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CWT announced last
week that it would file a prepackaged Chapter 11 bankruptcy in the United States.
The company in a statement positioned the move as a formality within the overall
scope of its recapitalization, announced
two weeks prior, that would allow the company to move more quickly toward
financial stability. BTN Group editorial director Elizabeth West interviewed CEO
Michelle McKinney Frymire at the Business Travel Show America virtual
conference on Sep. 23. The two spoke at length about the recapitalization. An edited
excerpt of that interview follows below. CWT would not provide an updated
statement from McKinney Frymire regarding the bankruptcy filing.
BTN: You took the CEO reins at CWT in April this year. Why was
this the right time for you, and was the pending recapitalization process a situation
in which your prior CFO role really allowed you, specifically, to serve effectively?
Michelle McKinney Frymire: For the year before I took over, obviously we were deeply embattled
fighting the pandemic and the whole industry was tremendously impacted in that
year. I was serving both as the president and the CFO. I had an opportunity to
be in front of clients a tremendous amount… [and] I was running our strategy
team. I had an opportunity to think about… how we could transform ourselves in
the midst of [the pandemic] and what we needed to look like coming out the
other side. Those were all things I was leading and that really positioned me
to look at the company as a whole—to look at our strategy, to look at where we
were going and to look at where our industry was going. I do think those things
gave me a unique view that allowed me to have a much broader view and
interaction with the company and our board in a way that maybe a traditional CFO
role on its own might not. I had had a breadth of experiences that prepared me
for that president role and from there [the CEO role] seemed like the natural next
step. Working through recapitalization is a very arduous journey, and it's one
that has taken tremendous amount of effort from the entire organization. But based
on where we are and what we have ahead of us, it's been so worth it.
BTN: How does the recapitalization reposition CWT in the
McKinney Frymire: It's such a vote of confidence from an enormous portion of
our investor base about how they see us and our strategy and our management
team. When over 90 of your debt holders want to recapitalize your business [and]
want to invest, it really tells you how they feel about how we've positioned
the company and the work we're doing and the work we want to do. But for us and
for our clients and our suppliers and our partners, it's about accelerating
innovation. It's about being able to move beyond the pandemic focus and the
cost maintenance and the multi-year recovery and into the future. Every TMC big
or small has had to manage through an incredibly difficult period. Any business
that loses 80 percent of its revenue—or more for some—they have to think differently.
We wanted to ensure that even for a multi-year recovery that we had adequate
liquidity, that our balance sheet was strong and that we could make the right
investments. That's what [the recapitalization] is positioning us to do.
BTN: Does the Carlson family stepping away from having a majority
stake change the culture of the company in any way?
McKinney Frymire: One of the things we've been really strong and vocal about
is that at CWT we have this rich shared heritage with [the Carlsons]. We have shared
values and we have shared perspective, and they have been a part of the business
for a very long time. They remain incredibly supportive, and they've been
incredibly supportive through this process. They absolutely want what's best for the business. But our values are our values. Just because
ownership is changing in some construct, it does not change our values. Our
strategy is our strategy. The ownership change is not about changing our
strategy or our purpose or our values; it's about giving us the financial
strength to deliver on our strategy and our purpose and our values.
BTN: You've talked about how innovation is where we need to focus.
How are you looking to invest—whether in people, technology or even regionally?
McKinney Frymire: People-plus-technology has been our strategy for five years.
It remains the focus of what we're doing, and we're investing in both. On the
people front, it's about ensuring we have the right resources in the right
places to serve our clients as the recovery happens, and it is happening
differently in every part of the world. We all know that and see that, and we
want to be positioned to manage through that recovery as we need to in each
part of the world. But we also want to make sure that we're giving our people
the right tools [and the right] technology. We've rolled out an entirely new
travel counselor platform during the pandemic that really allows us to deliver
on that omnichannel experience. We're also working on developments around MyCWT
and what the traveler experience looks like. We're also continuing to invest in
data and analytics. We know that is super important to so many of our clients—not
just understanding the data and having access to it but how can they look at it
how can they analyze it real time. Of course, RoomIt continues to be a huge part
of our strategy and we'll continue to invest there.
BTN: You made a huge investment in China just prior to the pandemic—I
presume that is going relatively well with domestic business travel recovery in
McKinney Frymire: China continues to be a great market for us. You're right
about the recovery—China has had many weeks in the last year where their
recovery is a hundred percent of 2019 or more. So we are absolutely going to
continue to invest there. We're really pleased with the response and reaction we've
had to the MyCWT China platform. It's very exciting and it's a great
opportunity for us. I mean, it is the world's largest travel market, and we
want to continue to serve clients in an innovative way. We've learned a lot by
the platform, and those lessons are really applicable to how we develop for
clients globally as well.
BTN: When TMCs want to innovate quickly, acquisitions often come
into play. We've seen a lot of M&A in the TMC space recently, but CWT has
not participated. Will that change with the recapitalization?
McKinney Frymire: We would certainly take advantage of a great opportunity if we
felt there was one that was really impactful. But I would say it's not a
purposeful or intentional part of where we're headed. A lot of the M&A
activity you've seen is about coupling people with technology. And, again,
we've had a people-plus-technology strategy for five years. You can do that in
one of two ways: you can go out and buy things and then do the heavy lifting of
integrating and trying to bring it all together in a cohesive way for your clients
or, what we have been doing and what we want to continue to do, is invest in
our technology staff and bring it together.
