Concur & Hipmunk: driven by business travel

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Small but powerful seems to be how the SAP-owned firm views its latest acquisition on the road to further consolidation in travel. Sally White reports

There is yet a further move to consolidate online travel as another niche innovator disappears into the maws of the majors. This time the territory is metasearch, with California-based hotel and flight search group Hipmunk (previously a finalist in the EyeforTravel Start-up and Innovation awards) being snapped up by travel and expense managers Concur. Succinctly setting out its strategy Concur said that its aim was to ‘ultimately deliver consumer-grade products to corporate customers’.

Just two years ago Concur was itself taken over by giant German-based multinational enterprise and customer relations software group SAP. The Concur deal was worth a whopping $8.3bn and part of SAP’s drive to increase its cloud presence. This is a strategy that seems to be working, with SAP’s cloud subscription and support revenues rising by 30% to around $805m in Q2 this year, and its new cloud bookings growing by 28%

As part of SAP, Concur no longer spells out its accounts or just how it has settled in, but this is its first acquisition as part of the German group. Back in its days of independence Concur grew by acquiring trip-planning app TripIt, developing expense reporting app ExpenseIt and investing in Indian OTA ClearTrip. Concur holds these up as evidence that it will make the Hipmunk merger work, saying it has a “long-held strategy of partnering with, investing in, acquiring or building consumer apps”.

Concur is getting additional travel products for its portfolio, combining Hipmunk’s multi-flight and hotel search with its own tools for managing business expenses and travel.Hipmunk has been at the forefront of innovation in creating a website and mobile app to sort travel results not just by price, but other key factors vital for business travellers: duration, stops and hotel location.

Expanding on the list of Hipmunk’s attractions, Concur’s president, Elena Donio, added at her media briefing that: “.. its calendar integration and hotel map search allow business travellers to easily see the best hotel and flight options based on meeting time and location. Lastly, Hipmunk is a leader in the cutting edge space of artificial intelligence-powered travel search and travel bots.” It’s not the only one focusing new distribution channels like as we heard in a story earlier this month – Skyscanner and the shifting metasearch landscape EyeforTravel September 6.

Building the brand 

Concur does not plan to integrate Hipmunk when the deal concludes next month. It says the 50-strong team will stay on and it will keep on building the Hipmunk brand. It seems that Concur wants to encourage Hipmunk to continue as an innovator, under the Concur roof.

….Concur wants to encourage Hipmunk to continue as an innovator, under the Concur roof

No value is put on Hipmunk in the Concur announcements, which is causing the travel investment platforms some frustration. Even Techcrunch has only been able to refer to a 2014 valuation of $66 million.

As Fortune Magazine highlighted a couple of months ago, there is a resurgence of interest in M&A in cloud software and those active in the market want to track current values. The magazine quoted the explanation given by Joshua Greenbaum, principal of Enterprise Applications Consulting, for the increase in take-over activity: “Those old-line companies desperately need to finesse the transition from on-premises software to cloud and the easiest way to do that is to buy more cloud companies.”

Certainly SAP says it ‘expects to be a cloud company by 2018’ and investment bank Nomura is forecasting that giant software player Microsoft’s cloud contribution to revenue to be 30% by that year.

And what is behind the companies’ anxiety? In Greenbaum’s words it is the investors: “Wall Street wants them to grow like cloud companies but generate profits like enterprise software companies. It’s a dance with the devil.”

While well established, Hipmunk is not exactly a blockbuster acquisition, being tiny compared to such competitors as Orbitz, Kayak (snapped up by Priceline in 2012), Expedia and its subsidiary Travelocity. Yet Hipmunk’s technology has attracted investment from some powerful names: it has raised $55 million in its six years, including from Nokia Growth Partners.  Concur says it believes Hipmunk can teach it a lot.

Hipmunk’s technology has attracted investment from some powerful names

However, a hitch in Concur’s plans might be that Steve Huffman, one of Hipmunk’s co-founders and its key chief technical officer, is currently there only part of the time. He has stepped in to fire fight at Reddit, the social media site he co-founded in 2009, following the resignation of its CEO.

Yet Concur has spent a lot of time reviewing data on how and where travellers are spending, particularly business travellers, so knew what it was looking for. Its database covers more than 40 million users, representing over $76 billion in annual spend, so its survey was well based.  

As Robb Nielsen, its vice president of global product experience, acknowledged at the launch in July at the Global Business Travel Association convention of its report, The State of Business Travel 2016: “Managing travel and expense is becoming increasingly complex, between integration with mobile technology, nuances in traveller preferences, and new travel supplier strategies.”

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