The stakes are high in American Express' acquisition of Rosenbluth International, which closed Oct. 1 and came at a time of rapid change and negligible stability, according to Amex officials. However, they said, Amex is well positioned as it embarks on a 12-month to 18-month integration process that will involve Rosenbluth's senior executives.
For one thing, they claimed, adding Rosenbluth's volume to its 2 million annual U.S. online transactions gives Amex more interactive managed corporate travel than any online provider. Amex reported that 25 percent of all bookings it handles in the United States now are made online—twice the 2002 level, which doubled the 2001 rate. Amex also said 84 percent of the online bookings it handles in the United States now are fulfilled entirely without human intervention.
While its edge in the U.S. corporate online booking race is under pressure from online-originating agencies, Amex can lay claim to a superior presence in foreign markets, both for online and off-line services, even as real growth of the former only just begins. The company this month announced plans to open in the first half of next year two new e-fulfillment centers in Sydney, Australia, and New Delhi, India—subject to regulatory approvals. Staff to be hired for the two new centers will provide both technical assistance on self-booking tools and such traditional travel services as en route changes. Exact locations of the two new centers are not yet determined. Amex already has centers in Miami, Montreal, Phoenix, Stockholm and Sophia Antipolis, France, that support interactive travel reservations in Europe, North America and Latin America.
Online booking penetration stands at 5 percent in Canada, Mexico and the United Kingdom, after barely registering at all in 2002, Amex said. Australia is doing even better, doubling from 4 percent at the end of 2002 to 8 percent by the middle of 2003. In Australia, Amex claimed Thomson Corp. used a corporate booking tool for literally every transaction in August. Meanwhile, adoption rates for Amex's U.S. clients continue to increase, it said, with the average for the 20 heaviest users among its large clients standing at 85 percent.
Amex said that overall more than 2,500 of its clients are using an online booking tool. The firm is providing e-fulfillment to clients from 21 countries in multiple languages and plans to add 13 countries by mid-2004.
Capabilities for multinational travel management are the most obvious advantages to working with Amex and the other mega travel agencies—vis-à-vis Orbitz and the like—if companies desire such services. According to Amex, they increasingly do. "In the last 12 months, we have received 57 requests for global travel management," said Amex Global Travel Services president Charles Petruccelli. "In the previous 12 months, there were eight."
Sorting out global capabilities and relationships is high on the to-do list as part of the Rosenbluth deal.
"In all international markets where Rosenbluth had a joint venture, we already had either an owned business or a joint venture," Petruccelli said. "We will try to convince clients to take ours, but they don't have to if they are happy." According to former Rosenbluth president and COO Alex Wasilov, now a senior advisor to Amex, "Ninety-plus percent of the business now done with historical Rosenbluth joint ventures and network partners will transition to Amex."
Navigant International and former Rosenbluth partners are working on making that a lower number
(see Inside Track).Amex Global Corporate Services group president Ed Gilligan sees Europe as the "next chapter" in a relaunch of the Amex global business, propelled by the Rosenbluth acquisition. He's even moving his whole family to London after the holidays to make it happen. The global angle is part of the reason this Rosenbluth deal is different from other Amex acquisitions—even if those were bigger across borders. "In the Thomas Cook acquisition, we kept the key people and client retention went well, although it was rockier in Europe," Gilligan said. In buying France's Havas and Travel One in New Jersey, he said, Amex completed "a reverse integration, keeping them pretty much intact." The Rosenbluth situation is different, Gilligan said, because "in the others, the companies we were buying were in weaker condition. Now the environment is unstable, but this company is stable. Now we're doing it from a position of strength in a weak industry."
Nevertheless, Wasilov said, "We recognize the need to change the business model and the technology platform. It's a transformation that requires support from suppliers and a global client base, and the only way to drive that change is to create synergies."
While the two companies' roughly 18,000 combined travel employees hold mostly customer-facing positions, officials did address anticipated "minimal" layoffs among duplicative roles in back office, technology and finance. According to former Rosenbluth chairman Hal Rosenbluth, also now a senior advisor, "There are certain redundancies and if you can remove expense, then you're doing business at a lower cost. The key is in how you do it." According to Gilligan, the way to do it is to use the savings to reinvest and create more value, rather than simply adding it to profits.
Rosenbluth said he was more impressed than he expected to be with Amex's employee treatment, noting wide-ranging career development opportunities, resources and empowerment. "I had a feeling there might be cultural differences, but as I began to understand Amex's values I realized we all have the same desire to be the best employer we can be and, as a result, the best service provider. Now I understand why we lost when we did."
Asked how the companies differ, Rosenbluth said his firm was more quick and decisive, though in recent years it began operating more like American Express in terms of being "process-oriented."
"The minor differences are more about style and will homogenize quickly," he said. "As a competitor, I used to look at Amex through filtered glasses, focusing on shortcomings and weaknesses. The marketplace thinks they're arrogant, but there's a thin line between arrogance and pride."
Amex officials said the acquisition should diminish the suspicions about Amex's commitment to the travel industry—a dig Rosenbluth admitted he proliferated. They also said it will be customers who determine the merger's success. "Customers tell you what they like," Gilligan said. "Already, in outstanding bids, they are telling us what parts they like and are customizing their own programs. Businesses need to travel, and they need more than just a booking engine."
Amex and Rosenbluth officials cited one unnamed credit card issuer that is not comfortable using Amex as its agency and acknowledged that others may find similar conflicts of interest.