CEO Gilliland Explores Security, Sabre's Privately Owned Future

Private equity players Silver Lake and TPG on March 30 completed their acquisition of Sabre Holdings, taking the travel giant private. Sabre chairman and CEO Sam Gilliland this month spoke with Business Travel News editor-in-chief David Meyer and senior editor Jay Boehmer to discuss the company's new ownership structure and increased spending on corporate travel offerings in development.

BTN: To what extent is Sabre upping product investment in the corporate travel space?

Sam Gilliland: I won't get into specifics of breakouts of what we're investing in corporate versus leisure, but we'll be spending about $10 million more this year than we had in our budget. Our development budget is very, very large. Whereas we've been hearing that competitors are dramatically shrinking their budgets, we are a product and technology company and I do not see that changing. I'm a product guy. That's where I grew up. I think you'll see continued emphasis and technology that's good for corporate travel.

We are investing in what we call corporate end-to-end. We are going to be investing in those areas that are going to be the hot topics for corporate travel managers, corporations and the employees of corporations. We have invested in traveler security and we'll be introducing a traveler security and data suite here soon. That's probably priority one today for both corporate travel agencies and corporations.

BTN: What is Sabre exploring in terms of end-to-end?

Gilliland: Our view is that we want to continue to provide tools that automate and drive efficiency in end-to-end. It does start before the booking occurs and ends well after the traveler has arrived back form their trip. There are areas where we want to fill gaps in that end-to-end—areas that haven't been automated in the past that we think we can automate and deliver a better proposition to corporate travel agencies and to corporations.

We don't have intentions, as an example, from an expense management perspective, except to say that we want to have great interfaces to the expense management companies that are out there, which has been a part of our history anyway. It's not one tool. It ends up being a menu of options, but as you move from pre-booking to post-booking to post-trip, we're doing a great job in each segment of that end-to-end in automating the process.

BTN: What is the status of your traveler-tracking tool?

Gilliland: We are in the beta-testing process, so we're not far from launch of a new data security suite.

This is all around safety and security of employees and quickly locating travelers around the world using real-time Sabre reservation data, and making that available through Web-based applications, so corporations can know up to the minute where their travelers are. Traveler security has really emphasized the value proposition on what we provide on a global basis. We have all this data in one place. It's difficult to have in one place this information about travelers, so this is a specific area of emphasis and investment. Our customers will have the opportunity to take advantage of this.

BTN: A lot of larger travel management companies already have launched traveler-tracking tools. Is this more for your smaller agencies?

Gilliland: This will be a broad-based offering. As we talk about corporate end-to-end, we certainly hope that both larger corporate travel management companies and smaller ones will take advantage of these, but they'll be part of a suite of capabilities and I think it's about providing choice.

BTN: Do your new private equity owners change Sabre's focus?

Gilliland: We've got just a couple days of experience being a private company, but we've gotten to know our new owners over the past four or five months of this process and I really don't see a whole lot changing in terms of how we manage the business going forward. This isn't about a changing strategy or a changing focus. This is about new owners.

We've gone through a lot of different ownership changes over the years, but I think our focus has remained the same. We had the airline-ownership years with American Airlines. We went through a process where we were publicly owned and yet American retained a majority stake in our company. Then we went through the full spin.

Now we are entering a chapter where we'll be privately owned. Through all of that history, we've maintained our focus on the marketplace, and that is really what I don't see changing. The marketplace and our customers will drive us, going forward.

In the private context, we're worried less what our numbers will be quarter to quarter, though we'll certainly be disciplined from a financial perspective. We are less focused on quarterly results and more focused on where we're going to be three, four, five years from now and make the kind of long-term investments our customers will be interested in.

BTN: Private equity companies often buy to sell. Have your new owners expressed any interest in divesting any Sabre properties?

Gilliland: I'd modify it just a little bit: I would say they buy to make money.

This is just pure capitalism. Their motivations and their goals are very consistent with that. In our case, we've had no discussions around anything other than driving this portfolio forward.

I get questions from employees, from customers and questions obviously from you around this point. We've had no discussion around the portfolio and whether we should change it or sell a unit. These guys are always going to reserve an option to make money and make the right financial decisions around our portfolio. That isn't a reason they bought this company, and I think they have the same beliefs in the portfolio strength that we do, but they're the owners, and we'll decide over time what makes sense.

BTN: Do your new owners give you more access to capital, raising the possibility of acquisitions?

Gilliland: We have readily available capital. The investment decision in large part remains the same. If you look at a business and you think it makes a lot of sense in terms of future growth, you'll take that forward to your new owners. It will be a very collaborative process going forward as they or we see opportunities around the world. Many of the same financial disciplines apply. It's great that they have ready access to capital, but it does end up at the end of the day being about the discipline of M&A as opposed to access to capital.

BTN: Have the mergers and acquisitions in this space made you think competitively about the need to counter?

Gilliland: We feel very good about the breadth of our offerings from a product perspective and about our geographic footprint. There are parts of the world where we'd like to expand and there are gaps in our portfolio. As we look at gaps, they generally look to be small.

There are acquisitions over the past couple of years for us in the small and medium-size sector. We invested in the hotel business with Synexus and that is very much within our sweet spot of what we deliver to our customers, but an area where we felt like we had a gap. In another example, we decided to enter a market on our own and grow from a standing start, so we just launched Travelocity India. There are probably some more gaps in our portfolio.

We'll either invest to build our own products, or we'll invest to make some small acquisitions. We feel very good about our portfolio. We will invest in Europe to specifically improve capabilities there in the corporate arena, so we'll invest to improve our rail content as one example. In North America, we are investing in the corporate efficiency formula.

BTN: Do you consider the follow-the-sun approach that some companies pioneered with Sabre successful?

Gilliland: This is where there is this balance between customer-led and product-technology-led, and I think we've attempted to provide the best-of-breed technology over the years. In fact, there are areas of the world where customers said they'd like us to provide our service, because they are operating on this follow-the-sun approach. There are markets we entered where we might not otherwise have entered because we want to provide the global service and support their follow-the-sun initiatives.

BTN: Are more companies looking for this type of service?

Gilliland: There is significant time and process investment involved in follow-the-sun. We're finding those companies that have taken a global view of how they want to manage travel have been successful in accomplishing their goals in efficiencies that result from the follow-the-sun approach. I think we'll see more. With follow-the-sun, which is relatively new, I think you'll find in ten years that it's the norm as opposed to just seeing a few early adopters.

We need to focus on having the knowledge and capabilities, and we're learning along with our customers what's important on a regional basis. For global companies, it's important over time to get to these types of models. Ten years from now, you'll see more have headed down this path.

BTN: What is the outlook for European Union deregulation of global distribution systems?

Gilliland: We want to work with the European Commission to get this right. We view partial deregulation as the right answer given the current conditions there. There are some aspects of the rules that need to change and should change now. That is in particular the nature of the commercial relationships we might strike with corporations, travel agencies or airlines. The current regulations govern a lot of that. We'd like to see more of an open market-based approach to the CRS rules. We see opportunities for some of the rules to roll away. We want to work with the European Commission to get it right because we also think some rules should stay in place. Our view at this point is that there won't be a knife's-edge cutover in terms of how deregulation or regulation occurs.

We're working at the E.C. level to lay out our views. We remain hopeful that their view or at least many of their views might be aligned with ours. These rules have been in review for a period of time and will continue to be in review for a while. I'm hopeful that we can move away from some of the rules. Some may remain in place. My feeling right now is there's an opportunity to change through evolution.