Doug Anderson
Carlson Wagonlit Travel said Tuesday that global sales volume for wholly owned operations and joint ventures grew by 7 percent year over year in 2008, to $27.8 billion. "Growth was strongest in China (25 percent), Brazil (25 percent) and Argentina (21 percent)," the company reported. "Double-digit growth was also reported in Indonesia (19 percent), Italy (16 percent), Russia (16 percent), Singapore (12 percent), Germany/Austria (11 percent) and India (10 percent). U.K. sales outperformed the market, increasing 7 percent. U.S. sales were up 2 percent, reflecting the economic slowdown in 2008." CEO Douglas Anderson said the market weakened significantly toward year-end 2008, and the slowdown continued into January. Excerpts of his Q&A during a conference call with reporters follow.
Regarding sales growth in 2008, how did things look toward the end of the year? We have heard upwards of a 20 percent reduction in business travel transactions in and around the fourth quarter.
We started [experiencing] a slowdown in growth and then a gradual decline in the U.S. commercial business at the end of the third and beginning of the fourth quarters of 2007, and that decline continued at a gradual pace until the fourth quarter of 2008--and then it accelerated. In the fourth quarter, we were in the negative double digits in the U.S. commercial business. We have a strong military and government business in the U.S., which behaved differently than that--and gave us some cushion--but the U.S. commercial business decline really accelerated in Q4. It was not as much as 20 percent, but in the mid-teens. In EMEA, Latin America and even Asia-Pacific, we had good stable underlying business or--in the case of Western Europe--growth through the first three quarters of the year, and then after the August holiday period in Europe, things started to slow down. September and October were down around low single-digit declines. November was a difficult month; we're not exactly sure why. But we recovered in EMEA in December. The month of January is similar to Q4. We will be down globally in the low double-digits in terms of transactions. We'll be down in the low double-digits in January, I believe.
The United States Travel Association referred to "panic" on the part of some corporate travel managers, particularly in the area of meetings, saying they're canceling meetings when they don't need to because they're concerned about perceptions of spending money on meetings at a time of financial crisis. Are you experiencing this?
I don't have any specific examples, but across our client portfolio, the levels of down trading among our top 100 clients globally in some cases are fantastic: down-trading levels in the 30 percent to 40 percent-plus range. The first tendency in some cases will be to overreact, and then reasonableness will take over. There's been a lot of bad publicity. One thing we have seen clients doing is, rather than have their annual meeting in some exotic place like the Caribbean or Hawaii, they're having their annual meeting closer to their corporate office or their center of interest, so if it's a U.S. client they're having it in a U.S. city like Las Vegas or Detroit, where there is capacity and the price is right. In the near term, until there's a little more clarity around what's going to happen and how severe the slowdown will get before it starts to bottom out, there will be some of that. I wouldn't recognize or identify it as panic; I'd identify it as the effort to make sure that expenditures make sense given this environment, and I think it will right itself when the time is right.
Are you planning redundancies?
Thus far, we have been able to use natural attrition, normal turnover and the flexibility we have in our agreements with employees. When a downturn happens, as has been happening over the last several months or year, we have maintained the flexibility to reduce headcount [in] the way we contract with a certain percentage of our workforce. Therefore, we have not made any significant redundancies or executed any significant severance plans. That's not to say we won't be faced with that as we go forward into 2009. It all depends on what happens in the sector, the continued down trading our clients do and the level of new business that we win. We have to adjust our cost structure like any company does; it will depend on the level of transactions we can generate. I'd expect to continue to make less significant adjustments as we have over the last several months, and if we have to make a more substantial adjustment, we will do that. But that's not in the cards at the moment.
Do you plan to expand the American Express commercial card dealyou signed last year past the 21 countries originally announced?
It pertains to 21 countries, and for the time being that covers most of the countries where our clients have asked for significant levels of service. We have signed around 30 clients since we put the agreement in place. It's good for us commercially to have a close association with a card provider. It's good for us financially for our clients to adopt a credit card for their transactions, to shift the receivables part of the transaction to a credit card and off our balance sheet. In the U.S., something like 65 percent or 70 percent of our business was on the Amex card before we put this agreement in place, so Amex had the client relationships in place and there's a lot of commonality in our client base. I don't see us expanding it in the near future for no other reason than it's not necessary right now. In some of the geographies--for example, China--Amex does not have an offering right now and when they do (that's an important market for us) we may be talking with them. In spite of the preferred global agreement with Amex, we don't have an exclusive agreement with anyone. We work with all major card providers.
How is the economic situation impacting the large clients' orientation to global consolidation?
Many clients are moving, in our experience, toward--rather than regional management of their travel--consolidating on a multi-regional or a global basis. The tide is more in the direction of further consolidation, but that doesn't always mean a single global provider. In some cases, that means regional consolidation or multi-regional consolidation. I think it's accelerating. We have won more global business in the last two years than we have in any other period. Companies are more and more concerned about being able to provide information for travelers and meet their concerns about safety and security. We're seeing a large number of global proposals. Some companies don't quite get there or get there in the first step. There's a lot of interest in maintaining local relationships with TMCs, so it's not easy for many companies to make the decision. It doesn't happen overnight.