With speculation intensifying about imminent changes to the ownership of Business Travel International, BTN contributing editor Amon Cohen met with David Radcliffe, CEO of both BTI and its 50 percent shareholder, Hogg Robinson. BTN: Have you reached agreement on consolidating ownership of the BTI brand?
David Radcliffe: I am not going to comment on private talks. Hogg Robinson and BCD are joint owners of the BTI brand. Hogg Robinson owns many of the driver territories outside the U.S. and BCD owns the U.S. and a small number of other countries.
BTN: Is there a struggle to gain complete control between Hogg Robinson and BCD?
Radcliffe: No. There is a focus by people outside, including the press, on the shareholder relationships in BTI, doubtless caused by some of our competitors. One of the things I am constantly aware of is there is no focus on our competitors' relationships. It wasn't very long ago that there were rumors of huge antipathy between Carlson and Accor. It wasn't too long ago you had huge rumors of Carlson and American Express merging. Maybe, if I'm pragmatic, it's BTI's turn.
BTN: Let's put it another way, then. There is concern among clients of WorldTravel BTI who are unsure whether in a few months' time they will be part of a larger, more consolidated global network or a weaker, less consolidated one.
Radcliffe: I haven't picked up too much concern. I have seen one or two things in the press, but I have spoken to far more clients. The fact is no client needs to be concerned because whatever BTI's future is or isn't, the relationships are as strong as the client contracts—and the contracts are very strong. We are committed to work within those contracts, regardless of whether talks bring the shareholders together.
BTN: But clients will see your acquisition of another travel management company in the U.S.—Sea Gate Travel Group
(BTN, May 16)—and wonder whether you will put your energies into a transatlantic relationship with Sea Gate or WorldTravel BTI.
Radcliffe: I disagree. In common with many companies in many industries, we have interests aside from where our other interests are. For instance, BCD sister company Boron has owned shares in Navigant for some time. BCD and Boron also own in territories where we operate as BTI. When we bought Sea Gate, we made a very clear statement that it is business as usual with BTI, and Sea Gate has nothing to do with BTI. Our partner in the U.S. is WorldTravel as far as BTI is concerned and Sea Gate is a separate operation.
BTN: So will transatlantic contracts be with WorldTravel, rather than with Sea Gate?
Radcliffe: That's an unequivocal yes. Transatlantic contracts that come to BTI will use the existing BTI partnership. But let me be equally clear. If a client goes to Sea Gate with an invitation to tender for their business, Sea Gate has every right to tender for that business. What it will not be able to do is use BTI products or services.
BTN: So that means Sea Gate will not be able to participate in international tenders?
Radcliffe: They will be able to participate in international tenders through Hogg Robinson, but Hogg Robinson will not be operating as BTI.
BTN: What if an offer comes to you in the U.K. for an international account? Would you propose operating that through BTI?
Radcliffe: Yes.
BTN: Would it be fair to call the existence of both WorldTravel BTI and Sea Gate an interim situation?
Radcliffe: No, I don't think that's fair at all. It's no fairer than to call any company's strategy an interim situation. Sea Gate is a very useful add-on to other businesses that we are in.
BTN: Leaving aside the ownership question, where are you planning to expand your business?
Radcliffe: We are currently looking at a number of acquisitions. It is no secret I would like to grow the Sea Gate model more in the States. We certainly want to build on our sports business and that is part of that plan.
BTN: When you say you want to build on the business, what do you mean?
Radcliffe: We are actively looking at acquisitions to add on to Sea Gate in the States. If there are companies which fit the model and the reason why we bought Sea Gate, then we will talk to them, and indeed are talking to them.
BTN: Is that on the business travel side or the sports side, or both?
Radcliffe: We bought Sea Gate primarily for the sports and event business. It happens to have a large business travel capability. But if there are other acquisitions we can bolt on to the sports and event business particularly, then we will do that. We are also involved in acquisitions in Europe and in dialogue about making further acquisitions in the Far East.
BTN: How are your plans regarding re-flotation of Hogg Robinson coming along?
Radcliffe: Hogg Robinson left the London stock exchange about four years ago. Since that time, we have completed around one dozen acquisitions. We have divested anything not to do with corporate travel services. We have invested in products which are going to help us move forward in the future, and there is a lot of interest in what Hogg Robinson is going to do next. It is not for me to comment specifically, but it is appropriate to say there has been a lot of interest from the investment community in us as a global company in its own right. Although the BTI element is very important to Hogg Robinson, it is a very substantial player in business travel aside from that. A lot of people are saying to us: "Maybe it is time for you to go back to the market," so that is clearly an option for us, but I am not going to say it is the only option.
BTN: Is that a hint that you are going to take on more investment as Hogg Robinson and then buy up the parts of the network which are not currently wholly owned?
