Private equity is eyeing up hospitality tech, not only because the market is underpenetrated but also because it believes it can use the latest developments in AI to introduce more sophisticated pricing models in areas like hotel rooms and ticketing, sources tell me this morning.
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Next, we look at Astorg making a couple of add-ons for Lebronze Alloys (LBA) as demand for high-performance metal alloys grows ever greater.
Pricing push
The hospitality sector has typically been more used to chopping boards than cutting-edge tech. But private equity firms are finding tech companies that are not only bringing the industry up to speed, but utilizing the very latest in technology – and many see even more opportunities ahead.
“Across all different areas, including hospitality, people are becoming more sophisticated on pricing,” Edward Hughes, a London-based managing director at PSG Equity, told PE Hub. “There’s been a generation of old-school, data-driven pricing tools, but now with AI coming into that space, you’re going to see a whole new wave of increasing sophistication in those tools. What’s really interesting is to find the right tool to invest behind.”
PSG has already backed a series of companies digitalizing the sector. Last month, it entered exclusive negotiations to sell its majority stake in Mapal, an operational management software provider for back-office processes for the food service and hospitality industries, to Eurazeo. PSG plans to retain a minority stake.
Mapal has an ‘AI Manager,’ which guides the restaurant manager through the working day, making recommendations based on past usages, forecasts and best practices. Users interact via conversational AI, rather than menu-based systems, while the AI can make suggestions based on the data it sees.
“The AI is key, particularly with users who are blue collar workers,” said Hughes. “It’s a transformational change to the end-user experience.”
Pain points
PSG has also looked at the front office, investing in 2022 in Paris-based Zenchef, a platform for bookings, venue management, loyalty and marketing automation and payments in the restaurant business. But it sees even more opportunities ahead.
“If you think about restaurant pain points, it’s the reservation squatting and then cancelling last minute,” said Hughes. “Taking those deposits is one of the functionalities we’ve got at Zenchef.
“But it gets more interesting around short-term rentals. How do they get more sophisticated, so they don’t sell rooms too cheaply ahead of a Taylor Swift concert? Because when that comes to town, they can basically double or triple pricing. Based on these dates, what are my competitors doing?
“You scrape their websites, then can see where you are on the demand curve and how you should adjust pricing. You’ve got a big AI macro-trend that is going to make that space much more sophisticated.”
Private equity firms are also looking at tapping directly into the ticketing business, Lisbeth Barron, CEO and chairman of sell-side advisory company Barron International Group, told PE Hub. Barron primarily works in sectors such as entertainment and media, leisure and hospitality, and branded consumer products.
“We’re spending quite a lot of our time in the ticketing space because we think that there is likely to be an opportunity to challenge the two or three biggest incumbent players with much more proprietary bespoke ticketing technology,” said Barron. “Venues and artists are looking for alternatives to some of the more traditional players.”
Confirmed deals in the ticketing sector include Brighton Park Capital investing $250 million in TickPick, a New York City-based ticket marketplace, in August. Dice, a London-based ticketing platform, has also been reported to have attracted private equity interest.
Read the full article to find out why investments in businesses like Mapal are particularly attractive in continental Europe.
Metal merger
Astorg has made a pair of acquisitions for Lebronze Alloys (LBA), a move in keeping with the growth plan it outlined to PE Hub in November after announcing it was buying the specialty copper and nickel alloy manufacturer.
LBA has acquired Allied Copper Alloys (ACA), a service center that specializes in precision slitting and service for special steels and copper alloy strips. It’s based in Birmingham, England.
AW Fraser, based in Christchurch, New Zealand, is the second add-on. It designs and produces specialty copper alloy products, particularly engineered bronzes.
LBA is based in Suippes, France. The company said that the add-ons would enhance its production and service capabilities globally, and grow its portfolio of materials, expertise and service levels.
Astorg managing director Paul Arhanchiague and partner Nicolas Marien told PE Hub’s Irien Joseph in November that the private equity firm would look to help LBA build its applications and product offerings as demand for copper alloys grows.
These alloys, a niche within the broader alloys market, possess unique properties, including thermal resistance, the ability to withstand friction and conductivity, making them “critical” components in various systems and end-markets like aerospace, medical devices, energy and electronics, Arhanchiague said.
Another area of focus was on improving LBA’s service quality, logistics and scale, Arhanchiague said, something that likely drove the latest add-ons. “A stronger local presence will help boost our representation” in target growth regions.
LBA has a “strong” foothold in Europe and aims to improve its presence in the US and Asia, he added. India is a market of interest, driven by significant infrastructure spending that creates strong demand for specialty copper alloys. “Our strategy involves a direct approach to these markets, ensuring that end customers buy from us directly.”