TORONTO — Consumers should expect more choice and possibly even lower prices in the vacation industry as two of Canada’s major tour operators merge.
Sunwing Vacations announced Tuesday that it will merge with struggling tour operator Signature Vacations and its SellOffVacations retail division under a strategic alliance with U.K.-based TUI Travel PLC. Precise finance details of the deal were not disclosed.
The move will create a larger company that is better protected from the vagaries of an industry that has taken successive beatings from high fuel prices, the economic downturn and concerns about the H1N1 flu virus.
Sunwing chief operating officer Stephen Hunter said the merger will solidify the company’s position as the number-two tour operator in Canada and will provide travellers with more choice.
“It’s a good combination between Sunwing Vacations and Signature, because Signature is quite heavily focused on Mexico in particular and the Dominican Republic, whereas Sunwing was focused more so on Cuba as well as some other Caribbean destinations,” Hunter said.
“So for our customers they’ll have more choice and more frequency of flights as well to all of the destinations.”
The head of a travel industry association said the merger will strengthen Sunwing’s position in the tour operator market, a move that will likely improve competition in the industry and lower prices as a result.
“I think it makes them a strong player in this market, so that means we continue to have good competition, which will help consumers get the best opportunities and the best pricing that they possibly can,” said David McCaig, president of the Association of Canadian Travel Agencies.
The two merging businesses have fared very differently during the recession. Over the last five years, the Toronto-based Hunter family’s Sunwing Travel Group has seen revenues increase more than 20-fold from $30 million to $660 million and has maintained underlying profitability.
Meanwhile, First Choice Canada, of which Signature Vacations is a division, lost $20 million in the first half of the current financial year.
Airline analyst Jacques Kavafian of Research Capital described the merger as an “amazing move” for Sunwing.
“The problem with Signature Vacations is it’s always been badly managed,” Kavafian said.
“It’s probably the weakest link in the business in Canada, and now Sunwing can do phenomenally well with Signature because they’re getting ($240 million) of revenue and they can almost instantly turn that into a profitable business.”
Hunter said Sunwing plans to keep the Signature brand, despite its problems.
“I think the Signature brand has a lot of value,” he said. “It’s a brand that’s been around a long time, and I think with some of the things that we’ve got planned for it, we’ll be able to make it a strong brand again.”