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There’s been some considerable movement in the travel management space during the past year as business travel continues rebounding in many parts of the world following the recession.
SAP’s acquisition of Concur reflected the global scale and scope of business travel and the need to make operations more efficient. American Express Global Business Travel formed a joint venture. Although not in the travel management sector, online travel agencies Booking.com and Expedia recently made moves to dive deeper into corporate travel by going after business travelers working at small businesses without strict managed travel programs.
Carslon Wagonlit Travel was the fourth largest travel agency in the world in 2013 with 20,000 employees and $26.9 billion in sales, according to Travel Weekly’s Power List.
Carlson Wagonlit Travel CEO Doug Anderson recently talked to Skift about the future of the travel management and what consolidation in travel management companies (TMCs) means for the future of business travel, how mobile will impact the company’s plans over the next year as well as efforts to get control over business travelers who want to book their travel on their own terms.
Following is an edited version of that interview:
Skift: What are your thoughts on Booking.com and Expedia’s recent announcements that they’re becoming more aggressive in the corporate client space? And what do you think of Expedia’s Egencia as a competitor? Is Egencia making an impact in the market?
Doug Anderson: We’ve competed with Egencia for a number years. Egencia’s appeal to me seems to be with companies that have very high rates of online adoption and they have a robust offering in that space. We view our services as being differentiated from Egencia in that we have an offering that I would call a bit more robust for clients looking for a more highly managed travel program. Egencia does come into the managed travel space, but I’d say in the more lighter end of this space. Business travel is a good place to be and we spend our life there.
I think Booking.com for Business is directed at the unmanaged business travel program and generally we think of the smaller programs that spend $3 to 5 million or more on business travel as being potentially interested in a more managed program like what what we offer.
Booking.com is trying to appeal to very high levels of online adoption and I think we’re differentiated in that we can provide our clients with real-time support if they need to reschedule a flight, to keep them informed about their safety wherever they’re traveling and to help travelers on the go 24/7, 365 days a year. Travelers want to be able to talk to someone when something goes wrong and that’s how we’re different from the online travel agencies.
Skift: So what does this mean for travel management companies like yourself and for the industry in general?
Anderson: I think it’s about repurposing their content and redistributing it across sectors that are adjacent to the leisure sectors that they’ve had from the beginning. Business travelers and their employees are looking for rich content and this is about leveraging their content across a segment that they haven’t been focused on.
Skift: Do you think there will be further consolidation among the big travel management companies such as yourself?
Anderson: Scale is important in our business and it’s important to be able to provide clients with a global offering and a breath of relevant content. Many of our clients are global and we expect to be able to provide service to those travelers no matter where they are. Scale is also important with airports and hotels who want to engage with TMCs who are able to provide them with a global reach. If you look at the geography of the world and the scale compared to our major TMC competitors we have a scale advantage.
It would be fair to say in the last five years the consolidation of airlines and the increasing strength of the alliances and the consolidation we’re now seeing in the hotel space is driving the next round of consolidation we’re seeing with Expedia buying Orbitz recently. I think this is all part of the increasing scale to retain relevance. We have no plans but if you look back over our history we’ve made a number of what I call smaller, tactical scale acquisitions. Between 2008 and 2012 we probably made 15 tactical, scale-based acquisitions where we bought small regional-based agencies.
We’ve now kind of moved away from that in favor of more strategic mergers and acquisitions when we bought WorldMate two and a half years ago to give us our own proprietary mobile platform and we continue to look for opportunities around a couple of our core strategic verticals.
We’ve got nothing to announce but I would not be surprised, or at least I wouldn’t be shocked, to see more consolidation at the mega TMC level something in the near to medium term future. I don’t know of any plans, but I do know that there’s been a lot of talk about structural changes and tier ownership changes at our next biggest competitor, Amex (American Express Global Business Travel). Deals drive deals and I wouldn’t be surprised to see another deal in the near to medium term.
Skift: That’s interesting you bring up WorldMate and Amex and I’d like to first ask how the WorldMate acquisition has impacted CWT’s operations and how the rise of mobile will impact CWT’s plans during the next year?