Radcliffe: No. A lot of people are asking if we are going to buy up the BTI network. It is a fact that the partner contracts we have within BTI do include pre-emption rights, but the joy and strength of BTI is that we can choose not to own. Sometimes, in some parts of the world, you can have a much stronger relationship with a local player that understands the culture rather than assume you have all the answers and go in with 100 percent ownership. China is a good example.
BTN: There seems to be a move among TMCs, particularly in the United States, toward lower cost and lower service as an ethos, whereas that has not happened yet in Europe.
Radcliffe: I'm not sure I agree with that. Europe is a more complex market, but let me talk about the United States. We believe in BTI that a major opportunity for us is to preach the word "value." Low cost is a vital component, but it is just that. Low cost is just a component of the total value which should be offered. With some clients, in some parts of the world, the focus is far more on low cost because it is a simpler type of transaction. In other parts, it is more complex. The transaction in the United States tends to be simpler. A greater percentage of business is domestic and technology lends itself to the simple type of transaction far more than complex ones, but the United States is still a big market for consultancy advice, though I see less of that going on than in Europe. In Europe and the rest of the world we are involved far more as a partner to the client, looking at how we can bring value to their expenditure. It is not happening as fast as it is in the United States.
BTN: Why do you think that is?
Radcliffe: My personal theory is that the big players in America were unnerved by the arrival of the online agencies and immediately turned themselves inside out to say that they were online as well. We stood back from making those statements. Instead, we said: "Yes, we are a big online transactor, but that is only one part of our business."
BTN: Do you think the U.S. will change in that respect?
Radcliffe: I am sure of it. At the transaction end, we actively encourage the client to use self-service technology, as much as we discourage them from using it when it add costs to their organization—and we shouldn't forget that modern technology in the wrong hands at the wrong moment can add huge costs and inefficiencies. We shouldn't be afraid to say so, but I think some of my competitors are. We have a former client just about to come back to us. They were attracted elsewhere by apparent low cost. They tried it. It failed. It actually increased cost within their own organization.
BTN: How did it increase cost?
Radcliffe: Their fee to their TMC relied on them achieving X amount of usage through self-service reservations. It all sounded very good until they realized a large part of their business didn't lend itself to self-service reservation, yet they were having to force themselves to use it to gain the low cost from the travel management company. It became a vicious circle: The lower the cost got with the TMC, the higher the cost was to the client—not exactly an honest relationship. We've got companies saying, "We're going to cut back on the use of SSRs. We've got very expensive scientists trying to do a job that you can do a lot cheaper."
BTN: You are just back from a trip to China, where you have a 51 percent share in a joint-venture with Jin Jiang. How important do you think the Chinese market is going to be to corporate travel?
Radcliffe: Immensely important. China is now the third-largest spender on business travel in the world. Between now and 2020, Airbus reckons it is going to deliver 1,800 aircraft there. It is a huge market and the joy is that we are only seeing the tip of the iceberg. Chinese industry is only just starting to invest outside China.
BTN: You've had an opportunity now to assess how things work in China. What are the challenges which face travel buyers trying to extend their global program into the country?
Radcliffe: I would like to call them opportunities. Challenges by definition have a negative attached and I really believe that China is full of opportunities and global travel is full of opportunities. The joy of working in China is that the Chinese can avoid the pitfalls and mistakes that expenditure consolidation programs have made while the corporate travel industry has learned across the globe. China can leapfrog all of the learning stages we have had to go through. Already, we are talking to very large organizations in China and the Far East about total outsourced programs.
BTN: You actually think that concept, which is still quite new here in the West, will be introduced relatively quickly in China?
Radcliffe: China is looking at everything afresh. It wants to have the best of what is available in the West. For such a wonderfully old culture, it doesn't have the overhang of history.
BTN: Are there any other emerging markets that you regard as particularly exciting?
Radcliffe: India, and I am not talking about offshore call centers. India as a market in its own right has yet to come to the fore. The country I find interesting for call center activity is South Africa. If you start looking at the low costs and the elements you need to make a call center work, South Africa is very promising.
BTN: It's something you are doing?
Radcliffe: It is something we are exploring, but the big area we are looking at for our clients is the merging of skills with low cost. By this I mean our two major competitors globally have rushed down the road to explore low-cost call centers. A call center by definition is a script-led, restrictive practice environment. Business travel by definition is not always simple. You can have a very simple domestic journey, say from Frankfurt to Cologne. Provided it is available, and provided the traveler needs make no change, there is no reason at all why that cannot be booked through a call center, low-skill, scripted environment. But what happens when that flight is full or the traveller needs to change his journey? Life starts to get a little more complicated, and that's before you start to add the more complex sort of itineraries. So what we are looking at now—and we're not ready to make an announcement yet but we're not far off—is a virtual call center. It is a call center that takes advantage of where the best people to do the job are but in a simple method of distribution.