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Amadeus IT Group SA A AMS

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Morningstar’s Analysis

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Narrow-Moat Amadeus Books Hotel IT Contract With Narrow-Moat Marriott; Shares Slightly Overvalued

Dan Wasiolek Senior Equity Analyst

Analyst Note

| Dan Wasiolek |

Narrow-moat Amadeus announced that narrow-moat Marriott will implement its cloud-based and customizable hotel reservation system. Marriott joins narrow-moat peer InterContinental as the second major global hotel chain to use Amadeus’ technology. While terms and timing of implementation were not provided, we estimate that Sabre's December 2014 win to host solutions for narrow-moat Wyndham generated around $30 million-$50 million, mostly in 2016. Based on this calculation and the comparative portfolio sizes of Wyndham (over 800,000 rooms and 9,000 hotels) and Marriott (nearly 1.4 million rooms and over 6,500 hotels), we believe the contract could generate around $50 million in annual sales for Amadeus, starting around 2024-25. This amount of revenue would equate to around 1% of total estimated Amadeus sales. As such, we don’t expect the contract to materially alter our EUR 57 fair value estimate for Amadeus, leaving the shares overvalued.

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Company Profile

Business Description

Among the top three operators, Amadeus' 40%-plus market share in air global distribution system bookings is the largest in the industry. The GDS segment represents 56% of total prepandemic revenue (2019). The company has a growing IT solutions division (44% of 2019 revenue) that addresses the airline, airport, rail, hotel, and business intelligence markets. Transaction fees, which are tied to volume and not price, account for the bulk of revenue and profits.

Salvador de Madariaga, 1
Madrid, 28027, Spain
T +34 915820100
Sector Technology
Industry Information Technology Services
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 15,879