Hubert Joly
Carlson Wagonlit Travel since 2003 has aggressively pursued acquisitions across the world to establish a global network of corporate travel services, but the company's largest purchase, the 2006 acquisition of U.S. rival Navigant, took some time to digest. Now, hungry for more, the company has announced several recent moves in Europe and Asia, the latest reportedly being the acquisition of Swedish agency Ark Travel. Due to regulatory restrictions, CWT president and chief executive officer Hubert Joly could not discuss details related to the proposed acquisition of a publicly traded TMC in Sweden, but he spoke this week to The Transnationalabout the reopening of the company's "M&A machine."
For a while, it seemed as if your rivals BCD Travel, American Express and HRG were announcing new developments for their non-U.S. market while CWT had remained quiet. Was that because you were digesting Navigant, and what remains on that integration?
From '04 to '05 we had done seven acquisitions as a company, only one of which was in the U.S. The U.S. one was, of course, Maritz. Outside the U.S. we had done one in Germany, a couple in France, one in Austria, one in Mexico and one in Brazil. Of course in '06 we did do Navigant, which was in the U.S. but also in Canada, Australia, New Zealand, U.K. and a little presence in Brazil. Navigant was our biggest acquisition ever. It doubled our size in the U.S. and when you make a big acquisition you want to digest it a little bit. I'm very pleased with the way the integration is going. [CWT chief operating officer] Jack O'Neill has done a fantastic job of integrating Navigant in our U.S. organization. The U.S. was the biggest part of Navigant and it has been extremely well managed. It's not 100 percent done, because the back office always takes longer. So we still have some IT and other systems work to be done. The organizations are integrated and the sales teams are integrated. Account management, also. So on that basis, we just reopened the M&A machine in July and since July we've done three or four. We've increased our stake in CWT India from 50 percent to 76 percent. In August, we did Preferred Travel near Boston. We have Polo Viaggi, which is a subsidiary of Pirelli in Italy, and we announced the launch of a tender offer on a Swedish company last week. In general, we feel that our space is very fragmented, as the co-leaders in this business travel investment space only have a small percent of the market, depending on how you measure it. We feel that each of us has about 6 percent or 7 percent of the market globally and the top four players have less than 20 percent of the market--so it's still incredibly fragmented out there. Yet, economies of scale are important and it's not that you want to lose the proximity to the customers. We believe this space will continue to consolidate and as you can tell, we've really been a major force in the consolidation and we intend to continue to do that.
Where are the biggest gaps for development?
We don't have gaps in our network. We're present in 150 countries, including the partner network. Excluding the partners, we're present in 39 countries with wholly owned operations or joint ventures. The world economy is such that if you have a presence in 39 countries, you do cover the world. There are other players who are busy building their network--who are rebuilding it, you could say. That is different than our situation. We have the footprint our clients need.
How do you identify opportunities for growth by acquisition?
What we tend to look for are opportunities where: we find companies we like, they have the right type of client portfolio, they have a great management team and we believe that there is the same customer focus and a good fit from a cultural and business standpoint, and scale. Navigant was a perfect example. In the U.S. we were tied with them at number two. We found a great company and it had great synergies, so there is a "type" we are looking for. India is a slightly different story, because there we had a 50 percent stake in CWT India. We're number one in the India market, and it's a great growth market. It's easier for us to control and integrate if we increase our stake there. So, we may have spots like that. For the most part, though, it's finding companies with a great portfolio, great team and sometimes great products. It's not to fill gaps. We don't need to fill gaps. I assume you are talking about companies that don't have a presence in this or that market and they need to acquire a partner to be successful. We're way past that, because we started, I think, before anybody else. We've been at this for 15 years, when in the early '90's Carlson Travel and Wagonlit Travel got together.
What does the recent agreement with MasterCard mean for how you relate to other forms of payment like Visa, American Express or UATP?
MasterCard is an interesting agreement. A big part of our mission is to help our clients optimize their travel budgets and this is, of course, data driven. And so, with the agreement with MasterCard, to the benefit of our mutual clients, we can have access to and enhance data. Basic data is just the amount, the date of transaction and the merchant category codes--so very basic stuff. At the highest level, you have very detailed information returned, sourced directly from the merchant or from the global distribution system in marriage with our TMC data on the ticketing and itinerary information. For the hotel, for example, it's not just a bill, but rather how much of it is room night, how much of it is breakfast, how much of it is laundry, business center--that is what you want, right? You'd like to know all of those details. [Data through the new agreement is now] available in Asia and 13 European countries. If our clients tell us they want it, we'll do it in the U.S., as well. It's a very pragmatic and timely focus for us. It's not that we're getting married to MasterCard. We work with every one of the card companies, but what we're trying to do with each of them is allow our clients to have access to more detailed data by marrying enhanced card data with enhanced travel management data. Today, we're now announcing this one, but it's not an exclusive arrangement. We're not an integrated company; we don't need to work with one card provider like some other travel management companies. We can work with everyone.
How many more of your customers are looking to consolidate their multinational travel programs?
We did a survey of large multinational companies a few months ago. We asked them whether or not they had a global travel manager, because if they are going to globalize their travel program they will have a global travel manager. Five to 10 years ago, with only slight variation between Europe and the U.S., only 15 percent had a global travel manager. One to five years ago, 40 percent of them had a global travel manager. Today, in 2007, it's roughly 60 percent. And when we ask them, within three years, how many will have a global travel manager, 70 percent said they either have it today or will have it in a few years. So, over a span of 10 years, it would have jumped from 15 percent to 60 percent today, and 70 percent in two more years. That's remarkable transformation. Of course, the fact that you have a global travel manager doesn't mean you have consolidated completely overnight. We still have a lot of work ahead of us. The geographic scope of the consolidation will depend on the company and its footprint. Some companies are purely Asian companies while some of them are purely European companies. Or, some of them only work in the Americas. Also, sometimes people take a step-by-step approach. Some companies take a big bang approach, others will take a progressive approach. The strategy to consolidate and the approach of the consolidation will really depend on the level of culture and construct of the company outside of travel. Travel is rarely the main discussion within the company. If you have a company that has a philosophy of centralization and shared services, has the global footprint, and needs to reduce costs through some financial pressure, they'll embark on the consolidation. Whereas if you have a company with a true culture of decentralization, then they won't. It's not driven so much by what surrounds travel, as by the overall organizational philosophy of the company. As a travel manager you cannot embark on this if you do not have the air cover [from senior management]. You'd be dead after five minutes.