Carlson Companies CEO Marilyn Carlson Nelson recently spoke with Business Travel News editors David Meyer and Jennifer Merritt about Carlson's commitment to Carlson Wagonlit Travel in light of the company's history and its announcement one month ago to become the majority shareholder in the mega travel management company and buy Navigant International (BTN, May 1).BTN: In early 2000, we heard stories that you considered selling CWT to American Express. Obviously, you're committed to the business now, but was there a moment when you questioned that commitment?
Marilyn Carlson Nelson: There were a couple of Amex discussions. There was one back when my dad was there, there was one later. It was driven more by the same question of consolidation, and we went through a period where we spent a lot of time trying to reinvent our business. With the burden of reinventing the business and these systems—everybody was trying to get it right—it wasn't exactly clear where the future lay. The margins of travel were low, and the concerns were great. There were concerns then of what the Internet was going to be, so I don't think we were so much backing away from the future of travel as following the instinct that as the airlines consolidated, we needed to consolidate. There were all these discussions of disintermediation and one of the things everyone always has asked is, "How can you do the right thing for the share owners?" We didn't know whether you needed the card connected with travel. It was a big decision. We didn't have as much sophisticated technology. Amex had a closed loop—they knew what they intended to do and what they did and they could bring that data. We had a trial with General Electric and we had a trial with Household Finance trying to get a card, and we begged Bank of America to put together the Diners card. It was our biggest hope to have a parallel system with a closed loop, and Diners was a closed loop, but they were franchised with gaps. We even went to Visa and asked them to create a competitive corporate card, but with their system and the merchant and transaction fees so low, they couldn't put together a program. We did have discussions with Amex, and ultimately we didn't move forward. We decided we should be really good at what we did and not try to do what anyone else did. It was kind of like coming through an identity crisis and saying, "You know what? We like what we are and we know who we are."
BTN: Do you think you'll get into the banking business now?
Carlson Nelson: I don't think we'll go into the banking business, in part because we provide travel services for so many of the Visa banks. Through the leisure division, we do a lot of loyalty programs and travel fulfillment. I always wished that we had a collaboration with a card, but we don't know yet. That's one more step in the system that costs money, because there's a relentless drive to take steps out of the process, and I don't think anyone's ready to do that. If you look at steps in the process, the companies that direct bill often save some money with us.
BTN: Who initiated the talks with TQ3Navigant?
Carlson Nelson: Carlson Wagonlit Travel CEO Hubert Joly did, really. Mike Batt and I had met with them a couple of years ago and he identified an early synergy, but at that time it didn't quite fit CWT. I put it out of my mind and then Hubert came and had this brilliant global strategy where he talked about the strength of our global network and identified the gaps. Hubert always said there was more than one alternative, and he initiated discussions and came back to us, saying he thought there was a possibility for something there. We have a lot of respect for our friends at TUI—they used to be our partners—and it looked very complicated, but Hubert kept coming back. It's pretty extraordinary that it happened—it was almost like it was meant to be. Having the TQ3 situation change in Europe cleared a path in some ways.
BTN: What were the behind-the-scenes discussions on the acquisition?
Carlson Nelson: CWT's board was for it. Accor and Carlson agreed that this was the best thing for CWT, and then, much to everyone's surprise, the CEO of Accor didn't have his contract renewed. Hubert, God bless him, was on a path. He had been developing relationships and we didn't know with whom we'd be competing for the acquisition, but it seemed like something worth doing. We were concerned because we had become so convinced, thanks to the persuasive leadership of Hubert and the great results integrating Maritz Corporate Travel. Maritz was the most amazing cultural fit and the board trusted that we had the systems and the mentality to merge companies and change management in a way that brought value to the shareholders and the customers. We were all raring to go. We thought Accor was ready to go and then this change happened. The new CEO felt enormous pressure to justify the choice, because there was competition, and we needed to be decisive and move quickly. He called and said, "I realize it's been a wonderful relationship, and don't take it personally, but where Accor is right now, we just really need to focus. If you're interested in this company, this is the time." Well, that would have been an easy thing except at the time we had targeted a $500 million acquisition! He said he would not be able, being new in that role, to divert that much investment, so it really was that that triggered looking for a partner so quickly.
