Egencia Is Growing Fast but Corporate Travel Rivals Still Dominate Large Accounts

In 2016, Egencia, the corporate travel division of Expedia Inc., saw its revenues rise 16 percent, to $462 million — aided by the acquisition of Orbitz for Business.

Egencia handled $6.3 billion in gross bookings last year. It aims to double that annual volume over the next four years. In 2016, lodging was a growth driver, with “room nights stayed” growing more than 16 percent.

For 2017, the corporate travel distributor is working to “dramatically improve” its expense management tools, said Expedia chief executive Dara Khosrowshahi on a Thursday call with investment analysts.

Khosrowshahi added, “We don’t see anyone else who is really a scale technology player in corporate travel.”

POSSIBLE M&A

Egencia believes that its technology investment will enable it to deliver digital services that appeal to corporate travelers, whose expectations are rapidly evolving. It believes it can out-innovate in a cost-effective way its arch-rivals Carlson Wagonlit Travel and American Express Global Business Travel (GBT).

To achieve its ambition, Egencia plans to hire more salespeople in the markets it serves in 2017. But logic dictates that an acquisition or two may be needed in the next few years, too.

Speaking in general of the Expedia Inc. portfolio, Khosrowshahi said that the company will do more deals in the next few years.

Egencia looks to improve its platform innovation. It may be eying companies that could enable it to connect better with segments of corporate travel it’s not reaching effectively today. It may also be looking at tech providers that could get its services more distribution.

Egencia uses several smaller players like Travelfusion (an airline direct-connect aggregator acquired by Ctrip in 2015) for connectivity.

Skift speculates that possible targets could include travel-and-expense software specialists. In 2011, Expedia bought Traveldoo, a France-based specialist in travel-and-expense integration. Egencia might be interested in other companies that have created solutions on the expense side.

The Chinese market is also a largely untapped opportunity, even though business travel in China was estimated to have surpassed volume in the U.S. last year by hitting $300 billion. Global players will be watching local companies that are rising stars in that market, like Baoku, a Beijing-based business travel and expense management company that offers Web-based travel management tools for corporate travelers and managers.

How Egencia looks at mergers and acquisitions is probably different from how the other four large global travel management companies do. BCD Travel, HRG, Amex GBT, and Carlson Wagonlit seem to look at their plans from an ability to aggregate volumes.

They may also look at buying companies that would give them consumer-grade interfaces, rather than trying to build these technologies in-house. A case in point, last year Concur, the corporate travel expense giant, acquired Hipmunk, the metasearch brand famous for its distinctive search interface.

RIDING THE MEGATREND

One of the 2017 megatrends in travel that Skift is watching is that corporate travel tech is in upheaval.

Pricing pressures are mounting because of the relative consolidation of airlines and major hotel groups and that is undermining travel management companies’  negotiating power.

Carlson Wagonlit says this month it will begin offering clients hotel content sourced from an outside provider, Booking.com, alongside properties it has sourced itself.

Cost pressures are rising, too, as the companies have to invest to provide consumer-grade interfaces. Hence, last year’s KDS-American Express GBT merger.

Expedia’s peers continue to say that they offer more robust services for clients looking for more highly managed travel programs. They may have a point. IBM’s decision last year not to migrate from Orbitz for Business as a booking tool to Egencia may have been telling in that regard. Concur won that business, while Amex GBT retained IBM as a lucrative client for other services.

Egencia plans to continue to prioritize the small-to-mid-market segment. Some airlines and hotel chains like the strategy because it’s difficult for them to otherwise target those companies incrementally in a cost-effective way.

Egencia is often bested by its travel management company peers when it comes to landing large accounts, which often require a lot of customization, down to white-labeling the look-and-feel of corporate booking portals, that a scale-focused company like Egencia balks at. The company says it is gradually wooing more large accounts by having more of the consumer-grade interfaces that their employees prefer.

Egencia’s peers also claim they do a better job of addressing a key concern of the largest corporate clients, so-called “leakage,” or the problem of employees ignoring company mandates to use the prescribed corporate booking tool to book a discounted rate at a hotel the travel management company has negotiated. Despite all its talk of innovation, Egencia hasn’t had much to add here.

ALTERNATIVE LODGING PUSH in 2017

Alternative lodging is another sector that Egencia has been slow to embrace. Some of Egencia’s travel management company peers have done integrations with Airbnb, while Egencia hasn’t.

Last August, Rob Greyber, president of Egencia, told Skift that his team has had talks with Airbnb. But he says talks have broken down about how to integrate the experience. Now, the method on offer is for an agent to use Airbnb’s extranet to complete the transaction. Greyber wants to integrate the inventory into the tools agents use every day. Rival property rental marektplace HomeAway is also owned by Expedia, which brings obvious advantages.

A few months ago Greyber told Skift that HomeAway’s inventory would begin to brought into Egencia’s system in a filtered way to get whole-home rentals, which business travelers tend to prefer to shared-property rentals, which are more common on Airbnb. He says that should start to happen by mid-2017.

When it happens, it may happen fast. Greyber says his company has taken several steps to improve its game. It has moved from three-year planning cycles to 120-day planning cycles, to adapt to changes faster. He says this is another differentiator between it and its travel management company rivals.

PRAISE FOR THE LEGACY TECH MIDDLEMEN

To connect with businesses and agencies, Egencia relies on large technology platforms like Sabre and Amadeus.

Greener believes those two companies have “scaled with the industry in a pretty good way” when it comes to technological investment and innovation.

Especially for air content, Egencia relies on Sabre and Amadeus to aggregate content and search at scale and with reliability.

Greyber says his company has piloted connectivity with newer, alternative players but, “for the most part, these players don’t meet client requirements reliably with a breadth and depth of content.”