Senior vice president of Dubai-based Dnata Travel Services Iain Andrew this month spoke with Business Travel News travel management editor Seth Harris about the company's recent investment in its partner Hogg Robinson Group and the growth of the United Arab Emirates business travel market.BTN: In June, Dnata purchased almost 20 percent of Hogg Robinson Group, becoming its largest single shareholder How does this change the relationship with your managing partner?
Iain Andrew: Inevitably, it strengthens it. We've had a very strong relationship with them the last couple of years. We've been working closer, ensuring that we can lead in this market by adopting a host of travel solutions that perhaps some of our competitors can't offer. We felt it was appropriate to strengthen that further by taking a long-term shareholding in the company. We have no other plans to invest further at this stage. We are keeping our options open, but it's a long-term shareholding to ensure that we will work deeper with them.
BTN: Dnata has been involved in the development of some HRG technology, including the HRG Universal Super Platform
(BTNonline, Feb. 25). How are you working with HRG technology?
Andrew: We're working with them to a large degree and that will get deeper now, particularly on the back of our investment. We are looking at rolling out the HRG Universal Super Platform and their online tools. We've got a good partnership with KDS out here because it addresses some of the regional requirements we have. HRG has their own product suite, so we'll be working with them aggressively to customize that suite for the region and make sure we are fully integrated with Hogg Robinson.
BTN: Who were the chief decision makers behind the HRG buy?
Andrew: My boss, Dnata president Gary Chapman, was fully involved, as was Sheikh Ahmed bin Saeed Al-Maktoum, Emirates Airline and Group chairman and CEO.
BTN: How has Dubai being one of the fastest-growing business travel markets affected Dnata's business?
Andrew: We've been unscathed so far and the growth remains phenomenal, with significant double-digit growth over the last two years. The demand for corporate travel is still exceptional for the region, particularly in the United Arab Emirates, where demand is growing on a daily basis. We've seen a lot of companies, like Halliburton, moving their head offices out here. In doing that, they are putting more staff on the ground who want to travel around the region. We've even seen significant growth in the charter business, with people moving from business class to first class and now into charters in order to get to their deal opportunities as fast as they possibly can. For certain parts of the region, capacity is restricted, but companies don't seem to be restricted too much on their travel policy, and they are able to use whatever means to get to their meetings. If you are chasing some of the huge investments that are around at the moment, the travel budget becomes a much smaller consideration.
BTN: How do you see the current Western economy and rising oil prices affecting business travel demand in your region?
Andrew: I'm not going to say that it's not inevitable. Some of the big travelers we have now are the big multinational companies, and their headquarters—whether based in Europe or the United States—are going through a hard time. It will inevitably rub over, if only from a political perspective, but there is plenty of business here. It's perhaps the lifeline for some of those organizations. I'm sure it will calm down a little, but at the moment we don't see any signs of that.
BTN: How do you see changes in capacity and new hotels entering the market affecting corporate negotiations?
Andrew: Some carriers have pulled back a bit. Even Emirates has scaled back a couple of routes from initial commitments. We'll probably see a few more airlines taper their growth a little bit. There is no doubt that there are more hotel properties coming online. We are starting to see a little bit of flexibility in pricing, but we are going through the quiet season for hotel rates in the Middle East. Probably it will give corporate buyers on the hotel side more of an opportunity. On the airline side, it will take longer. There still seems to be strong demand for the routes and the airlines don't need to be as aggressive on deals with the corporate decision makers. It will change. There is a lot of capacity coming on with larger aircraft in this market.
BTN: What is the preferred primary basis for TMC contracts in the region?
Andrew: That's topical, because Emirates has declared that they are going to a 0 percent commission on Oct. 1. That will probably take most of the UAE to 0 percent. A number of other markets in the region have gone to 0 percent. Therefore, the rebate agreements are disappearing. They will still be here for most of this year, but next year they will have moved on, which means the management fee and transactions fees will be the most prevalent. That will cause some challenges for some of the less mature agents who will probably have to increase their service gains to compete with the global players that can offer a far different range of services.