Carlson Wagonlit Travel president and CEO Hubert Joly last week spoke with Business Travel News editors David Meyer and Seth Harris about the company's growth in the first half of the year, the development of a new online portal, upcoming acquisition activity, the globalization of travel management, technology investment and the possibility of further industry consolidation.BTN: What part of the $2.2 billion in new sales you recently announced is coming from business travel?
Hubert Joly: Business travel is the overwhelming majority. Meetings and events is 5 percent of the $2.2 billion, and 95 percent is business travel.
BTN: Is CWT winning marketshare or rising with the pie?
Joly: Share in our market is very difficult to measure. It's hard to segment the market by strata. We can only approximate. If we take out the acquisitions, we are slowly gaining share. It's a slow movement because share does not move quickly in this market because companies don't like to change travel agencies. We are more than holding our own. We are slowly gaining, but we are not getting five share points per quarter.
BTN: Looking at the big economic picture, what is your perspective on how the general economy will affect growth in the rest of this year and into next year?
Joly: This is something we watch very carefully. We all know that business travel is tightly correlated with economic development. When we saw the turmoil in the financial markets in August, that raised questions and there was a Credit Suisse survey that said a majority of companies were going to reduce travel. Even so, I must say, so far so good. The overall economy remains very strong and the markets continue to be growing. With the expansion in overseas markets, the U.S. economy, despite its size, is no longer the sole driver of economic growth. The companies that have globalized their operations, whether or not there is growth, need to increase travel to run their business. It's still early, but the truth is no one really knows what will happen in the next couple of months.
BTN: For the past few years, demand has remained surprisingly strong. Is that still the case or is it softening a little bit?
Joly: We see continued strong demand. It's been continuous for almost four years. At some point it may slow down, but it continues to be very robust.
BTN: What new developments are on the horizon?
Joly: We'll soon have an announcement of a new portal this month. We've done a lot of work with the travelers and design specialists to provide a revamp of our portal capabilities. It's a completely new portal. The CWT Program Management Center is really focused on travel managers
(BTN, May 7). The portal that we are launching this month is focused on the travelers. The CWT portal is essentially for the travelers and travel arrangers.
BTN: Has the Navigant acquisition
(BTN, May 1, 2006) been fully integrated?
Joly: Jack O'Neill and his North American team have done a really great job with the Navigant integration. Organizationally, it is done and it's impressive to see how the legacy teams melded and got together in the same culture and work effectively together. Client transitions have been effectively seamless. The one thing that is not complete, because it always takes longer, is the back-office integration and rationalization. That will take us well into 2008. It's now been 13 months and it's been an extremely well-done integration and I couldn't be more pleased with it.
BTN: Is your next acquisition going to be a big one or a series of small moves?
Joly: After the Navigant deal, I shut down the M&A machine for a while, because it's one thing to spend the money, but you first have to make sure you can integrate. Navigant was really our biggest one ever. We reopened the M&A machine in June and July. We don't need to make new acquisitions because of our scale, footprint and capabilities. We are making acquisitions when they add value to the portfolio
(see story). The main priority at this stage is small add-on acquisitions that are relatively easy to integrate.
BTN: Should we expect the acquisitions mostly outside the United States?
Joly: Not necessarily. The United States is the largest market in the world. It remains very fragmented. All of it is going to be targeted opportunity. That's the current focus. It's going to be the key markets. From a coverage standpoint, we cover the markets. It's more addition than anything else. Whenever we can increase our stake in joint ventures, we are interested in that, because we like that business so much.
BTN: It seems there are more opportunities out there and a number of parties who might be interested in them. It had been talked about for a long time that there might be a massive consolidation. Is it really occurring now, in your view?
Joly: In terms of the big rationalization, I would argue that the last couple of years have seen some significant movement. Two years ago, there was Amex, CWT, WorldTravel Partners, Hogg Robinson and then the Germans and Navigant. The space has really been clarified because there are really three or four big guys. Clearly CWT has really grown, BCD has emerged as a strong number three and then there is Hogg Robinson.
BTN: You've positioned CWT as a provider of global travel management services. Has the marketplace developed on a global scale as you predicted it would?
Joly: All the surprises have been positive, especially when compared to three or four years ago when too many people were predicting the death of travel management. The surprise has been the strong growth of the market and the trends toward global consolidation of travel programs, outsourcing and travel program optimization. We continue to have as the vast majority of our client portfolio small to midsize local domestic clients, which we serve extremely well. You don't need to be HP or GE to be a client of CWT.
BTN: Are you seeing the majority of accounts becoming heavily multinational?
Joly: The large global accounts, especially with the acquisition of Navigant, probably represent 25 to 30 percent of the business. The economies are still largely made up of small to medium-size domestic companies, as well as companies that are managing travel in a decentralized fashion, and you need to earn their business on a country-by-country basis.
BTN: We understand that CWT Symphonie booking technology is exclusively for North American clients. Are there any plans to bring a similar system to Europe?
Joly: We have a variety of the components of Symphonie globally. An example is CWT Discovery, our global reporting tool. We've had a modular approach to this. Increasingly, we are evolving toward a global technology strategy while recognizing that it's never going to be truly global because of the incredible diversity in the market, like dealing with online booking using TravelSky in China, where we had to build our own tool. Will we have a global agent desktop environment at some point? We are increasingly looking at these things. The way CWT CIO Loren Brown would describe it is that we are working toward a service-oriented architecture where it will be homogenous globally and allows us to plug services in more readily. It's more of an architecture that is used around the world, through which you can provide a more seamless integrated solution.
BTN: Do clients look to CWT to provide technology solutions or to support their own technology solutions?
Joly: We are not a product company, so we are not selling products. We are not SAP or Microsoft. We are in the business of designing and delivering services for our clients, but also integrating. We will use our own technology or leverage the industry infrastructure by combining third-party and proprietary technology wherever it makes sense. Our clients don't really care whether it's third-party or proprietary. They care that it works.