The Hornblower Group’s bid to buy the troubled cruise shore excursion seller ShoreTrips is just the latest in a series of moves by the company to snap up pandemic-ravaged companies and position itself as a leader in the cruise-related tour operator space.
Hornblower, the parent of the American Queen Steamboat Co. and Victory Cruise Lines as well as a number of day- and dinner-cruise companies, last fall purchased Shore Excursions of America, which had been the exclusive provider of tours for its domestic river cruises.
Last month, it purchased the U.K.-based cruise tour specialist Cruising Excursions.
And late last year, it entered a contract to run Puerto Rico’s ferry system, a move that American Queen CEO John Waggoner indicated was intended to help establish more excursion options for the many cruise ships that call at the port there.
Waggoner last year told Travel Weekly the company had an infusion of private equity and was also looking in the traditional tour operator space for companies that might be ready to get out of the travel space.
“There are some folks for whom this has been devastating,” he said in a December interview. “Some are just saying, ‘Hey, I was going to retire anyway, but this is forcing me to retire.’ So I think it has created a bunch of new opportunities for us.”
It should come as no surprise, then, that Hornblower jumped on the opportunity to snap up the Milwaukee-based ShoreTrips, which filed for the Wisconsin state alternative to bankruptcy late last year.
Before the filing, in which the company listed more than $6 million in debt, including $4.7 million in unrefunded customer payments and deposits on canceled trips, ShoreTrips was a leader in selling independent, commissionable cruise shore excursions.
According to court documents, the unnamed winning bidder will get the company free and clear of those debts.
Sources involved in the case confirmed Hornblower is the buyer, though Hornblower declined comment.
A court hearing to approve the deal is scheduled Feb. 23 before Milwaukee County Circuit Court judge Timothy Witkowiak.
ShoreTrips has few physical assets; Hornblower apparently is buying access to ShoreTrips’ client list and vast network of suppliers. But it also risks acquiring the taint of a business that has angered travel agents and their clients who lost deposits or accepted now-worthless tour credits.
It was unclear last week if the company would retain the ShoreTrips name or whether founders Barry and Julie Karp would have any role moving forward.
The Karps have declined repeated requests for comment, although Barry Karp late last year in a statement indicated they had hoped to resume operations under new owners.
But with so much in customer money gone, advisors and others questioned the Karps’ business ethics.
In an email to Travel Weekly, Carolyn Sandgren, president of Elite Travel, blasted the couple for blaming the pandemic for the company’s failure and questioned where the millions in traveler payments went.
“I believe every agent and client is asking the same question … Covid-19 didn’t spend this money. Businesses, especially those under the ASTA umbrella, are held to a code of ethics.
“What a boatload of money, of client funds,” she continued. “How can that add up to anything else but something our industry would call, I believe, unethical. Imagine the damage this does to the reputation of advisors who recommended them over the safety net of cruise line excursions.”
ASTA said its code of ethics does not specifically address whether companies should put client money in escrow or trust, but “in most circumstances, an intentional misappropriation of consumer funds would be deemed conduct incompatible with membership in ASTA under the association’s bylaws,” said Peter Lobasso, ASTA senior vice president and general counsel.
Rob Keen, co-founder of one of ShoreTrips’ smaller competitors, Project Expedition, said there didn’t appear to be any reasonable explanation for so much traveler money to have gone missing.
“There is no answer, is there? Except the money is gone,” he said. “It’s too much for it to be a small error.”
Unlike tour operators, who often have to pay hotel, restaurant and transportation and other partners in advance of trips clients have booked, the excursion business generally has no upfront costs, Keen said.
“For the most part, we don’t pay the operator until the tour is delivered,” he said. “So if you book a shore excursion from me today, you pay me today. We put it in a trust account. And when you do the trip in say, June, that’s when we pay the operator. That’s when we pay the commission.”
One agent, who asked not to be named, said she asked Karp directly during an ice cream social the company sponsored in 2019 whether it kept client money in escrow.
“Of course, darling, now have some ice cream,” she said Karp replied.
The ShoreTrips website also said it held customer money until tours were complete.
“Your payment is held in escrow at the Bank of the West and is not credited to ShoreTrips until after your excursion has been taken,” the site said. “This process ensures that your payment is protected and is fully refundable if for any reason your trip is canceled and deemed to be refundable under our rules allowing such refunds.”