Nearly 30 years after it started helping vacationers reach their destinations, travel and hospitality giant Carlson is leaving the leisure side of the business to concentrate on hotels, restaurants and corporate travelers.
Minnetonka-based Carlson has sold its Carlson Leisure Group for an undisclosed amount to a group of the unit's top managers. No price was disclosed for the deal, which closed Monday, but Carlson Leisure Group President and CEO Michael Batt said the terms went beyond "the cold steel of a business transaction."
The sale is in line with Carlson's previously stated intention to reduce its presence in the leisure market while focusing on the more lucrative area of business-travel management. In December, Carlson announced the sale of its four-ship luxury cruise line. The deal does not affect Carlson's majority ownership in the international operation of Carlson Wagonlit Travel.
The new leisure operation will operate as Travel Acquisitions Group but keep the Carlson Wagonlit name for up to three years. The leisure travel group includes 1,700 U.S.-based franchisees who annually book sales in excess of $5 billion. Carlson company-owned sales for leisure travel total $1 billion a year.
Of the 1,700 travel franchises, 500 carry the Carlson Wagonlit names and the others include more than a dozen other franchise groups carrying other names, including Cruise Holidays, SeaMaster Cruises and Results Travel.
But Carlson's revenue stream will be losing $6.5 billion mostly in name only because it derives revenue from the franchises through franchise fees, not total sales. In 2006, those fees totaled $22.3 million, according to records filed with the Minnesota Commerce Department.
Nonetheless, Carlson Chairwoman and CEO Marilyn Carlson Nelson made it sound as if a child were leaving home when she announced the transaction at a New York news conference Tuesday.
"This is a teenager ready to graduate," Nelson said, noting the parent company's need to focus resources on its other brands.
"[This] allows Carlson to accelerate the growth of its global, travel, hotel and restaurant brand, and it enables a proven management team ... to seek new opportunities in the leisure space," Nelson said.
Nelson said the leisure division of the company was not as big a player in its category as Carlson's other brands, including Radisson and Regent Hotels and Country Inn and T.G.I. Friday's restaurants.
"We have to make decisions and set priorities," Nelson told reporters. "It was the right thing to do.
Carlson entered the leisure travel arena in 1979 with the acquisition of Ask Mr. Foster, one of the best known brands in the field. In 1994, Carlson joined with Paris-based Wagonlit.
Arnie Weissmann, editor-in-chief of Travel Weekly, a trade publication, said he was initially surprised by the move.
"But it makes sense to be diversified across currencies and continents," Weissman said. "Carlson's leisure group is largely a U.S. operation. And there's not a huge amount of cash flow."
Batt's partners in the new organization are Tom Baumann, Eric Burdon and Roger Block, all Carlson veterans.
Batt said the new organization plans to grow internally and through acquisition. He said the firm is looking for capital partners to provide the resources for making those purchases.
David Phelps • 612-673-7269
