Amex Acquires Travel One As It Targets Mid-Market

New York - American Express this month signed a letter of intent to acquire Travel One, a family-owned New Jersey super regional with annual air sales of $650 million. The deal is set to close by December.

Amex is taking a new approach with this acquisition: Travel One will remain a separate unit within American Express Corporate Services--at least for the next few years. In past acquisitions, including Lifeco and Thomas Cook, Amex folded all operations into its existing infrastructure.

Travel One president and CEO Jeffrey Harrow--who, insiders said, spent much of the year in merger talks with Rosenbluth International--said the deal had absolutely nothing to do with the commission cuts, but rather the day-to-day difficulty of competing with ever-larger, and better financed, global competitors. "The business requires a significant investment in technology and our clients' needs for global resources were getting incredibly sophisticated," he said. "We thought Amex was best poised to help us."

American Express said the acquisition of Travel One, whose Mt. Laurel headquarters is only 100 miles from Manhattan, fits its increasing focus on middle market accounts and builds its coverage in the East and Midwest. At the same time, it allows Travel One to tap into Amex's resources, technology and global presence. "We have wanted to differentiate and improve our service to midsized companies," said Ed Gilligan, president of American Express Corporate Services. "We saw we could combine forces with Travel One and have a very sizable middle market business that is truly national in scope."

For customers, the new ownership will bring little change. Harrow and COO Scott Tarte will remain under three-year contracts, and no immediate name or logo change is planned. While Harrow has signed a non-compete contract with Amex, he said it is "not my intent to go into the travel business again after my agreement with them is over."

Harrow said Travel One expects to retain all its clients because of the way the new arrangement is structured, with all client contact staff, products and services intact.

If Shared Medical Systems Corp. of Malvern, Pa., is any indication of Travel One's customer base as a whole, then Harrow may just be right. "In today's world, acquisitions aren't unusual and it doesn't upset me," said Maynard Honesty, vice president of purchasing for the $20 million air volume account. "From my point of view there will be absolutely no change."

Honesty said his company chose Travel One seven years ago for its strong customer service reputation--illustrated by the fact that Harrow called Honesty personally to tell him about the deal. "That is why I was with Travel One and not Amex. I think they are going to teach Amex how to do customer service," he said.

Honesty also sees advantages to the deal, particularly in the technology arena. Shared Medical is beta testing E-Travel, the online booking system of which Travel One is a major distributor. "We are looking at what the electronic world is going to mean to us and how we do business--and we feel certain Amex has a lot of tools and processes that can benefit us," he said.

Amex will "continue to support E-Travel because that is what Travel One sold to its customers," said Margaret Brownlee, Amex's senior VP and COO for business travel and customer service. "We have agreements with them and we want to keep them in the organization." But she added that "they now have access to AXI, and if customers that are on E-Travel today would like AXI, that would be fine with us."

Harrow said Travel One will continue to support E-Travel but "long term we will take a look at what makes sense. We did this to be able to offer more products and services to our clients, not less."

On the expense processing side, Travel One has had its own product, Expense One, up and running for the past three years, but has been searching for other partners as well. Now, "we will probably migrate people over to AXI's end-to-end solution as it makes sense," Harrow said.

Insiders, noted that saying 'things will not change much' is a standard line during agency acquisitions. "We have been assured things will remain status quo because of Travel One's strengths in the mid-market arena," said Management Alternatives president Carol Salcito, "but only time will tell. I really hope that the strengths Travel One has brought forth to so many of its clients don't go by the wayside."

Rolfe Shellenberger, senior consultant at Runzheimer International, noted that the merger also has implications for East Coast air competition. "Travel One, like Rosenbluth, has been aligned with United almost to the point of having to turn away corporate customers who do not use United so as not to deplete its market share," he said. "United has a very aggressive override program, and it's very demanding; an agency that gets in bed with United has to stay in bed with them."

While American Express has tried not to do that on a national level, Shellenberger said, "it's very much aligned with United in the Philadelphia area, where Travel One is based. So this merger will create an imbalance for American Express with respect to its airline affiliation, and could make it embarrassing for American Express as it tries to maintain an even-handed approach with the other airlines.