Summarize this content to 2000 words in 6 paragraphs
When Kurt Ekert became CEO of Sabre in 2023, he set out to reinvent the business.
Just one week after he took the role, he began a reorganization meant to save $200 million annually. And the company has spent the last couple of years investing in newer tech for airlines, hotels, and travel agencies.
Ekert says the changes are necessary for Sabre to survive in an industry that’s rapidly evolving with advancing technology.
“We’re very proud of what Sabre has been historically, but the business we want to create is going to be different than the business that we inherited,” Ekert said in an interview with Skift.
The Texas-based company’s primary business is as the world’s second-largest global distribution system (GDS), which aggregates fares and other information from airlines and shares it with travel sellers.
Ekert joined the company as president in 2022 and then added CEO to his title in 2023. He’s the former president and CEO of corporate travel agency CWT.
Skift spoke with Ekert about the changes Sabre is undergoing and potential for future growth.
The Need for Change
“When I joined the company and when I became CEO, I was aware that Sabre was a company with a compelling market position, with a rich history. But in my eyes, that rich history is now an artifact. It’s not who we are anymore. It was a business in need of transformation.”
“If we’re going to thrive in this new world, that’s about bringing incremental and new value to our two-sided marketplace, and that requires innovation and becoming really good at go-to-market. And we had to learn new muscle memory over the last couple of years.”
“We’re trying to solve, I think, some of the most complex technology problems or opportunities in this industry. That’s not going to be easy. It requires focus; it requires investment; it requires tremendous intellectual and engineering talent. I think we have the right building blocks, but the proof will be in the pudding as we go forward.”
The Restructure
Despite financial changes as a result of the pandemic, Sabre had not executed a substantial restructuring until Ekert took over, he said.
As part of the reorganization, Sabre laid off 15% of its workforce, roughly 1,100 people. While Ekert said it wasn’t an easy decision, he said it was necessary to reset and move the company forward.
“When you go through something like that, it’s a dislocated, very challenging experience for the organization, for the people. You’re losing a lot of people who have contributed to the organization, and that is intellectually and emotionally, a very hard thing to take.”
“My belief is, when an organization goes through that, you have to operate with relative transparency; you have to be candid; you have to explain the why behind what you’re doing. And then you have to talk about going forward, how the business is going to operate, what’s in, what’s out, what matters.”
“If I project forward to where we are today, we are delivering product at a pace that people who have been around for 10 years say is very different than what Sabre has ever done…I think people feel like this is a different company.”
“The leadership we have in our technology and our product organizations is fundamentally improved.”
“There is nobody on the executive leadership team who sat at that table at the beginning of Covid. So it is an entirely new team. As you go down one or two levels in the organization, there’s also a lot of new leadership and a lot of new thinking there.”
Upgrading the Software Services
Sabre has been working to upgrade its central reservation system, which helps hotels manage reservations, inventory, and rates. Among other tech, it’s selling a modern retail system meant to enable hoteliers to sell attributes beyond rooms alone, as well as ancillary services like spa treatments and city tours.
The company has also been working to reimagine airline tech for a retail experience more akin to online shopping. Ekert said some of the tech is already gaining traction, but the other parts will take much longer for full adoption. Regardless, that’s where the industry is headed.
“On the modern technology front, we have made a dramatic move in the last four or five years … to a business where 99% of our compute is in the cloud.”
“As our airline customers and our hotel customers look at how they go to market, they want more flexibility. They want to integrate modern technology, and there was really the need to upscale and differentiate those platforms relative to what they were.”
“We still thrive on these platforms that were built a long time ago. And the question is either, how do you replace those platforms, or how do you add on top of those platforms to bring new value.”
“Because a lot of these investments started one or two years ago, we’re early in the revenue curve for what these promise to be.”
The Potential for Growth in IT Services
“[The hotel tech] business is absolutely on fire. Hotel tech is a massive sector that’s hugely fragmented. We think we’re in the leading position to begin to grow in that space.” EBITDA (earnings before interest, taxes, depreciation, and amortization) for the hospitality business was negative $30 million in 2022, and it’s expected it will be close to $70 million in 2025 — a turnaround of $100 million.
“In airline IT, we obviously are the number two player, quite a distant player from the number one player there. But one of the things I’ve really asked the organization to do is to adopt the mentality of being the challenger in the marketplace. And we should not be afraid to disrupt not only the marketplace, but ourselves.”
“We’re going to go at this very, very aggressively. And so I think the growth prospects — and then for an investor, the investment return prospects, if you choose to get in with Sabre — are tremendous. If you do the math and you project this out a couple of years, I think our stock price will be in a very different place.”
Earnings Growth Post-Covid
Sabre has struggled to recover to pre-Covid levels. Revenue in 2023 was $2.91 billion, about 73% of its revenue in 2019.
But “2019 is an artifact or element of the past,” Ekert said, and he’s focused on what’s next.
Ekert said the company is on track to more than double EBITDA from $335 million in 2023 to more than $700 million in 2025.
“Clearly, when you look at distribution, there’s been a small amount of dislocation with direct connects between large carriers and large online travel agents. There may be the opportunity for some of that to come back in channel, but the GDS industry is a bit smaller industry today than it was five years ago.”
“From a share perspective, I think we had the biggest year of wins in 2024 in the history of the company.”
The Sale of GetThere
Sabre in October said it would be selling its business travel booking tool, GetThere, for $12 million.
Ekert said he wants to focus on creating the behind-the-scenes system that powers booking tools, letting clients go with whichever tool works best for them.
“We want to basically be the connectivity tissue behind all of that. And so when we looked at GetThere, we thought: Compelling market position, good asset, but we thought our value could be more in stepping one layer back from that.”
Correction: This article has been updated to accurately reflect Sabre’s company-wide EBITDA projections. The article originally mixed up the company-wide EBITDA with that of the hospitality business.
