Sabre, one the grand-daddies of B2B transaction platforms, recently filed to go public. I should say, the great grand-daddy of all B2B transaction platforms.
SABRE, you old fogies will recall, was the original passenger reservation system for American Airlines–replacing handwriting! It went live in the 1960s. That is not a typo. It migrated to being available through Compuserve and GEnie (dial-up services) in the 1980s and finally met the Internet through AOL in the 90s. It went partly public in the 90s and in 2000 (when else?) it was spun off of American Airlines. In 2007, a couple of PE firms bought SABRE and now it is going public again. (BTW, SABRE orginally stood for Semi-Automated Business Research Environment–you cannot make this stuff up.)
Sabre now has three operating segments:
- The Travel Network or Global Distribution System (GDS) which is the original booking and transactional system for making reservations on first American Airlines, then most airlines and now hotels, car rentals, cruise lines, etc. This segment represents 57% of revenue and 80% of EBITDA. Remember that.
- Airline and hospitality solutions which means applications to help airlines and hotels run their businesses (e.g., reservation systems, revenue management, scheduling tools, etc.) This segment is 22% of revenue and 20% of EBITDA.
- Travelocity, Sabre’s well-known, consumer-facing online travel agency (OTA being the acronym). Travelocity contributes 20% of Sabre’s revenue, and less than 1% of EBITDA! Fame and fortune are not always bedfellows!
The prospectus has some fascinating and staggering numbers in it (and more acronyms than you can shake a stick at!):
- Sabre’s technology processes over $100 billion in travel spend annually.
- Sabre had about $3 billion in annual revenue in 2012. From these two figures, we can calculate their “gross yield” to be 3%. In other words, for aggregating content, facilitating secure, reliable transactions, and building some applications on top of that, they net about $0.03 on every $1 processed. It sounds small until you realize that it is 10x what folks like Visa, Mastercard, Ariba, etc. eke out.
- Adjusted EBITDA for 2012 was almost $800 million. That is after adding back all the usual items plus $400 million in litigation, taxes and penalties.
- The system processed 465 million billable transactions in 2012, so about $7 per transaction. The system also processed more than 1.1 trillion messages in 2013 and more than 410 million XML transactions daily.
Sabre is an incredible behemoth with a fascinating history. I used to think the EDI giants were interesting examples to learn from, but this one is so much bigger and so much older. Just looking over their 50+ year history in a cursory way suggests some great lessons for today’s Industry Cloud (IC) entrepreneurs. In my next post, I’ll cover some obvious lessons even an industry outsider can pick up:
- From closed/biased to open/fair
- From one vertical to a complete solution
- Value-based pricing
- Concentration and antitrust management
- The continuing existence of many channels (no tipping point)
- The importance of core commerce
Someone needs to write a book about Sabre. But for now a couple of blog posts will have to do.