More details are emerging behind today's dramatic announcements of realignments and acquisitions among the pack of international travel management companies that trail market leaders American Express and Carlson Wagonlit Travel
(see story).
The joint-venture companies that run both Business Travel International and TQ3 Travel Solutions have split. From the ashes, three new entities are emerging:
•A merger between the TUI-owned interests in TQ3, WorldTravel BTI and the other corporate travel interests of BTI's joint-venture holder BCD Holdings, and independent U.K. travel management company The Travel Company.
•Hogg Robinson, the other 50 percent owner of BTI, is to continue with the BTI name in 16 of the 17 markets where it has full ownership of the local BTI partner and the four where it has a majority shareholding. The one exception is the United States, where Hogg owns Sea Gate Travel Group but is not allowed to use the BTI name. Hogg may drop the BTI name worldwide in favor of the name Hogg Robinson.
•Navigant International, which owned the TQ3 joint venture with the German travel company TUI, has assumed full ownership of the TQ3 brand and trademark and what remains of its licensee network.
Commenting on the day's reordering of the global corporate travel market, Travel Analytics CEO Scott Gillespie said multinational corporate clients will suffer some initial inconvenience, in spite of all parties promising business as usual, but ultimately will gain from consolidation of ownership of the networks.
"Clients of BTI and TQ3 are going to face some practical and political problems but they should not be insurmountable if all the parties are true to their word," he said. "However, anyone currently going out to bid will have to rethink their strategies and this will cause delays. This will undoubtedly be a benefit for American Express and Carlson Wagonlit Travel. There will also be a benefit for independent consultants, like ourselves, because having a third party for tasks like data consolidation minimizes the disruption.
"There are also implications for pricing. The TMCs involved in today's announcements will probably have to drop prices in the short term to attract new clients, but I am not sure Amex and Carlson Wagonlit will match them. Clients will put a premium on stability at this time.
"Looking ahead, consolidation of the networks and clearer lines of ownership are in the best interests of the corporate. Benefits of stability, better service and global reach will offset any upward pressures on pricing. However, I do expect there to be another round of consolidation in six to 12 months," said Gillespie.
A name for BCD's merged and newly acquired businesses likely will be announced soon, once the acquisition of TUI's interests has received regulatory clearance in Germany, which is expected to be a formality that will take about 30 days. The global CEO of the new company will be Mike Buckman, currently CEO of WorldTravel BTI. Marc Hildebrand, president and CEO of TQ3, said he too will join the new company and he anticipates that most of the TQ3 senior management team will do so as well. Joop Dreschel will remain chairman of WorldTravel and Mike Walley of The Travel Company will continue to maintain customer relationships out of the United Kingdom.
Mary Ellen George, executive vice president of sales and marketing at WorldTravel, expects a smooth integration of the three companies. "We've learned we certainly want to listen to all constituencies and share best practices, but at the same time it's best not to let things drag on too long," she said. "We want to move as quickly as we can once we get the regulatory approval. We expect once the deal closes, we'll be very well along through our integration plans and certainly well along to integrating under one brand."
The BCD acquisition from TUI is expected to close in March, at which time the assets will be combined with BCD's existing interests and The Travel Company. In addition to the 20 countries where TUI owned TQ3 holdings, there are around 20 TUI-owned licensees in less important business travel markets, such as Greece, Egypt and Morocco, which also will transfer their allegiance from TQ3 to the new entity.
Hildebrand claimed that the new company will have a combined workforce of 10,000 and a revenue of $8 billion, making it the third-largest TMC in the world. "This will change the marketplace significantly," said Hildebrand. "There have been four global companies competing against each other but there will now only be three." Hogg Robinson disputes this view, claiming that its operation remains larger than BCD, even after the loss of WorldTravel.
Hildebrand said there are 150 to 180 clients jointly served by what was TUI-owned TQ3 and Navigant International and it will be "business as usual" until their contracts expire. He added that BCD's new company will handle travel for one-third of
Fortune 500 companies.
Additionally, Carla Harris, vice president of marketing and marketing services at WorldTravel, said the new company will continue to service customers within the BTI network in the United States until customer contracts end. "That could be four years down the road," she said, "and even then we'll still answer the phone as BTI. Even when we change our brand, we won't change our name when it comes to those customers."
However, which company continues to service existing clients after contracts expire remains to be seen. Referencing a term used by former WorldTravel BTI President Danny Hood, George recognized the split's potential for some friendly "coopetition" between her company and that of Hogg Robinson. "Obviously, we have some great global multinational customers that both parties are very interested in retaining and continuing on," she said. "It's like coopetition on steroids."
TQ3 suffered from instability of ownership almost from its inception in 2001. This included losing its first U.S. partner, Maritz, to Carlson Wagonlit in 2004. Hildebrand declared publicly several times in 2005 that single ownership had to be the way ahead—although it was generally assumed the single owner would be TUI. "This completes our mission to be under one ownership," Hildebrand said today. "In the last five years, we have gone through painful experiences where our network was damaged more than once."
BCD initially has taken a 20 percent stake in The Travel Company, rising to 70 percent when the companies combine in March. Directors Mike Walley and Michèle Bibby will roll the remaining 30 percent into the new entity, giving them a small stake along with some directors of WorldTravel BTI. However, the overwhelming shareholding will belong to BCD chairman John Fentener van Vlissingen.
The Travel Company was a founding member of a small global network Synergi. A statement about the future of Synergi will be made on Thursday. The Travel Company is a specialist in music and entertainment travel, also a specialization of WorldTravel BTI through its acquisition of Hoffman Travel in the 1990s.
Navigant International, which becomes sole owner of the TQ3 brand, owns offices in the United States, Germany, France, Brazil, Australia, New Zealand and Canada. Following the withdrawal of all TUI-related interests, there remain 50 to 60 TQ3 licensees worldwide. Chairman and chief executive Ed Adams told
BTN that Navigant will seek to keep this network of owned offices and licensees together under the TQ3 name. However, Adams said, "we will probably keep the TQ3Navigant name in the U.S. because of the public nature of the company."
Mike Premo, the Navigant executive who was TQ3's senior vice president for Latin America, becomes senior vice president for the new network. Like BCD and Hogg Robinson, Adams said Navigant intends to make acquisitions to ensure ownership in key strategic markets. "Single ownership is fairly critical in the G8 countries," he said.
Adams is upbeat about the future of TQ3. "TUI decided to devote more time and resources to other interests, so this is a good opportunity for us to manage and control the TQ3 brand," he said.