TRX Buys Travel Analytics

Travel technology company TRX early this month announced it acquired Travel Analytics Inc., a developer of reporting and spend management technology with annual sales of $1.2 million. Terms of the deal were not disclosed, but BTN editors David Meyer and Jennifer Merritt spoke last week with TRX president and CEO Trip Davis about Travel Analytics' future with TRX, other acquisition targets and how today's industry dynamics have the potential to shape the future.

BTN: What is your strategic rationale in acquiring Travel Analytics?

Trip Davis: We feel like we're at the center of a lot of data activity—sometimes it feels like a storm, sometimes it feels like a nice free-flowing river—but the point of our data offerings is to serve the four key segments of the market: the payment providers—and that includes both issuing banks and card associations—the travel agencies, the suppliers and the corporations. As we look at the landscape, it's getting more complicated and that complication ends up on the desk of the travel manager as they're trying to sort through their supplier deals, their agency fees and the GDS content situation. We see a terrific opportunity to deepen the data analysis for the corporations. The heart of the strategic rationale is the data analysis and the value of the analysis of the spend by supplier, by vendor and by market for the corporation. We continue to see a great revenue opportunity for TRX and a great value opportunity for clients.

BTN: Is Travel Analytics structurally joining the data part of the business?

Davis: That's exactly right. We have already been addressing major corporations—Lockheed Martin, UBS, Ford Motor Company and PricewaterhouseCoopers being a couple of examples of existing DataTrax clients—and [former Travel Analytics CEO] Scott Gillespie and his team will work directly with our DataTrax team on what amounts to a more robust offering in the market for our existing clients. Certainly, our intent is to ramp up sales to new clients.

BTN: Are you envisioning the creation of a new product offering?

Davis: Consider the Travel Analytics technologies as a value-add to the existing DataTrax model. The existing model has to do with data consolidation from multiple sources and multiple formats, then matching and enhancing that data, and in turn, handing that data back to the corporation. DataTrax is more of a global data consolidation and reporting solution, and if you add on top of that more hardcore analysis capabilities, that's where Travel Analytics comes in.

BTN: Is there any overlap between clients of TRX and Travel Analytics?

Davis: There are a couple that have been working with both of us and the feedback from those who have been working with us has been, "OK, finally!" That's been encouraging. Collectively, you're talking about several dozen corporate clients.

BTN: What will Scott Gillespie's role be at TRX?

Davis: Scott has signed a long-term employment agreement and his entire team of analysts joined TRX. We set up both employment contracts as well as retention and incentive plans for the whole team. They're very excited about a larger playing field and working for a larger company, but at the same time being able to do something they know how to do really well. His title is vice president and general manager of Travel Analytics and his charge is to grow that data analytics portion of our business and to leverage the technology and intellectual property that he's created over the last five years.

BTN: In the short term, Travel Analytics is a separate offering, but in the long term, do you see it and DataTrax combining to create a new product?

Davis: I think that's a fair assessment. In the short term, we want to make sure that we give Scott the latitude to do what he needs to do to grow with TRX. In the long term, we see an opportunity to bring the teams together and create a much broader offering to the four segments that I mentioned. We see as much opportunity in the supplier, agency and payment provider community as we do in the corporate community. At the end of the day, it really is about the same spend data and we feel it can serve all four segments and leverage those capabilities.

BTN: Is there any other M&A activity you're pursuing at the moment?

Davis: In our earnings call two weeks ago, we were pretty explicit about the four legs of our growth strategy: expanding relationships with existing clients, bringing in new clients, introducing new products and doing strategic acquisitions. We do intend to look at further acquisitions in the next year or two, which will be very targeted. We call those "tuck-in" acquisitions, as in you're going to "tuck it in" to what you already do strategically. Ticket processing and data reporting are our core business and there are some very nice opportunities in the U.S., Europe and Asia, with a focus primarily on India and China. Those marketplaces are so vibrant. Surprisingly, across those markets, agencies and suppliers are still using so many manual and paper processes for very high-volume transactions, so we see very attractive opportunities to automate a lot of activity.

BTN: You will revamp ResX in the fourth quarter. Are other product enhancements coming as well?

Davis: We have a major development going on with ResX: an introduction of a new user interface. It's amazing to still see the progress and development of Web interfaces, even after 10 to 15 years of having HTML technology available. The introduction of Web 2.0 is going to fairly dramatically change the user interaction on any Web site. We're using a lot of the principles of Web 2.0 and that's something that we think will dramatically enhance the user experience, the speed of the application and the flexibility for the corporations and the agencies to present what they want to present to their travelers. Our user interface goes live in Q4 and many of the consumer Web sites—an example in travel is Kayak.com—are using Web 2.0 today, so I think you'll see that emerge on a rolling basis as a standard for 2007.

On the Correx front, had you asked me if this was going to be a harvest solution or a growth solution in 2006, it would have been an easy answer: It would have been a harvest solution, meaning that the growth has tapered off and you need to really just refine it and continue to operate it. Instead, it's quite the contrary. We have seen more demand for our automated ticketing solution, Correx, than we had predicted and continue to see a lot of demand in the U.S., Europe and Asia. You would think, on the surface, that most of the manual services would have been automated at this point and that most agencies in particular would have an automated solution in place. That is not the case and if you look at the top three or four mega agencies, each one of them today—because of the acquisitions they've done and the pretty dramatic consolidation in the marketplace—still have multiple ticketing and midoffice operations in place. When I say multiple, I mean more than two. That right there is a data point that would indicate that there is still fragmentation, decentralization or nonstandardization that exists in corporate travel ticket processing. We see a lot of opportunity to continue to do that.

One of the things on the agency front that we would like to emphasize is our desire to work very closely with consulting organizations. We want to offer our service to them and offer value add to their offerings. We think this plays right into our efforts to support the agencies more. There's no reason for so many different companies to do all this data consolidation. We are all analyzing essentially the same data.

BTN: Speaking of the mega agencies, what's your take on their state of affairs with global distribution systems?

Davis: Just like they navigated the change in compensation with the suppliers, they will navigate the change in compensation with the GDSs. Corporations, in turn, will be in a position to make a decision on what supplier they want to use and how they want to buy that supply. If you really get at the root cause of the frustration for the corporations, it's their desire to have more insight and more control over what they buy and how much it costs including the service fees. It's a continued progress toward transparency, but in the meantime it is confusing and painful.

BTN: When American Airlines and Sabre Travel Network do make a deal, does that change the current situation?

Davis: Clearly the American/Sabre relationship has defined so many aspects of the travel industry that we know today: the creation of the GDS, the creation of one of the top online Web sites, the acquisition and promotion of one of the top online booking tools, the spin-off of technology assets. The irony is, they are the brothers and sisters that used to be all in the family and now you're looking at a bellwether negotiation for how GDS and airline economics will work. You could say it would be great to have that one go first, but I'm not sure that's realistic. It's a big one, so it's a harder one and will take a little bit more time. The fact is, American can't afford not to participate in Sabre and Sabre can't afford not to have American participate in Sabre. At some point, they'll figure it out.