Australian private equity investor Blue Sky says it is looking to make more acquisitions in the New Zealand tourism market to help grow its Queenstown-based Active Adventures operation.
Blue Sky led a consortium of investors in August to take a circa 40% stake in Active Adventures for between A$2m and A$6m. Active Adventures was owned by co-founders Phil Boorman, Robin Wiseley and managing director Michelle Trapski.
Speaking at the Tourism Summit Aotearoa in Wellington this week, Brisbane-based Blue Sky’s investment director, Nick Miller, said the investor would look to grow Active Adventures organically, as well as by launching new products and by acquisition.
“We will look to acquire other businesses, whether that’s within the supplier chain or indeed across horizontally in terms of other service operators but they do need to fit a strict criteria – you need to have that cultural fit [and] you need to have that strategic fit,” said Miller.
What qualities does Blue Sky look for when deciding whether to invest?
“It’s not rocket science,” said Miller. “There are basically six key elements that we look for in any opportunity in any business.”
The market the business was operating in should be large and growing, it should be an established and growing company, and it must have management that can deliver on its promises. The business must be a good partner for Blue Sky to align with, it must have a clear and achievable growth plan, and an exceptional product and service.
“We first looked at Active Adventures in October 2016 and we invested a little over three or four months ago so it was a long period in terms of getting to know each other but it was a great period in order to get to know each other,” said Miller.
The global adventure tourism market had been growing at 36% annually and was predicted to increase to 46% until 2020. New Zealand adventure tourism was a US$13.5bn industry which was expected to grow by 20% until 2020.
The country was ranked third in the world for its adventure tourism proposition behind Iceland and Germany and was only one of two countries that had stayed in the top five of the adventure tourism development index since 2008.
Active Adventures was an established and profitable organisation and it used a direct sales model so was not paying margins to agents, said Miller. Also, it already operated in six countries so had expanded beyond New Zealand.
Miller said Active Adventures could rely on growing inbound tourism to New Zealand as well as taking market share with new products. It recently launched a walking tours product to meet demand from people seeking more sedate experiences.
“We believe that we are only touching the surface of the customers who are coming to New Zealand that sit within our sweet spot,” he said.
In terms of the returns Blue Sky was seeking from New Zealand’s tourism sector, Miller said there was no set rate.
“It depends on the business. There’s always risk and return and our targeted return for any investment is typically higher than debt level-type investments,” he said.
“There’s no one target return because it really does depend on how de-risked the investment is [and] how much visibility you have over the growth of the business – there are a whole bunch of factors that come into it.”