Travel Management Behemoths Consolidate to Compete in a Digital World

The corporate travel world is at a unique moment in its growth, as giant legacy travel management companies consolidate in the face of rapidly growing startups.

A major driver behind this consolidation is travel management company BCD Travel, with its aggressive acquisition strategy and growing global presence. The company recognizes its role in the changing travel landscape but sees this growing consolidation as an improvement on what otherwise might be a very fragmented travel market.

In just the past two months, BCD Travel acquired Adelman Travel in North America and gained a majority share in Hitachi Travel in Japan. American Express Global Business Travel, another leading travel management company, has also been buying up smaller businesses. In August, for example, the company announced it had completed its acquisition of German company DER Business Travel.

“BCD Travel is going to continue to use an acquisition strategy for years to come,” said Michael Janssen, chief operating officer and chief commercial officer for BCD Travel. “And I believe American Express GBT will as well. I personally think it’s good for the industry.”

Janssen explained that a fragmented industry presents challenges to businesses that want to expand globally. While they may have their travel running smoothly in their home market, once they start moving into other countries, it becomes much more complicated.

“It’s not good for customers, the way the industry is right now,” Janssen said. “Many customers who want to globalize are sitting there going, ‘Well, gosh. I want everything to be with BCD. But there’s still certain areas where my local market feels better using this or that particular agency.’”

By acquiring businesses in strategic markets across the world, the company believes it can create a more seamless experience for customers, no matter where they are.

This desire to reach every corner of the globe explains many of BCD Travel’s recent acquisitions. Gaining a majority share in Hitachi Travel helps it further penetrate the Asia-Pacific market, while its 2017 acquisition of Avipam in Brazil helps it expand into South America. The company in 2016 took a majority share in its Hong Kong and China joint venture, further solidifying its presence in the China market.

The Asia-Pacific market has been notoriously difficult for many outside companies to crack into. By acquiring local companies and often allowing the original owners to retain control of the business operations, BCD Travel believes it can sidestep a lot of the problems many companies face when trying to expand. Most important, it does not have to learn an entirely new market with different consumer expectations.

“In Latin America or Brazil, for example, they do hotels so differently. It still can be very, very laborious to make sure you’re getting the best rates and the best hotel solution for your customer,” Janssen explained. “And then in Europe you have to integrate rail. Then in Japan, a different terminal’s going to be used depending on whether you’re booking air, hotel, or rail. When you look at all that uniqueness, we’ve got to solve the problem of making that simple for the traveler. They don’t see all of the difference that exists. They don’t need to get caught up in that. They just need to know that they’re getting access to all the content that’s being delivered to them in the easiest, most successful way.”

The Traveler Experience Matters

However, while global consolidation can make some aspects of business travel easier for companies with international offices, it may also have a detrimental impact on innovation and change. This is especially true for an industry that not only lags far behind leisure travel in terms of traveler experience but also is known for being slow to evolve.

Smaller startups such as TripActions and TravelPerk have grown in recent years, with the aim of fixing some of the long-standing issues that have plagued the business travel space. One of the biggest issues has been the clunky and old-fashioned interfaces of large companies like BCD Travel and American Express Global Business Travel, leading many employees to book outside of company policy.

Avi Meir, CEO and co-founder of TravelPerk, believes the consolidation coming from companies like BCD Travel is a reaction to the increased booking choice customers have, thanks to the internet and the growth of online travel agencies.

“The consolidation of the corporate travel market is a direct consequence of its digitalization and the emergence of self-booking tools, which have become the business traveler’s preferred way to book,” he said. “The rapid growth of companies innovating in this space, like ourselves and others, has forced the legacy players in the industry to consolidate in order to keep costs down as they try to modernize.”

Ultimately, he believes, the travelers themselves will shape the market, as companies seek to drive up compliance with company booking tools. While behemoths like BCD Travel and American Express Global Business Travel may have the widest breadth of inventory, they may ultimately lose ground to newer companies that provide a more modern and flexible booking experience.

“In the next five years, I believe that we’ll start to see significant convergence in the business travel market, and the winners will be those companies that go beyond just being a provider and, instead, become a brand that people recognize, like, and trust — in the same way that we think about consumer or lifestyle brands today,” Meir said.