Charles Petruccelli
A release of pent-up demand drove recent improvements in booking levels, and a "prolonged period of flatness" is more likely than a sharp recovery, according to a somber industry outlook presented last week by American Express Global Travel Services president Charles Petruccelli here at The Masters Program. Having also referenced other topics, including "a new era of accountability" and "fundamental" challenges that mean travel managers need to "reset their role," Petruccelli took questions from audience members. An excerpt of those and his answers follows.
Could you comment on the differences between European travelers and U.S.-based travelers as we move to a more traveler-centricmodel?
The point I was making before was from a transaction-centric to a traveler-centric model. The traveler-centric model is based on profile, behavior and preference--not at the point of sale but on-the-go as much as at the point of sale. I wouldn't say there's so much of a difference between the European traveler and U.S. traveler. There's a difference between the needs of a midsize company versus a large company, but the needs of the midsize company in the U.S. and in Europe and in Asia are very much the same, and the same for large companies. What you find in some areas is that there are more of some solutions available; for example, the European traveler uses high-speed train. But the approach is the same. The traveler has really become global. Where you see a difference is not between regions or countries as much as it is between generations. And the generations are very much accelerating toward technology solutions, and we have to deal with that.
Do you think expectations are farther ahead of the reality of where technological capabilities are in the industry today?
Yes, our industry technology infrastructure is still very much based on hard-coded technology as opposed to distributed technology, and expectations are that we want more flexibility than the industry as a whole can deliver.
When will we begin catching up?
The beauty of this industry is you have a lot of small, start-up companies with innovative ideas. And they do have the tech platforms we need, so they are putting pressure on the rest of the players to match these solutions. There is acceleration.
We have seen over the past 10 or 15 years a dramatic consolidation of the TMCs serving the business travel marketplace, and it even seems we're ripe for more consolidation in that sector. What's your broad commentary on what we might see on that in the next year or two?
It sounds obvious to me, if you look from the outside, that this industry will see more consolidation happening in distribution, in the airline industry, in the technology players--because this is really a global industry. I expect more of that in the next 18 months.
For those of us who track and watch, say, the balance-sheet profile of a big travel management company that has done a big acquisitionor a private equity player that is in a major TMC, the clock [on debt obligations] started a few years ago. It might be a three-year clock, or a five-year clock, but it sure is not a 10- or 15-year clock. Are these financial priorities, or underlying covenants, going to drive activity?
You really want me to be specific and I want to be very generic, so it's going to be very difficult [laughter]. I'm just going to say you are absolutely right. There is no free lunch, and the bill will be presented at one point. It's true that multiples the industry has enjoyed the last few years are ludicrous, and prices paid and debt are very high. You need to service the interest on that debt and pay back the investment. So when you add two plus two, it always makes four; you can try it both ways, but two plus two makes four.