We already have the biggest owned operating footprint of any
TMC. We operate in 45 countries with CWT staff and employees. That's more than
anyone, so we don't need to grow our footprint. A potential acquisition would
have to be something more impactful, something where you were gaining a real technological
advantage. We're, of course, always looking at the landscape and thinking about
how we want to participate. But we're also very thoughtful about money invested
in M&A is money that's not invested in the technology-plus-people strategy.
It's not that M&A is bad or good. It can be great, as long as you do it
thoughtfully. I will tell you, I came from a background … where we did 75 or 80
different acquisitions so I've lived in that space and I know how valuable it
can be. But we also know that integration takes time, effort and resources, and
we want to make sure that if we do it, it's in a way that's really going to be
additive for the client.
BTN: Has CWT, like many TMCs, been looking to move away from transaction
fee models due to the risk position these models force upon agencies?
McKinney Frymire: We have been testing and implementing innovative pricing
models for our clients. Every client has a different set of needs, a different
dynamic around their global servicing model. We have a significant number of clients
who are on a management fee, where they've got a set number of resources. We've
got clients on a combination of the [management fee and transaction fee]; we've
got clients on transaction fee. My worry about the transaction fee is not that
it exposes us to risk. My worry is that we align our cost structure and our
servicing model to be more variable—to be able to move up and down with volumes.
Even in a pre-pandemic environment, this business was very seasonal. We all
know what happens in August and December. You have to be able to staff around
that. Our large global servicing centers can very readily flex our staffing and
really work around the different volumes presented by clients. There are fixed-plus-variable
models of pricing that have proven interesting to clients. I've seen simplicity
in pricing being really important to clients and we have done a tremendous
amount of that. Almost every client we've renewed, we've introduced simplified
pricing models. Really getting away from the 40 fees—and 40 different fees in all
100 countries that you travel in. I don't think that's what people want. They
want is something that's easy to understand, easy to implement, easy to invoice
and easy to manage. They want to know what the travel program is going to cost,
so we have worked to do a lot of innovation there.
BTN: CWT has had some client losses and gains in the past year. What
conversations are you having about client retention and pursuing new clients—and
how is request-for-proposal activity?
McKinney Frymire: I think everyone in the industry recognizes that you're
always winning and losing clients. We have been really pleased to maintain our
very high mid-90 [percent] client retention rates that we've had for years,
despite a lot of the speculation about financial stability. We saw RFP activity
was much lower at the end of 2020. Going into 2021 we've seen it come back—maybe
not fully back to where it was pre-pandemic but definitely returning. We've had
a lot of great successes with our existing clients and thinking about how to
help them modify their programs. We recognize it's a competitive market and we
have to prove ourselves every day. So do our competitors. We feel great about
the conversations we're able to have with clients now that we've gotten the recapitalization
agreement. We're able to say, "Listen, let me take this worry off your
plate. Let me walk you through what we're doing [and] let me help you
understand how much liquidity the business will have [and] how strongly it positions
us." When clients have that question mark, it's hard. What we've done
through the hard work of this [recapitalization] process is to be able to
remove that question mark.
BTN: What recovery models is CWT working with as business travel
begins to emerge from shutdown?
McKinney Frymire: We are believers that this is a multi-year recovery. Because
we're thinking about liquidity and investment, we have taken a fairly conservative
approach to our recovery projections. That's been good for us because it also
means over the last three or four months we've been exceeding those projections.
For staffing, we take a slightly more aggressive perspective. We look at
volumes a little bit higher and a little more aggressively because if I think
there's going to be a significant uptick in September, I need to be preparing
for that in June and July. You're going to bring people back to full-time … or
maybe they've got to do some retraining. So we do use multiple scenario models.
We have an internal long-range projection that goes all the way through 2024. We
think every month how did data come in, how did we do against the competition, how
is business travel recovering versus travel as a whole? Also, what does all that
mean to our forecasting—does what we learned this month change what we think
about next month or the next three months or the next three years? We have a
regular process by which we do that, and we don't just look at our own data we
look at [external] information. The large strategic consulting firms like McKinsey
and BCG have done phenomenal work in this space, and we look at what IATA is
saying and at the GBTA surveys and other polls. Most importantly, we hear from
our clients. We have the greatest database of people to draw on to ask about
the recovery—the people actually doing the traveling. We've done a number of client
BTN: What are you seeing?
McKinney Frymire: I can tell you what I'm seeing right now in real time is
that there has absolutely been in the last 30 days a meaningful step up in
business travel. It's really exciting for the business and it's not just in one
country it is in multiple countries. That said, it is a highly varied recovery.
There are countries like India where the human suffering has been tremendous, and
the recovery of business travel is going to lag there. There are countries like
the U.S. and France that are definitely leading the way, and certainly China. So
we look at it at a pretty granular level not just by region and country but by
segment industry segment.
BTN: Do you see any commonalities among the successful first-movers?
McKinney Frymire: You can clearly see that is coupled with vaccination rates. Our
No. 1 goal for our employees and our travelers is that they're safe, and we
believe that safety comes with being vaccinated. So we just keep encouraging
[people] to do that and know that it'll be a part of the recovery.
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