Carlson Wagonlit Travel president and CEO Hubert Joly last week spoke with BTN editor-in-chief David Meyer and travel management editor Seth Harris about demand, service, savings, security, the Navigant integration and a new management information tool.BTN: Is CWT doing anything new to help corporate clients save money?
Joly: I think we have become quite sophisticated in this area. We globalized the Solutions Group last year. It's not just them but our account managers who work with our clients to raise the eight key levers of effective travel management.
We'll be launching the CWT program management center next month and enhancements throughout the year. It's not a physical center, but a Web site that is more than a portal. It is where the travel managers will have all of their management information. Discovery was also a Web-based tool, but this is day and night. When you see it you'll say, "Yeah, that is what they wanted all along."
BTN: Have customers been involved in developing that?
Joly: Yes. It's been a yearlong development, with input from customers and account managers from all over the world. The first installment will be in April and then the second one in July.
BTN: Is April a beta test or an actual rollout?
Joly: No, April is a rollout but only the first wave of functionality. We'll be showing it at the Association of Corporate Travel Executives conference in May.
BTN: That sounds exciting.
Joly: Yes. In a way, we were busy in 2006 with the integration of Navigant
(BTN, May 1, 2006), which is really progressing well, but we have continued to be focused on enhancing our capabilities around the processing of transactions, program optimization, safety and security and meetings and events, which I would say are our four lines of business. In each of these areas, we had a good series of new product introductions in 2006 and a good pipeline in 2007. We launched an online booking tool in China and Japan in 2006. These are big steps.
BTN: What's left to be done in the Navigant integration?
Joly: The things that take the longest are systems. Our approach to integration is that there are a number of things that we don't touch—meaning the customer interface, the good people and so forth. We aggressively rationalize general services and administration and supplier management.
Systems take time and we certainly are looking for the best of both without being predisposed to the Navigant, the CWT or a new tool. Support for existing clients, development and migration can take up to two years. The migration of the Maritz client to CWT Discovery took place in 2006, exactly two years after the acquisition. We're working with the same timing and topics: reporting and back office. There is no need to rush. You want to do it properly, make the sure that the feature functionalities are those that the client wants.
BTN: What about future acquisitions? Are you on the lookout for more?
Joly: Sure. The space remains incredibly fragmented. You know the top four players have 25 percent of the market. With our experience with acquisitions it makes sense for us. We don't need to make any new acquisitions. We have critical mass in all of the countries where we need to be, but we will make more acquisitions in the U.S. or Europe or anywhere else we find a good opportunity. You don't want to distract your team with these things, so it's a question of balance. With the Navigant integration, we have not done any deal in the past nine months.
BTN: In the year ahead, do you think you will? And where?
Joly: Yeah, sure. We know where the 15 top markets are in the world, and it will be in one of these if and when it makes sense.
BTN: The European Union just turned 50, which sounds like a milestone, but it's still not a unified union, is it?
Joly: The celebration was a bit subdued. It is a huge accomplishment, and yet the future is a bit unclear. Where do we go now? Is it just a free trade union or is there a grander political agenda for the 27 of us?
BTN: Even so, in the EU region, is there still a lot of growth potential?
Joly: From a business standpoint what is amazing is that although GDP growth is not the highest in the world, the growth of business traffic is just enormous because European companies have become global and are traveling everywhere. I continue to be amazed by how robust demand is. Our central Europe region, which goes from the Rhine River to Siberia, is growing in the teens, with clients traveling more. Most of that business is in Germany. Russia for us last year grew 37 percent and in Germany in the teens.
BTN: Do you think this demand will stay strong through the next year?
Joly: Ah, the Alan Greenspan question. Business travel is highly correlated with GDP growth, so every morning when I wake up I look at the stock market and what happens in Shanghai. It's clear that you are going to have a recession in the next three years, maybe four. I'm no economist, but you would expect that at some point it grows slowly. The rate of growth of the world economy has been just extraordinary. The only sure thing is that at some point it will slow down and then it will pick back up again.