Anderson: Well, WorldMate has been a game-changer and it has changed the game for us. The revolution in business travel that we’re seeing wasn’t driven by WorldMate, it was driven by mobile. Acquiring WorldMate put us in a position where we are the only mega TMC that has our own proprietary, fully owned mobile development capability and therefore application and flexibility to invest and decide our own mobile destiny. One thing that sets us apart from our competitors is that we have our own development team working on our applications without having to refer to a partner and we’re able to decide how those priorities are set.
When we first bought WorldMate they had about 25 developers, all Tel Aviv-based. Today we have about 50 and we’ve doubled the size of that organization and we continue to develop the WorldMate app. We leveraged that platform to build an app specifically for business travel called CWT To Go. Our vision is that CWT To Go will become the mobile app for business travelers.
When I talk to a tech-savvy business travelers, they’ll typically have 15 travel apps on their smartphone or tablet. They’ll have all their favorite hotels and airlines so they can confirm their reservations and flights and they’ll probably have Uber too. Our vision is to bring those features and that functionality into a single app called CWT To Go.
During the last quarter we developed hotel booking for our clients on CWT To Go that enables them travelers to book their preferred hotels with their corporate rates. Right now we’re working on an internal pilot now and before long we’ll have a client pilot of with air booking on CWT To Go and we’ll integrate online check-in capability for all the major carriers.
I honestly believe that that acquisition has proven and will continue to prove to be a real game-changer for CWT. We say that 25% of online bookings will be on mobile on 2017 and I think all of us are underestimating the adoption rate that we’re going to see of mobile in the next couple of years. The curve is pretty steep upward and in some markets like China, for example, we saw that online booking takes over and then mobile gradually replaces it.
This online booking step won’t be relevant in the future, in emerging markets it will go from offline transactions right to mobile because it’s so effective and so pervasive and available to virtually any business traveler because they’re all carrying some kind of smart device in their briefcase.
Skift: And what about the formation of American Express Global Business Travel’s joint venture. Has this made Amex a more formidable competitor?
Anderson: I think it definitely will and may have already. I think it will because the travel business when it was holding on by Amex, and I’m almost quoting here, was competing for capital with some very, very high return financial services and opportunities that Amex has. And therefore Amex sometimes lost out when there were some interesting opportunities in travel but maybe not as interesting as some of the financial services.
I think the focus will create a situation where the Amex business traveler will be a stronger competitor. The work that they’ve stated they’re doing to separate core infrastructure from Amex the parent I know they’ve been focused on for some number of months now. They recently announced their suite of internal applications that they’ll be using for HR and finance, etc.
So they’ve taken those decisions and they’re going down the path of kind of separating the travel business from the financial services business and I think that will create an opportunity for them to be more nimble and to focus more on business travel. And I think it will make us better competitors, competition is not a bad thing and we’re not afraid to compete with Amex.
At the same time, that business, like our business, will be standing more or less on its own and there’s a bit of a safety net of a larger organization and they’ll be more like us in that they’ll be operating not only with the benefit but with any limitations that moving away from the parent has created, so it’s good for everybody.
Skift: Let’s dive a bit more into booking concepts as I’d like to get your thoughts on Concur’s open-booking initiative. Do you think this concept can be successful with travel management?
Anderson: Concur is starting to get a few suppliers into the program and they have a couple of major airlines and major hotel chains. My statement would be that they’re having some success with bringing a few large suppliers into the program and what we’re hearing from our clients, medium and large corporate clients, is not a tremendous interest in the open-booking concept. Our clients continue to look for a holistic, end-to-end travel management offering. I haven’t seen a lot of migration or a lot of momentum towards open-booking, it’s been probably 18 months or so and I haven’t seen a lot of traction.
Skift: So You wouldn’t consider implementing open-booking at CWT?
Anderson: I won’t go as far to say that the open-booking concept is an unmanaged program concept but it leans in that direction. We have access to global distribution system (GDS) content for hotels but also web content for non-GDS airlines and aggregator web content for non-GDS hotels, car rental and rail.
