Parked at the gate - M&A trends in travel, leisure and hospitality

Higher interest rates and discordant asset valuations tempered deal making in the TLH sector even as strong consumer demand for travel and experiential offerings bolstered industry performance. Both strategic and financial buyers mostly retreated from the bigger deals that characterized transactions in 2021, tending instead to focus on asset purchases and smaller transactions.

 As a result, the average deal value for the TLH sector in 2022 was $56.0 million versus $180.6 million in 2021. And while the number of deals dropped by just 10% to 1,116 in 2022 from 1,245 in 2021, the total value of deals plunged 72% to $62.5 billion from $224.8 billion a year earlier.

Some notable deal trends in 2022 included:

• Only two $5 billion-plus acquisitions: Private-equity (PE) firm Blackstone bought Crown Resorts for $6.3 billion, and an investor group led by PE company Apollo purchased Atlas Air Worldwide for $5.2 billion.
• Asset purchases and smaller transactions: Strategic buyers mostly played it conservatively in 2022, opting to selectively enhance their portfolios rather than pursue big transformational deals.
• Special-purpose acquisition companies (SPACs): While the number of transactions remained consistent in the sector at 14, the total value of these deals collapsed to $5.7 billion from $76.5 billion in 2021.

As the industry adjusts to the reality of higher interest rates in the first half of 2023, more deals are likely to emerge later on, especially those involving corporate/strategic buyers seeking synergies and scale. Private equity and financial buyers, meanwhile, will be less motivated to act until sellers lower their price expectations to reflect the higher cost of capital. Deals involving pressured sellers will reprice the market, aiding price discovery and fueling more M&A volume in the 3rd and 4th quarters of 2023.

For the latest market trends and KPMG deal professionals’ view of what may lie ahead, download our full 2022 report.