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 partnerships to serve customers in 25 others,
according to Pfaffmann. He discussed the acquisition and growth strategy with BTN'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.