Corporate Travel Agencies Restructure to Gain Edge for Recovery

Image counts for everything in the current climate, as travel agencies look to reassure their customers they can handle their bookings as economies start to recover.

And company travel managers will be seeking guarantees from them that they can cope with a surge in activity as travel restrictions lift, particularly as governments wind down their financial support packages and labor shortages threaten a wider industry recovery.

The “time of truth” is approaching, according to one global travel buyer working in the retail sector. “It’s especially difficult to read how privately owned companies are doing. It’s up to them to provide the transparency,” he said, preferring to withhold his name.

Several large agencies now appear to be ramping up their messaging, and in some cases restructuring and refinancing.

Credit Concerns?

CWT is reportedly in restructuring talks, and looking to credit firms including Caspian Capital and Oaktree Capital Management for new financing.

Bloomberg said CWT entered into the talks “after it skipped June 15 interest payments on its bonds … the missed coupons started the clock on a 30-day grace period, and the company is using that time to try to reach a restructuring deal.”

Two days prior to the report, credit rating agency Fitch Ratings downgraded the company, due to the missed debt payments. “The company is engaged in discussions with a majority of its lenders and bondholders to negotiate an agreement for a more comprehensive transaction,” it said.

A spokesperson for CWT told Skift a recovery in the global travel industry was underway and it was ready to serve customers throughout the rebound and beyond. “As a next step in our recovery, we are in active discussions with our owners and bondholders to further strengthen our financial position and accelerate our ability to invest in our business. These discussions have been positive, and we are making great progress,” they said.

“One element of this plan includes an agreement with our bondholders that allows us to delay our June interest payments. This agreement gives us more time and flexibility to arrive at the best possible financial plan for CWT and all of our stakeholders, regardless of any potential ratings updates made by the credit rating agencies.”

Finding a Pulse

Financial health is important to travel managers. If the travel agency collapses, their company won’t be able to recover as quickly as their competitors because their employees will be mostly grounded.

The retail company travel buyer said running due diligence on financial stability should be an ongoing exercise, and travel agencies should be providing a 12-month, forward looking cash-burn plan. It was an exercise he’d been pushing at his own company — but had so far failed.

“I need reassurance that service will be maintained, including an agreed Plan B, and C,” said another global travel manager, working in the entertainment sector. “In re-running a global agency request for proposal over the past year, one topic that had much discussion was contingency plans for business failure or service underperformance.”

Global agency group ATPI is hearing the message loud and clear, and this month took the unusual step to preview its financial results. It was forced to reduce its global workforce by 20 percent because of the pandemic.

On June 14, it reported an underlying profit of $15.24 million for its 2020 financial year. For the 12 months to December 2019, it made a profit of $30.48 million. But it added that it had actually traded profitably every month since June 2020.

“It’s becoming increasingly relevant, especially to the travel buyer community, that the financial stability of travel management groups is probably being brought into a certain amount of question,” said Ian Sinderson, CEO at ATPI. “We felt it was important to get out to the market that that sort of perception isn’t necessarily universal, and that some travel agencies, especially ATPI, are actually weathering the pandemic pretty well.”

Sinderson was previously the agency’s chief financial officer, which explains his keenness to get the message out now before publishing the full set of results at the end of August. “It’s the first time, and something I’d like to continue through the recovery phase,” he said. “It’s important to put into the public domain, the situation and how we’re getting on.”

Different Shapes and Sizes

One agency thinks now is a good time to restructure, and take on a new shape to capitalize on the rebound. Corporate Travel Management said it expects to emerge from the pandemic as a more globally focused company, after buying U.S. agency Travel & Transport last year. It has now reinvented itself as three global business units: Global Customer Solutions, Global Agency Partnership Programme and Global Supplier Partnerships Programme.

“We believe this value proposition positions CTM as a leading contender for global and multi-national travel management services moving forward,” said Laura Ruffles, CTM Global’s chief operating officer.

“We’ve listened to feedback from our customers, partner networks, and sales and technology teams to identify the needs, opportunities and challenges facing global travel programs as they get back to business travel. And we’re confident that we’ve successfully implemented a structure that fills a market gap.”

CTM wasn’t the only one snapping up the competition. In fact, it’s as common tactic in a recession, according to Mohamad Halawi, global travel director at perfume company Firmenich. “Usually in a recession, you either save your way out of a recession, let go of staff, stop your capex investments, and you lock everything up,” he told Skift earlier this month. “Or you invest your way out, putting more into research and development, and buying someone else.”

Meanwhile, American Express Global Business Travel sits on the sidelines to some extent as it awaits clearance for its takeover of Egencia.

New Priorities

Yet as travel managers keep an eye on their agencies, they also appreciate there’ll be a greater dependence in some areas. Health and safety, for example, will be a priority and agencies have been responding.

CWT enhanced its Travel Essentials search platform last week, adding 15 extra languages, easier access to travel documents, vaccination status filter, and a sharing feature for employees to send documents to co-workers, friends and family.

“CWT Travel Essentials has already supported a 28 percent increase in daily searches since the start of the year,” said Erica Antony, CWT’s chief product officer. “Wider availability and breadth of services will make it easier for our global travelers to resume travel confidently.”

Amex GBT revealed new features on Tuesday, including post-trip traveler surveys to allow managers to collect information directly from travelers to analyze flight and hotel experiences.

It also launched a Live Travel Dashboard, as part of its Premier Insights platform, which uses anonymized data to show all of its customers’ destinations. This means travel managers can see which destinations are open for business travel, and then update their travel policies and pre-trip approval processes accordingly.

“To best adapt their programs, travel managers are looking for new ways to get real insights into the traveler experience and deliver up-to-date Covid-related information to travelers at every point in the journey,” said Mark McSpadden, vice-president of product strategy.

Further ahead, larger companies will need to lean on their agencies for detailed carbon reporting in the future. “Sustainability and the reporting of offsetting will be important, and you need a travel management company to help manage this program,” said another travel manager, based in Germany. “I don’t see a big risk in general for the travel agencies if they adapt to the new capabilities needed.”