Corporate travel posted stronger growth than overall agency
activity through most of 2011 and into the first part of 2012, according to
aggregated U.S. air transaction data for six of the largest travel management
companies as well as individual data on many players in the next tier. As
measured by their ARC air bookings, the largest business-travel-oriented
agencies operating in the United States have been showing transaction and sales
growth for most months, although a leveling off from the double-digit percentage
increases of recovery year 2010 has occurred.
[Please click here to view the digital edition of the 2012 Business Travel Survey, featuring all
charted data, downloadable as a pdf.]
Among travel management companies that authorize the release
of their individual ARC air transaction data for this research, the 10 largest
on average enjoyed 9 percent growth in ARC transactions. That included Omega
World Travel, where transactions fell 12 percent due to spending cuts among its
government clients, and Altour, which was flat. The top 10 recorded a 16
percent year-over-year increase in ARC sales last year, besting the 6.1 percent
recorded for all ARC agencies.
When sales growth outpaces transactions, the per-unit value
of the distribution channel increases. Also examining ARC data, Solutionz Group
founder Chicke Fitzgerald recently pointed out on her blog that the average
domestic airfare in 2011 increased 7 percent for transactions processed by the
global corporate agencies that ARC includes in its "mega" category.
Among those TMCs, the average international fare rose 5 percent.
"In measuring their effectiveness as a distribution
channel, the mega and brick-and-mortar agencies consistently produce higher
average ticket prices (and as a result, a much higher yield) for the airlines
than their online travel agency counterparts," Fitzgerald wrote. "The
large TMC channel is a great way to sell tickets, even if it requires paying a
commission and a GDS booking fee."
Travelport president and CEO Gordon Wilson made a related
point about how TMCs using global distribution systems are demonstrating an "improving
value" for suppliers. Airline and hotel sales by travel agencies through
Travelport grew 6 percent last year to $83 billion, with the average fare up 11
percent and average daily room rate up 12 percent.
Higher unit value, though, in years past has not stopped
airlines from attempting programs that bypass the GDSs. Concerns about that
continue although the flashpoint is stuck in the legal mess between American
Airlines and the GDSs. Carlson Wagonlit Travel last year announced that should
there be a direct-connect program, costs of accessing it would be passed to the
corporate client. Those "costs" theoretically would include a loss of
GDS incentive revenue, which can drive upwards of 10 percent of a TMC's total
revenue.
Client fees and supplier commissions make up far larger
pieces of the pie, though, and a bigger concern for TMCs may be that the
middleman to be cut out is them. There has been more chatter of late about the "rogue
traveler," and some proposed solutions would enable the traveler to skip
the TMC altogether and maintain some data capture. But these have not been
legitimized as best corporate travel practices, and some highly managed
programs have actually gone in the other direction by putting more enforcement
behind their preferred booking channel policies. For some, booking outside the
TMC means not getting reimbursed.
The following highlights public data from TMCs servicing
corporate accounts.
American Express
Global Business Travel
The growth chart for global corporate travel at American
Express during the past four years shows just how crazy this industry's ride
has been. Second-quarter growth, for example, vanished in the March 2008
quarter and by the next year turned into a massive 42 percent reduction. But
beginning in 2010, Amex posted double-digit percentage increases for seven
straight quarters. In the December 2011 period, growth fell to 2 percent and in
the March 2012 quarter it was negative 2 percent. Is the full reset finished?
Apparently uncertainty itself is to blame for uncertainty about that.
For full-year 2011, corporate travel sales were $19.6
billion at Amex, 12 percent more than in 2010. The company did not authorize
ARC to release its U.S. transaction and sales figures for this survey.
Included among recent highlights for American Express Global
Business Travel is a management reshuffling that saw the unit's president,
Charles Petruccelli, depart in January for a consulting role. He was replaced
by the company's former Merchant Services Americas head, Kim Goodman. She
reports to new Global Corporate Payments and Business Travel president Bill
Glenn, who was replaced as Global Merchant Services leader by former Global
Corporate Payments head Anre Williams. Goodman reorganized the group with the
creation of three new senior positions to lead the Americas; Europe, the Middle
East, and Africa; and Asia/Pacific regions.
