2008 Business Travel Survey: Networks, Franchisors See Global Opportunities (BTNonline-Only Content)

Globalization of small- and midsize corporations has stimulated repositioning by some agency franchisors and networks to be more business-travel-focused organizations by enlarging their corporate sales forces, investing in corporate technology focused on the midmarket, expanding their global footprints and, in the Carlson Leisure Group's case, separating from its parent to create an independent corporate travel identity. Meanwhile, HRG has joined the category by recently launching a North American affiliate program, aimed at attracting regional corporate travel management companies looking to service their clients and garner new accounts with a global strategy.

While agency consolidation is rife in the franchisor and travel management network categories, there is the potential for consolidation among the travel service provider network companies, as Hickory Travel Systems is facing a potential tie-up with competitors or a sale of the business as chairman, president and CEO Bill Chiles plans to separate from parent company American Leisure Group.

In January, the Carlson Leisure Group, which houses the Carlson Wagonlit Travel Associates and Results Travel franchisor brands, underwent a management buyout from parent company Carlson Cos. and formed the independent Travel Acquisitions Group. Including wholly owned operations, 305 franchisees under the CWT Associates banner, 830 Results Travel franchisees and the ProQuest Travel Group, TAG reported $6 billion in sales, half of which are corporate travel generated.

TAG chairman and CEO Mike Batt plans to transition the overall company to mirror its franchisee operations, which average 60 percent to 70 percent of their business from corporate accounts, by investing in technology designed for the midmarket and acquiring agencies that are focused on business travel, such as the March buy from publicly held American Leisure Group of Coral Gables, Fla.-based TraveLeaders, a 65 percent corporate agency that claims $223.3 million in 2007 sales.

In February, TAG tapped Lehman Brothers veteran J.D. O'Hara as senior vice president of corporate development, charged with handling TAG's merger and acquisition activity for both company-owned and franchised agencies.

"If you take somebody like Carlson, Amex or BCD, they tend to operate very much at the top end of the market with large multinationals, huge companies. When we worked as part of Carlson, our business travel offering represented what Carlson did globally, which was for big corporates," said Batt. "The opportunity we see is to focus on the midmarket and small corporate market and give franchisees a much better offering as a result of that."

Midmarket travel globalization certainly factored into the April launch of the HRG North America affiliate program, with its four founding members: Melville, N.Y.-based Austin Travel, Houston-based Avia International travel, Santa Clara, Calif.-based Casto Travel and Overland Park, Kan.-based Short's Travel Management. It is planned for about one dozen regional and midsize corporate agencies.

"The primary focus is giving larger regional travel management companies access to the global network so they can be competitive, have a global presence and more likely be able to hang on to corporate accounts," said Chris Dane, president of the HRG North America Affiliates Program and a former president of the Hickory Travel Systems.

Capitalizing on the midmarket travel expansion was one impetus for combining nine U.S. Uniglobe Group franchises and one franchisor unit into a $200 million corporate agency. The new organization, Uniglobe Travel Partners, has consolidated operations and begun sharing some corporate accounts and later this year plans to start servicing unified accounts, said Marie Magliano, president of Uniglobe Travel Partners.

Meanwhile, the franchisor has expanded its global reach, adding two agencies in Singapore, including Fortune Travel, which Uniglobe claims has $88 million in travel sales. The company also added partners in Paris, Peru and the Philippines.

Agency network GlobalStar Travel Management also has added to its foreign footprint with agencies based in Yemen and Korea. GlobalStar is targeting growth internationally in the midmarket. In May, members approved and embarked on a three-year growth strategy, which includes multiplying the network's budget by a minimum of four to five, beginning in 2009. The new funding will be allocated to triple in the network's employee base of six, including the addition of a president and four dedicated sales staff and account management positions, and an investment in technology.

The five-year-old network is no longer fledgling, as it has filled its global holes, built partner trust and won global accounts, according to GlobalStar global chairman and Ultramar Travel Management president and CEO Peter Klebanow. "In the corporate space, the global is as strategic as online was 10 years ago, This is a burgeoning arena, certainly moving into the mid-tier space and those that get real good at it early are the ones that are going to be the beneficiaries."

GlobalStar underwent a management restructuring last year that included the departure of president and managing director Martin Metzler and realignment of regional to global duties, such as appointing board member Bob Morgan, former international development director at U.K.-based Advanced Travel Partner, as executive vice president of operations, and chairman of GlobalStar Asia/Pacific Claire Gray adding the global role of executive vice president of sales and marketing.

Agency network Radius also saw CEO and president Tony Hughes leave after serving in the top spot since 2002. A successor has yet to be named, but interim president and CEO Allan Slan, who excluded himself from consideration, said a new leader would be announced this summer. Over the past year, the company has doubled its staff while adding multinational sales team appointments. Earlier this year, Kieran Hartwell assumed the head role over Radius' multinational corporate sales efforts and in April added Edyta Citron as director of multinational corporate sales in North America and later other sales staff in Asia/Pacific.

The company has concentrated on building out its network in such emerging markets as Kazakhstan, Oman, Panama as well as those in Central and Eastern Europe and Latin America, according to Slan.

While franchisor and network organizations continue to broaden their reach, the travel network service providers TravelSavers and Hickory Travel Systems are facing the potential for consolidation in their sector, which has been decreasing as M&A activity continues to swallow up agency customers. Hickory chairman, president and CEO Bill Chiles is in the process of buying back his 51 percent stake in the company from American Leisure Group. In the buy-back attempt, which Chiles plans to close this month, he is seeking capital investors and possible tie-ups with competitors and possibly selling the company outright over the next two to three years. Possible suitors include travel network marketer YTB International and direct competitor TravelSavers, whose COO Jim Mazza indicated interest to Business Travel News in buying some or all of Hickory should Chiles chose to sell.

Chiles said the Hickory-ALG marriage has not been harmonious. "It's been long overdue and it has been a very serious departure from our way of doing business," he said. "They don't understand our business very well and managing the business is sensitive to personal relationships. They are more of a wheeler-and-dealer type organization." Along with relationship problems, consolidation has hurt Hickory's business. Chiles said a considerable amount of business was lost in the TraveLeaders sale earlier this year, 60 percent of the agencies rolled into Navigant International were part of the Hickory network and 80 percent of HRG's North American acquisitions were serviced by Hickory.

Operationally, Hickory is introducing a reservation modification services reporting system in its 24-hour call centers, which provides a Web-based system for agent productivity, call statistics and data on voids, refunds and exchanges. To augment the company's worldwide hotel program, Chiles is considering opening reservations centers in Europe, Latin America and Asia/Pacific.

Direct competitor TravelSavers is concentrating on increasing its staff and technology service offering with a $2 million investment in its Agent24 after-hours call center operation, the former Thor24 service, which it purchased in 2006. In April 2008, the company launched Acclaim Meetings, a meetings and incentives booking tool designed for the midmarket, where the company is concentrating its focus, according to Mazza. During the year, TravelSavers expanded its international membership, including agencies in India, Brazil and most recently Israel. Mazza said outside of Canada, Ireland, Mexico, the United Kingdom and the United States, the company is focused on the corporate travel market.