BTN: How much of your business these days is new business, as opposed to marketshare gains?
Joly: And as opposed to just base business growth?
BTN: Yes.
Joly: Roughly speaking, in the 2006 pro forma with Navigant we were at slightly north of $20 billion. New sales were about $2 billion, but of course we have some churn, maybe about 3 percent. Organic growth in 2006 was 10 percent. The base business growth was at 5 percent from people traveling more.
BTN: When you look at the universe, as opposed to just your own business, is the pie growing?
Joly: Five percent. When you look at the market, there are no precise statistics, but when you triangulate what IATA and the airlines are saying, and what BSPs and ARC are saying, it's about five or six percent, which is 1.5 times GDP growth, which seems to be the historical trend.
BTN: As far as the global business is concerned, as opposed to the midmarket and local business, is that growing by the same numbers or does that reflect a different measurement?
Joly: Out of the $2 billion of new sales in 2006, there was a good chunk, though not the majority, but maybe 40 percent that's coming from global accounts. It's about $700 million from large global accounts.
BTN: What are customers asking you for today?
Joly: We talk about service, savings and security. The nuances today as compared to two years ago would be the advent in some countries of concerns about carbon emissions and tools to calculate them, that's new.
BTN: Are companies generally pricing rather than buying those services?
Joly: This is never going to be a big revenue stream, but it's a nice opportunity to provide value to our clients. Adding a formula to the trip information we already have is pretty easy and is valuable to our clients. We're happy to do that. Are we going to make a large revenue stream out of this? No. It's a bit like security, being able to report where all those travelers are is not a big revenue stream, but it is valuable for clients. There is a disconnect in our industry between what people pay for and what is valuable to them.
BTN: Has tracking every traveler become a standard offering?
Joly: It is, but it really depends on the countries. In the United States, absolutely; in the U.K., yes. In France, not everybody is interested. In Italy, they don't really care that much. For large corporates? Absolutely. A big driver of consolidation? Absolutely. So yes, there has been a lot of talk about carbon emissions and a few implementations, and we'll have more this year. The other thing that I find interesting in the way that some things go in circles and you realize it when you have been around for more than two days. The emphasis over the last three years has been on savings, online bookings, program optimization. Is it because we are in the last year of a five-year cycle of economic expansion so that companies are feeling better, and the investment banks, oil companies and consulting companies don't know what to do with their money? Savings is important, but service is back.
We all forgot about the traveler, frankly. We've been very good at focusing on the travel manager, but for travelers who spend their life on the road for business, it's no longer a perk. How we support these travelers is important. If you start focusing again on the traveler, there is a whole host of things that we travelers would like some help with. If I am going to Vienna, Austria, maybe you could tell me that Don Giovanni is playing Wednesday night and you can get me a ticket. This can be done in partnership with providers.
The history of travel management company experience over the past 10 years has been: How do we focus on the customers as the suppliers worried about things like eliminating commissions? We are looking to partner with suppliers in a more sophisticated and intelligent fashion from a service standpoint as well as a business standpoint. There are some areas from a service standpoint, such as the U.S. Advanced Passenger Information System, in which the process is terrible. Partnering with the suppliers is a way to address this.
BTN: That's one way you are looking to enhance service. Are there other ways?
Joly: The targeted marketing is probably an opportunity as well. We have travelers who come into our stores, and we know who they are, but once they have been in we don't do anything with them other than efficiently book their trip. There are probably a host of marketing opportunities that exist there both for their personal time and their business trip. Do I know all of the things we can do? No. But it's an area we are focusing on.
BTN: Is there an investment that you are making in that area, more than people's valuable time?
Joly: The first thing to do is to look at what people are doing today. The best people always do the right thing without being told what to do. In terms of new product introductions, there is globalization of CWT Freedom, the traveler notification service, and more communications with the individual travelers while they are traveling. That is a concrete first step.