One-On-One: CWT Set On U.S. Growth

Hubert Joly joined Carlson Wagonlit Travel from French utility group Vivendi Universal in June 2004, assuming the position of president and CEO one month later. After his first 100 days in office, Joly spoke with BTN contributing editor Amon Cohen about his vision for the company, including plans to make more acquisitions, especially in North America, and his determination to make Carlson Wagonlit the Accenture of the travel management business.

BTN: Where do you see Carlson Wagonlit sitting now and where do you want to take it?

Hubert Joly: We are one of only two truly global players. We are number one in Europe, Asia/Pacific and Latin America, and number two or three in the U.S. We are present in 60 of the Fortune 100 companies and we are also very strong in Europe with small and medium-market clients. In terms of where we are taking the company, the first thing to say is that we are one of the long-term survivors. This is a very fragmented space. We, and American Express, have a combined share of maybe only 15 percent of the total market. Because of economies of scale and how the industry is evolving, there will be more concentration. This year, we have made three acquisitions: Maritz, Protravel [France] and Onboard [Germany], so we have signaled we will continue to be long-term players.

We will base our service on what our customers are looking for. I see us being a very large, very lean transaction processor, ensuring consistent, quality service around the world and helping clients drive online adoption. In parallel, I see us continuing to build a consulting, systems integration and business process outsourcing service, helping our clients optimize their programs and processes. We will be an Accenture of the travel management business. We will go through a similar transformation to what the IT companies have been through over the last 20 years.

BTN: Does the fragmentation of the market mean we can expect more acquisitions imminently?

Joly: My first task is to complete the integration of the recent acquisitions. We are very pleased with the way it is going. Client retention in the U.S. has been better than 99 percent. We are also very pleased with the synergies—they are probably ahead of what we expected. Once we have digested that, we will look again, but, in general, yes, we see the industry consolidating and we are very open to acquisitions and merger opportunities. We will be very vigilant and active in that space.

BTN: Are there particular geographic markets or market segments where you think you need to grow?

Joly: We are number one in Europe, Asia/Pacific and Latin America. We are not number one in the U.S., the largest market. There is a clear priority for us to strengthen our position there.

BTN: In the United States, one obvious purchase for you might be Navigant. Is that something you are looking at?

Joly: Next to American Express and CWT, it is easy to develop a list of the next players. There is WorldTravel Partners, there is Navigant, there is Business Travel International and there is TQ3. After 100 days, I don't yet have a fully fleshed-out acquisition strategy but these are natural players to think about.

BTN: Do you have any other plans for the U.S. market in particular?

Joly: I am very pleased with the strong team that Jack [O'Neill, chief operating officer for North America, inherited as part of the acquisition of Maritz] has around him. We have won some major contracts, including our Solutions consulting group being chosen by Microsoft as its partner in global travel management. One area Jack will be very focused on is the midmarket in the U.S. We are very strong on this in Europe but less so in North America.

BTN: What about Asia/Pacific?

Joly: In Asia/Pacific, even though we are number one and crossed the $1 billion volume mark in 2004 [up from $815 million in 2003], I think we will become even bigger. I have a vision of Asia/Pac a few years from now representing one-third of our business, and we will have one-third in Europe and one-third in the U.S. I don't believe this will take as much as 10 years. I have seen data which suggest it could be three to five years. I think we can rely on organic growth because the market is still forming itself, so I don't know that we need to make acquisitions there.

BTN: Are the Internet travel agencies going to become travel management company buyers?

Joly: We audited our hotel rates against the ITAs and discovered we find the lowest price in 70 percent of searches, while none of them find it in more than 10 percent of searches. The ITAs are finding it hard to compete with us in the managed travel space. Nothing would prevent an ITA acquiring a travel management company to fill these gaps, but that has not happened on a large scale. You see them acquiring small agencies instead.

BTN: And what about acquisitions by global distribution systems?

Joly: One cannot rule that out. On the other hand, it would be a very bold move and I don't sense this is necessarily what they want to do.

BTN: How is demand changing?

Joly: In my first 100 days, I have met approximately 75 customers around the globe. The first thing that strikes me is travel at many corporations is now heavily influenced by purchasing. These people are beginning to understand that travel is harder to procure than pencils, partly because of the volatility and complexity of suppliers, GDSs and so forth. Our customers have four major requirements. The first, as I have already mentioned, is they are looking for a partner to optimize the transaction processing cost. The second is a proactive partner to help them manage their programs and develop sourcing strategies; someone who at the transaction level is able to find the lowest rates and fares. Third, in spite of automation, many companies still want high-touch service for their travelers and fourth, related to that, security is very top of mind for many of our clients around the globe.

BTN: What are you going to do to meet those demands?

Joly: On the transaction side, I see us being a very lean processor, helping customers with their strategy to drive online adoption. CWT is one of the main online agencies. In the U.S., we have done close to two million online transactions this year, which is close to 30 percent of our total transactions. That is why we have developed the expertise.

Clearly, Europe lags behind the U.S., but we are seeing a major push by many companies there to go in that direction.

In the area of managed travel, we have close to 500 consultants, account managers and information services specialists. I see this business growing significantly. Many customers are telling me they want to outsource an increasingly large proportion of their program to us. We will also help them with security. You need a global TMC to help you with this.

BTN: To what extent are companies going to outsource travel? Are you going to address this issue formally with any of the big outsourcing companies?

Joly: We already work with some of the outsourcing companies by taking on subcontracts for the travel part of their work. It would not make sense to have an exclusive relationship with only one of them. Our clients are telling us the level of expertise of these generalist outsourcers is not what they need. Clients may outsource many of their non-production purchases to them but they feel travel is a highly engineered commodity that has to be given to the specialists. However, when it comes to issues like end-to-end processes and integration with enterprise resource planning systems, then it makes sense to partner.

BTN: Which functions are clients increasingly wishing to outsource?

Joly: They rely on us to help select the right booking tool. They also rely on us to select and then engineer part of the T&E process. This could mean outsourcing the hotel program. We have just won a very big contract with the U.S. government for its lodging program. We are going to help it get the best rate and the best compliance.

BTN: Will more companies outsource the entire travel function?

Joly: The one thing I would advise clients against outsourcing is the ultimate responsibility for travel. I worked at EDS for three years and there were some clients that outsourced everything, including the position of chief information officer. That does not make sense. Likewise, we are a service provider. We need to be managed by somebody. We cannot dictate the travel policy, for example. We can assume the responsibility for lots of things, but the ultimate responsibility to set the parameters stays with the client. Yet, outsourcing many of the functions that require expertise does make sense. No client needs to be a world-class expert on deciding whether G2 Switchworks is going to be an alternative to Sabre.

BTN: Will Symphonie continue to underpin your technology strategy?

Joly: Symphonie is a world-class suite of tools. The average adoption rate for clients using it in the U.S. is 70 percent. There are several things we are doing with it at the moment. We are starting to roll out the components worldwide. For many clients, it is critical to have the same booking tool around the world. The second thing we are doing is reviewing our overall technology investment following the merger with Maritz. This is still in process.

BTN: Will Symphonie remain at the center of your automated strategy?

Joly: I don't call it the center of our automated strategy. The U.S. is only about 25 percent of our revenue. Sixty-five percent of our revenue comes from Europe and today, Symphonie is only employed as a core product in North America. Even in North America, it is a minority of our automated business. We work with a more booking tools than any other travel management company.