BCD Travel
BCD Holdings announced a record $20.8 billion in revenues
for 2011, an 18 percent year-over-year increase. Earnings before interest,
taxes, depreciation and amortization rose to $138 million, according to a press
statement. BCD Holdings CEO Joop Drechsel indicated he expects "demand for
business travel to continue to increase in the coming years, largely due to
strong economic growth in the emerging markets." The largest portion of
BCD Holdings is corporate travel agency BCD Travel, which declined to authorize
the release of its 2011 ARC data.
Meanwhile, BCD Holdings owner John Fentener van Vlissingen's
Boron Investments has continued to increase its stake in Hogg Robinson Group,
now at 24 percent. That's up from 19 percent in January 2009 and 13 percent in
April 2008. Van Vlissingen has said the growing investment is meant to ensure
he is "at the table" for any strategic transaction involving HRG.
The economic roller coaster has been "a learning
experience" for BCD, Drechsel last year told The Beat. Like at many TMCs,
cost-cutting "was done at the expense of some very good people who
unfortunately we had to let go, but as a result we remain financially robust
despite taking the hit. It's still a scary world out there. Every now and then
in the global political arena, we go from crisis to crisis, which potentially
has impact. So I want to be very cautious."
Carlson Wagonlit
Travel
Also declining to authorize the ARC data release, Carlson
Wagonlit Travel recently announced "record performance" for 2011,
including a 15 percent jump to $28 billion in global air, hotel and ground
sales volume among wholly owned operations and joint ventures. CWT said
transactions managed grew 7 percent to 61.9 million.
"We are seeing strong growth across the industry,
despite the unpredictable economic environment," according to a March 2012
statement by CWT president and CEO Douglas Anderson. "Global corporations
are more optimistic about their travel spend going forward, and certain areas
of the world, such as Asia and Latin America, continue to show strong growth."
CWT in 2011 appointed former American Express exec Brian
Mogler as vice president of global supplier management for North and Latin
America, and more recently created an Americas region led by Håkan Ericsson
following the retirement of North America president Jack O'Neill. Acquisitions
in Brazil and Costa Rica punctuated the Latin focus. CWT also bought its
Finland-based partner and appointed Andrew Waller president for Europe, the
Middle East, Africa and the global partners network.
Egencia
Egencia has grown to a point that ARC saw fit to add the
company to its "mega" agency category, which also includes American
Express, BCD, CWT, HRG and Omega World Travel. Egencia does not authorize ARC
to release its specific numbers, but parent company Expedia details certain
performance figures in earnings reports.
Egencia, which Expedia calls the world's fifth-largest
travel management company, reported 2011 gross bookings of $2.6 billion, up 34
percent from a year earlier and double the 2009 dollar-volume level. Revenue at
Egencia was up 25 percent to $179 million during the year. The company
continued its focus on building a multinational presence and at year-end 2011
claimed operations in 47 countries.
The growth plan includes acquisitions and partnerships
through Egencia's global alliance. Recent acquisitions include Via Travel in
the Nordics and Travelforce of Australia and New Zealand. Meanwhile, Expedia
also announced in 2011 that it entered the corporate booking tool business with
a deal to acquire Traveldoo, a France-based provider claiming more than 4,000
clients across 50 countries.
HRG
Publicly traded Hogg Robinson Group for its financial year
through March 31 reported a 16 percent jump in profit before tax to £38.2
million. Total revenue climbed 5 percent year over year to £374.2 million, or
up 2 percent at constant currency exchange rates. All growth came in the first
six months, although profitability continued to improve in the second half. The
fiscal year finished with client travel transaction volume up 2 percent and
client spending at 5 percent higher. "During the first six months, we
delivered very good growth despite the continuing macroeconomic uncertainty,"
according to chief executive David Radcliffe. "As expected, the second
half was essentially flat when measured against more demanding year-on-year
comparatives following our strong performance in the second half of last year."
Radcliffe added that "given the obvious macroeconomic
uncertainty, it is not surprising that our clients continue to show a cautious
approach to their travel." HRG also indicated that more clients are considering
"consolidation of travel management services through fewer locations."
HRG recently bought full control of the Spendvision expense
management company after holding partial ownership for eight years. "There
are two different directions a TMC can take," Radcliffe argued. "One
is as a fulfillment provider, with outsourced technology. The other is to turn
more into a services group. The market is right in the middle of this change."
HRG in March said goodbye to a retiring Tom Gleason, former
president of the North America region. A replacement has not been named.
This report
originally appeared in the June 4, 2012, edition of Business Travel News.