Ken Pfaffmann
Three years after it first entered the Australian market, Expedia's Egencia this month acquired Australian and New Zealand travel management company Travelforce. Egencia expanded to Australia in 2008 and a year later partnered with Travelforce for fullfillment and other back-office needs, according to Ken Pfaffmann, promoted to managing director for Australia after two years of leading Egencia's growth strategy. Officially branded as Travelforce, an Egencia Company, the TMC has a regional base in Sydney and offices in Auckland, Brisbane, Melbourne and Wellington. Egencia now operates wholly owned businesses in 15 countries and relies on partnershipsto serve customers in 25 others, according to Pfaffmann. He discussed the acquisition and growth strategy with The Transnational's Mary Ann McNulty. An excerpt follows.
Why did you decide to acquire in this market rather than continue to grow the business organically?
Honestly, it was a thing of opportunity. When you look at our business model and ultimate strategy, acquisition is not core to our success and growth. All of our plans were based on organic growth of our business. But we found an opportunity to have a very good-quality, credible company added to our business; that was one key thing that made it appealing. Also, given the size of Travelforce, it helps add scale to our business, which obviously is good when you're in a start-up mode to add efficiency. We had a business relationship already, we had very good visibility into their culture--one of high-quality service and innovation.
Is your Australian business primarily serving North American or local customers?
It's a little bit of each. Well over half of our clients are local Australian businesses. Today, the clients we have out of New Zealand are primarily Australian-based companies with operations in New Zealand. There's obviously an element of global clients that we've sold out of Europe, North America or other parts of Asia/Pacific. We found very early on that to be successful and build a business and level of scale in Australia, it's not enough to just rely on global business. Yes, it happens, but it's going to take a really long time to get to points of scale. We have a strong and good solution for the Australian market.
How many employees did Egencia have in Australia/New Zealand prior to the acquisition?
With the new team we're well over 50 people, with the vast majority Travelforce employees. We've made good headway in the Australian market organically. The vast majority of folks on our side had been in sales, account management and implementation, with a few technical people. The level of online adoption we've been able to attain in the first couple of years averages in the low 80-percent adoption range, which for this market is far and above where anybody else is, although I haven't seen numbers published. From a business culture perspective there is definitely an affinity to leverage technology. With that said, I would say in the Australian market, there is a bit more focus on quality of service from a travel exec, travel consultant--a little bit more so than in the United States--but technology is also important. For this reason, I think our two companies are an excellent fit. They're well-known for quality service and done quite a bit of innovation, leveraging technology on their own. When we combine our two businesses, I view our success as being world-class on service and technology.
How much of Travelforce's business is corporate travel versus meetings and leisure?
The vast majority--70-plus percent--is corporate travel. They've had a meetings organization in place for two years, and definitely that is a growth opportunity for us as we did not have a meetings solution in place in Australia. They also have some high-end private services--$80,000 to $100,000 vacations--which is an excellent addition for us when it comes to supporting the C-level of our clients.
Why are you continuing to use the Travelforce name in this market rather than Egencia?
Long term, we will [use Egencia]. The reason we aren't initially is that this company has been in business down here for 30-plus years, so they have brand recognition, credibility and we don't want to lose that instantly. It will be a gradual migration to solely the Egencia brand, but that will take time. There's a lot of education of the market about who Egencia is that has been ongoing for the past two years. We'll continue to do that, but also continue to benefit from all the brand equity that Travelforce has built. The article originally was published in Business Travel News.