BTN: Please give us some historical perspective on Carlson Companies.
Carlson Nelson: My dad started the Gold Bond stamp company in 1938, just as World War II was beginning. He actually wouldn't have taken a partner, but he thought he was going to be drafted, so he brought in a partner, but ended up not getting drafted. The company grew dramatically after the war because there was pent-up demand for merchandise: lamps, irons, toasters. Interestingly enough, Carlson was only one of two nationwide purchasers, because department stores then were not amalgamated at all, so at the time, we were the largest purchaser from General Electric. That gave us something that one day we would have in travel, which is netting enormous aggregate purchasing power. It allowed us to work very closely with GE on everything—even product design. As some of those early needs during the war were fulfilled and the population began to age, it became clear that a major incentive was starting to be travel, which is interesting when you think about China and how as soon as people have fulfilled some basic needs, they are eager to travel.
BTN: How did Carlson Wagonlit Travel become what it is today?
Carlson Nelson: We were looking at process reengineering and I had told my dad that I wanted to be the chief quality officer, and he said, "Oh, you want to be that? That's a dead end," and I said, "Dad, I think quality is here to stay." That opened doors for us, but it did clearly take leisure away from commercial because commercial was a technological, efficiency-driven buy and leisure continued to be consultative, so we separated those.
On the corporate side, we had created a national footprint by putting the three regions together. I interviewed Geoffrey Marshall, thinking that he could be someone that could head Carlson Travel. He had been at Wagonlit and he was talking about Wagonlit and how they were number one or number two in all these markets, except they only had a small presence in the United States in the Ohio River Valley. We were, at that point, a leader in the U.S. market and we had an associate network in Europe. We estimated at the time that it would cost us about $200 million to really enter Europe and get up to the competitive position we were in view of. Ironically, Wagonlit had estimated it was going to cost them about $200 million to become stronger in the United States. In that meeting, I said, "We'll hire you, but you know what? We should put the companies together." Actually, I don't remember if Geoffrey said it or if I said it, but the point is that it was clear that we were mirror images and we both recognized that we needed to spend our money to develop Asia. In the meantime, Accor had purchased Wagonlit, but they really hadn't integrated it.
BTN: How has your more than 60-year-long relationship with General Electric affected your business?
Carlson Nelson: Our relationship with General Electric really helped us enter the 21st century of travel. Dad bought a couple different travel companies. When I first got involved, we still had three separate travel regions that were run very independently. The first step was pulling those together and getting some consistency. At that point, you tended to use regional carriers, so that worked well at that time—there wasn't a powerful driver to have this national domestic company. Then, as things evolved, we still had the leisure travel and the corporate travel together and it became more and more clear that the leisure purchase and the corporate purchase were different. Right around that time, Jack Welch at GE decided travel was one of their single biggest expenses and he asked Carlson, American Express and I think Rosenbluth to write a white paper on the future of travel. This was the early '90s. We were asked to extend what we knew and what we envisioned an efficient travel operation would be. I remember this was right around Thanksgiving—we had just purchased Gelco Travel Management and no one wanted to write this white paper because of the holiday, and everyone was saying, "Well, they're not going to pick us anyway," and I said, "Write the white paper."
We had a travel laboratory on the 8th floor, because we had been working on whether or not to separate leisure and corporate and I knew we had a vision. We wrote the white paper, and GE put the three white papers together and put out a request for proposals and we won, much to our amazement. It was almost like the complexity of doing this recent deal with Navigant, only it was more sustained than that. Doing what we had envisioned for GE, putting the technology in place, it just zapped every bit of energy out of our corporation to the point where I think Curt Carlson was worried about putting pressure on me—why on earth is this so important, we could be serving a lot of clients, rather than trying to serve GE? Everybody I talked to was working on GE and it just took an extraordinary strength, but it let me know that if you break down a barrier and go through a door, there are more doors, and of course to this day we serve GE around the world.