One-On-One With CWT's Douglas Anderson: Mega CEO Eyes Cost, Growth Plans

New Carlson Wagonlit Travel president and CEO Douglas Anderson recently spoke with Business Travel News editor-in-chief David Meyer and travel management editor Seth Harris about shedding costs, finding the right mix of acquisitive and organic growth and keeping the company at full speed in the current economic conditions.

BTN: When you were appointed CEO in April, you spoke with BTN about reevaluating the company's cost structure. Have you embarked on that course yet and what is your plan?

Douglas Anderson: The majority of our operating costs are payroll-related. Somewhere in the neighborhood of 70 percent of our total cost is people-related. Of the 20,000-plus people we have, 16,000 of them work in travel and transaction services or what you might call operations, so most are our agents. We are working on developing a more consistent and efficient set of processes around travel and transactions services.

Before Hubert Joly left, he created a global TTS function headed by senior manager Berthold Trenkel. Berthold has marshaled a small team working for him, looking globally at our operations, ways to standardize processes and at structured measurement around our large contact centers, which is fairly standard for companies that operate large contact centers. That has been a big step for us. That group has a set of initiatives and has annual efficiency targets. This isn't about creating a machine. It's about continuing to serve clients' needs with personalized service, but finding a more efficient way to do that.

BTN: With Trenkel shifting to the global TTS role, do you plan to further globalize management?

Anderson: In general, the functions—and we have six or seven of them, TTS being the newest—are organized on a matrix, so we're not looking at globalizing further any of our functional support areas. IT, finance, communications, marketing and now TTS are global. Global accounts are under Cathy Voss. Those five or six areas are run at global levels and those managers sit on the executive team. We believe that's the structure we need going into the foreseeable future.

BTN: In the past few months, you made a series of acquisitions in Europe. What other gaps do you need to fill in the region?

Anderson: In Europe, the one strategic gap we needed to fill was in Scandinavia and we did that with Ark Travel. It would not be impossible for us to look at another acquisition in Scandinavia because Ark was very Sweden-centric. I'm not predicting anything. I'm just saying that strategically over the next 12 to 18 months it may make sense for us to look further at Scandinavia. It makes sense to build scale because organic growth is somewhat limited. We are winning clients, but even as the sea level was rising over the last three or four years, organic growth is not a double-digit gain. It's a 3, 4 or 5 percent gain with the growth in transactions, the pressure of pricing and online adoption working in the other direction.

BTN: Do you have a specific target for growth as part of your three-year plan?

Anderson: We do have an acquired growth objective. It's less than 10 percent and north of market growth. We'd like to pick up a point and a half or two in acquired growth and we'd like to continue to develop our client wins, ride the wave when the economy turns around and grow a couple points higher than market growth. When I joined the company and saw the growth rates that we were experiencing and expecting, my view was, and it's probably because I didn't know the travel business, can't we figure how to grow this thing in double digits? I've learned over the last six or eight months that that's not going to happen without big acquisitions. We're not in a mode where we wouldn't consider a big acquisition or merger, but the credit markets are tight and the next 12 to 18 months are going to be buttoned-down, making sure we do things right, prove our efficiency and then be ready.

BTN: Former CEO Hubert Joly has said that the company had budgeted in "prudent fashion" for this year. You have said that there has been decelerated growth in the first few months of this year. What are your business travel demand expectations for the rest of this year?

Anderson: Our experience through the first four months is that Europe has continued to grow very nicely. I'm cautious about Europe because it seems Europe should or would follow the United States if the U.S. slowdown continues. We are performing and growing nicely in Latin America and Asia/Pacific.

The one area where we are experiencing a slowdown is U.S. commercial. In the latter half and middle of '07, our growth rates started to slow down. In the fourth quarter of '07, things flattened out, and we had a flat year-over-year transaction comparison between '06 and '07. In our base business, we've seen some decline in transactions in the first quarter of this year compared to 2007—a small single-digit decline.

We do have the advantage of having sold $3 billion in new business last year and we are in the process of implementing that. Ramp-up time, especially with large customers, takes some time. We have the advantage of implementing that new business but some of our base business customers that we had in '06 and '07 are trading less than they did the previous year, especially those in financial services. Our exposure to that sector, if you look at a pie chart, isn't huge. Globally, it's less than 10 percent.

BTN: With the corporate travel market softness right now, what influence does it have in negotiation with vendors?

Anderson: A lot of our supplier relationships are based on growth. Some are based on marketshare and some of the marketshare agreements will be better for us in a period like this. We have opportunities to renegotiate those on an annual basis. Executive vice president of global supplier management Mike Koetting and his team are working on figuring out how we react in a situation like this, where we may not have as much growth, especially in the United States.

We are close to our suppliers and have a lot of scale. It gives us the opportunity to have meaningful conversations with our supplies. We are not worried. We have longer-term agreements with all the global distribution systems that take us through the end of 2011. We're continuing to meet and talk with our airline and hotel suppliers. We're not alarmed about our relationships. We're still growing and still have a significant share of the market.

BTN: What are some of your long-term priorities?

Anderson: We have a board and two shareholders who have a very complementary perspective on the future. The Carlson family wants to be in the travel business for a very long time. We have a private equity investor, One Equity Partners, who wants to be in the travel business for some time. They have a way of keeping us sharp. They are good idea and opportunity generators. I don't know where all that will go.

Right now, I think what the board is looking for is how to create the next step, which is value change for this enterprise. There are discussions around that that are ongoing. Things are rocky right now. There isn't a lot of debt available, and companies are buttoning down—including us—to make sure we get through the next year or so unscathed. We are going to continue to stick to the knitting for the next year or so. Beyond that, we'll see. The industry is going to consolidate and we want to be on the front end of that, not the back end.