Fewer vendors can mean higher prices and weaker service, but not all buyers are concerned about the announced acquisition of Maritz Corporate Travel by Carlson Wagonlit Travel and the alignment of Navigant International and TQ3. Combined with last fall's American Express-Rosenbluth deal, these moves shave from six to four the number of U.S. mega agencies, but competition for North American travel management should remain intense.
The deals
(see story) reflect the ever more global scope of corporate travel management. By narrowing the field of megas with significant multinational capabilities from five to four, these vendors may be boosting their pricing power over the long term, said some buyers and consultants. However, agency consortia and anticipated multinational competition from global distribution system companies and online-originating agencies
(BTN, March 15) may help hold prices in check.
"It would have been a lot worse if Amex was the acquirer, because they would be getting too big," said Maritz Corporate Travel client New York Life corporate vice president Ted Kohnen. "There will continue to be competition, and other options like outsourcing and e-booking will counterbalance to keep fees down."
Two other MCT clients agreed, but did not want to reveal their names amid the onset of the acquisition. "Competition is still pretty heavy," one said.
According to consultant Susan Stowe of John Caldwell & Associates, "There's probably a little risk of higher prices, but at the same time we still have enough players out there to keep up the pressure."
Some said the deals strengthen both CWT and TQ3—the former shoring up U.S. capabilities, especially with onsites, and the latter getting a far larger U.S. partner than it had previously. In a domestic corporate travel environment that Omega World Travel COO Dan Bohan called, "dog eat dog," "not as fun as it used to be" and "more like a business," multinational management ostensibly is the feather in the megas' caps.
"We had two global RFPs two years ago," Pam Arway, American Express executive vice president and general manager of North America corporate travel, said last month. "Last year, we had over 70, and they were not all Fortune 100 companies. One we won last week was $3.5 million in global air, with $500,000 overseas, and it was service for the half million that drove the decision." TQ3 global COO Toby Joseph earlier this month said, "We're responding to 20 multinational RFPs in the next month."
"Global travel management is totally real now," said WorldTravel BTI president Danny Hood. "We have 46 global companies, and probably 22 of those have truly consolidated more than 95 percent of their air travel worldwide."
Sources differ on whether the emergence of multinational and/or global travel management has been gradual because of delays in buyer or supplier readiness, concluding that it's plenty of both.
On the vendor side, TMC executives debate the necessity of owning the agencies that service their multinational clients. Even if something less than ownership can work from a servicing perspective, though, the TQ3 example shows it fails to insulate a globally minded travel management company against losing partners to competitors. "We now have a split shop," said one TQ3 client.
Ownership also helps with sales. "The majority of our multinational success up until this point has come from elsewhere around the world," TQ3's Joseph said, stopping short of saying Maritz Corporate Travel wasn't pulling its weight. "As a leading TMC in Europe, TQ3 needed a partner in the U.S. with more critical mass, otherwise global leadership is difficult to achieve."
"You have seen TQ3 in the past three years making a lot of investment and acquisitions throughout the world, but that has mainly happened from the TUI-owned side," said TQ3 president and CEO Marc Hildebrand. "We haven't seen that level of investment activity from our former partner. Navigant is very capable of making investment."
Soon to be former Maritz Corporate Travel president Jack O'Neill did not respond to the comments other than to say, "The marketplace determines who is successful with global sales. Being successful is a team effort when you are joint venture partners, and we had some success." Maritz Inc. chief marketing officer Scott Bush said the company had determined corporate travel was not a core part of its future. "When you're the smallest of the mega agencies in a highly competitive industry, it's hard to gain marketshare," Bush said. "This combined entity will be very successful in the future."
According to the North American president of that entity, CWT's Robin Schleien, U.S. clients who spend upwards of $25 million on air travel, but have small volumes in other countries, are asking, "What can you do for me globally? Can you help me create more value globally? Can you control my transactions? Can you control the data consolidation? What generates growth is being able to answer those questions, 'Yes, we can, and here's how, through a wholly owned network.' If you can't answer those questions, then you may slip back the other way."
Navigant International for years has been, for the most part, unable to answer those questions. "It goes without saying" that the new TQ3 arrangement will allow Navigant to pursue larger U.S. accounts than it had been, said chairman, president and CEO Ed Adams. "We have worked around other affiliations in the past that were not the optimal solution for Navigant. On multinational or global support, we felt we were at a bit of a disadvantage." The TQ3 deal, he said, "is not an affiliation, not a loose working group."
Navigant recently held talks with a group of agencies that previously served as Rosenbluth International's foreign partners
(BTN, Oct. 20, 2003)."What's different in, say, the Rosenbluth network partners and joint ventures is that you do those deals one partner at a time," said former Rosenbluth COO Ron DiLeo, now American Express vice president and general manager for EMEA. "In the Amex world, the business is managed in wholly owned locations. Even companies that package their affiliations well, like TQ3 and BTI, create a holding company and a brand name and 'If you network your business to my country, then I'll get your business.' The packaging is great, but execution is difficult."
BTI differs a bit. "Two or three owners does work as long as you have proper governance," Hood said.
Buyers are mixed. "If you don't own it, I would think it has to be almost like McDonald's where they have to be on the same standard," New York Life's Kohnen said.
As for the consortia that tie together large agencies and often purport to provide mega-agency services, Management Alternatives consultant John Heilner said, "They have never proven they can handle a large multinational company."
Such groupings as GlobalStar, Radius and Synergi continue to build out their international partnerships and tools. Still, none was able to refer BTN to a client that had selected member agencies because of the multinational organizations to which they belong. "There are few, if any, recorded examples of consortia winning major accounts," said Corporate Solutions Group consultant Thom Nulty.
Then again, "I've seen a number of bid situations in the past few years where there were questions about the global network, and whether I've won or lost, a top reason cited is global brand recognition," said Tower Travel Management president John Smith, who recently joined WorldTravel Affiliates for a brand name he said is interpreted as more global than Hickory or Radius.
In recent interviews, network executives argued that their members are past the days of merely enabling the proverbial RFP box checking.
"That old-fashioned view of the networks was probably correct and may still be for some of them," said Radius president and CEO Tony Hughes. "But our members have stepped up, and they're starting to promote the Radius brand more. We're getting on more bid lists as Radius. There's great momentum in Europe at the moment, and we're in the finals on two major U.S. accounts." Radius' U.S. membership includes most of the sub-mega tier: Omega, Total Travel Management, TraveLeaders and Travel & Transport.
Spearheaded in the United States by Sea Gate Travel Group, Synergi has been "steering away from global and toward a regional or multinational focus," said president Greg O'Neil, noting a self-described imprecise definition of multinational as "maybe three countries, whereas 22 is global."