So the access to content isn’t an issue. No one needs to necessarily go to a supplier’s website to access the content. It is available through the connectivity that we have even if it’s not GDS content. Giving up the other value that we wrap around the booking experience in favor of a more loosely or lightly managed program doesn’t seem to make a lot of sense to me and it hasn’t appeared to make a lot of sense to our clients either.
Skift: What is the solution to getting control of business travelers who want to book wherever and whatever they want?
Anderson: I think there are two channels of value here. One is what I’ve already mentioned around helping companies manage their travel and corporate clients have always encouraged their travelers to use the preferred supplier and the preferred channel. Those who have chosen not to use the preferred supplier or channel or have been given more flexibility, it’s been like herding them back into the program and that’s what we’re doing with our mobile program by inviting them back in.
For example, 85% of air booking is program-compliant for any company that has a managed program and it’s been like this for a long time. Where leakage really comes into play is with hotels. We and our competitors would tell you that 55% of hotels in the program are booked through the TMC channel and the other 45% are not. What we’re doing right now is reminding travelers when they’ve booked air or rail travel is that if they haven’t also booked a hotel they get a reminder on their mobile device.
That reminder includes an icon they can click to go directly to our hotel booking engine on CWT To Go and up come their employers’ preferred programs and rates and proximity to their office. It’s so easy to complete this transaction that there’s little or no reason to go elsewhere.
There will always be cases where someone makes a trip every week and when I walk out of the office on Friday evening or when I leave the hotel I say “can you book me my same room for next week?” That will always happen because that’s just human nature and it’s easy. But it’s no longer a matter of proving to travelers that they need to be compliant because it’s the right thing to do, it’s a matter of extreme convenience for the traveler to elect us as the channel because it’s harder not to.
Skift: Thinking about new trends in business travel: more business travelers now use ride-shares like Uber and apartment shares like Airbnb (less so than Uber but still growing) while traveling. What might this mean for travel management companies?
Anderson: The first one that comes to mind is Uber and Uber has found it’s place in business travel in a very significant way. I’m not sure what the percentage of ground transportation bookings for business travelers are made on Uber today but I know it’s growing rapidly. Companies seem to be in most markets very willing to let their companies decide whether they want to book transportation on Uber. There’s been some reluctance in some markets but generally on a broad basis Uber is being adopted by business travelers and their employers.
And therefore we need to figure out how to include these sharing brands and models in our distribution because we haven’t figured that out yet but we will. Because we have to make it easy to use us to the extent that their employers are willing to support and pay for these providers that are in the sharing economy and I think Uber is clearly positioned to be one of the winners.
Airbnb is not so clear to me where corporate clients are going to go with that company. We have a couple of clients who’ve decided Airbnb will be supported within their program but CWT hasn’t made any steps in the direction of figuring out how we could distribute Airbnb. I think there’s still some security concerns around the properties being distributed by Airbnb so we’re not doing much there except watching. We’re eager to distribute content that our clients and travelers are eager to purchase and this includes the sharing economy that’s growing up around us.
Skift: Lastly, what kind of impact have you seen from the weakened Euro and strengthened U.S. dollar during the past six months or so?
Anderson: On our financials our answer is yes, we’ve seen an impact, but it hasn’t been huge. We have a good balance and match between our revenues and our costs so when we deliver service in the U.K. we’re generally invoicing and accruing costs in British pounds and being paid in British pounds as well. We have a good natural hedge in the way that we contact with our clients and there are a few exceptions to that but nothing significant.
There is translation impact as we report our results in dollars since the functional currency for the company is U.S. dollars and it takes more euros to buy dollars than it did six months ago. So it does have an impact on our overall earnings and it’s had an impact of probably 6 or 8% negative impact on our revenue and about the same negative impact for our costs.
So our revenue and costs are down a bit as a result of the euro and the impact on our earnings is 5 or 6% which isn’t a significant impact because of the natural hedge we have in the the way of contracting. We know exactly based on our budgets what a 10-cent move in the euro against the dollar means to us so this is exactly what we expected and there’s no surprise or angst.