latest all-cash offer being valued at close to $3.8 billion.

Spirit CEO Ted Christie expressed disappointment about Spirit terminating its merger agreement with Frontier, a deal he had repeatedly backed. But he said his company’s board of directors would continue negotiating with JetBlue.

We head to Colombia next. The country’s booming tourism industry is set for a major transformation under its incoming government — the most diverse in Colombia’s history, reports Editor-at-Large Lebawit Lily Girma.

Girma writes Colombia’s tourism industry could become the model for inclusivity, equity and sustainability in Latin America. Incoming President Gustavo Petro, who assumes office on August 7, and the rest of the country’s new government — which features members of the Afro-Colombian and Indigenous communities in prominent roles — aim to use tourism as a vehicle for peace and economic equality. Colombian travel executives are hopeful the incoming government will help local communities reap the benefits of tourism. Rodrigo Atuesta, the CEO of Colombian-based tour company Impulse Travel, said he’s never seen so much optimism before about the country’s tourism industry.

Finally, hotel companies have historically focused on filling as many rooms as possible, but Wyndham Hotels & Resorts has instead opted to charge the highest rates possible. That strategy is paying off significantly for the company, reports Senior Hospitality Editor Sean O’Neill.

Wyndham reported, in its second-quarter earnings call on Wednesday, that the company’s U.S. revenue per available room — a key hotel industry metric — surpassed pre-Covid levels by 9 percent. That’s a pandemic-era first for the company. O’Neill writes that Wyndham’s decision to increase room rates drove its successful quarter. The company’s second-quarter average daily rate was 17 percent higher than pre-pandemic levels.

Wyndham generated $92 million of net profit during the second quarter.

Skift Take

Travelzoo could gain a new set of customers if its metaverse project truly takes off. For now, its investment is modest, though.

Dennis Schaal

Deal seller Travelzoo plans to launch a subscription-based travel metaverse in September as a way to reach new customers.

The Travelzoo Meta, which began testing in May with a limited set of users, “will be browser-enabled entertaining travel experiences that allow members to interact with, and in, the Metaverse,” the company said in a slide presentation accompany its second quarter earnings report Wednesday. “Travelzoo META is expected to attract a completely new generation of members, in addition to complementing real-world lifestyle and travel experiences curated by Travelzoo for its existing 30 million members.”

During the earnings call with analysts, Arveena Ahluwalia, Travelzoo’s global director of Travelzoo Meta, added: “Being a first-mover is important.”

 Ahluwalia cited a survey in a June McKinsey report that found “virtual immersive travel is the second most sought-after experience in the Metaverse.”

For consumers who prefer virtual immersive experiences to similar activities in the real world, the survey found that connectivity with people (44 percent) and exploring digital worlds (26 percent) were the top two wish list items.

Travelzoo is in a test and learn phase with its metaverse project and would launch it in phases beginning in September.

CEO Holger Bartel said the project wouldn’t entail a large tech investment.

“So Travelzoo META will be complementing real-world travel and attracting a completely new generation of members,” Ahluwalia said. “So we will not be competing with real world travel but making places that are inaccessible more accessible via virtual travel experiences. In addition, we’ll be providing other forms of travel experiences, which you cannot will experience in the real world.”

For the second quarter, Travelzoo officials said revenue still hasn’t reached pre-pandemic levels but they achieved higher operating margins than in 2019. Officials attributed the revenue weakness to customers redeeming vouchers for travel.

Revenue for the quarter fell 7 percent to $17.7 million. Net income was $1 million, compared with $3 million a year earlier.

Travelzoo said it had challenges sourcing deals from airlines and hotels in the second quarter, but expects that to change in the fall as hotels and airlines slash prices.

Skift Take

It’s taken JetBlue four attempts to buy Spirit. Now it’s crossed the line in a deal that’s worth $3.8 billion, as long as it doesn’t raise any antitrust red flags in Washington, D.C.

Matthew Parsons

It’s the end of the saga, as JetBlue Airways has now finalized a deal to buy Spirit Airlines for $3.8 billion, just hours after the airline pulled the plug on a merger agreement with Frontier Airlines.

It first made a counterbid on April 5. Almost four months later, and with four revised bids, JetBlue confirmed the deal on Thursday.

Its acquisition of Spirit would create the U.S.’s fifth-largest carrier, with a fleet of 458 aircraft and an order book of over 300 Airbus aircraft.

“In the end, JetBlue won the battle. But the story might not be over yet. The merger requires approval from competition regulators which is hardly a slam dunk,” said Jay Shabat, senior analyst at Airline Weekly, a Skift brand.

The companies expect to conclude the regulatory process and close the transaction no later than the first half of 2024. If legislators decide to block the deal, JetBlue will pay Spirit a reverse break-up fee of $70 million and stockholders of Spirit a reverse break-up fee of $400 million.

JetBlue is to also expand its no furlough commitment to Spirit’s team members as they join after the acquisition closes. “JetBlue is committed to working with labor leaders at both airlines and JetBlue values committee representatives to ensure the combination supports the needs of those that operate the airline,” it said in a statement.

JetBlue said it will offer its combined 77 million customers more options and choices, and that the acquisition would accelerate its organic growth plan with more than 1,700 daily flights to 125 destinations in 30 countries, based on December 2022 schedules.

The deal also increases relevance for JetBlue in certain key focus cities (Fort Lauderdale, Orlando, San Juan, and Los Angeles) as well as the “big four” airline hubs of Las Vegas, Dallas, Houston, Chicago, Detroit, Atlanta and Miami, it added.

“Buying Spirit provides JetBlue with more scale and removes one of its leading rivals, especially in the large and price-sensitive Florida market,” Shabat added.

The terms of the deal involves JetBlue acquiring Spirit for $33.50 per share in cash, including a prepayment of $2.50 per share in cash payable upon Spirit stockholders’ approval of the transaction and a ticking fee of $0.10 per month starting in January 2023 through closing, for an aggregate fully diluted equity value of $3.8 billion, and an adjusted enterprise value of $7.6 billion.

JetBlue expects to achieve $600-700 million in net annual synergies, and the combined company is projected to have annual revenues of $11.9 billion, based on 2019 revenues.

“We are excited to deliver this compelling combination that turbocharges our strategic growth, enabling JetBlue to bring our unique blend of low fares and exceptional service to more customers, on more routes,” said JetBlue CEO Robin Hayes.

This story is breaking. Stay tuned for more updates.