Amex's DiLeo Guiding Overseas Growth

Ron DiLeo, American Express Business Travel senior vice president for Europe, the Middle East and Africa, met with BTN Editor-in-Chief David Meyer in Chicago during the National Business Travel Association convention this month to offer an update on Amex's development during the first half of 2006.

BTN: How's business?

Ron DiLeo: In Europe, we're close to a half-billion dollars in new business just through the first six months of this year, and we have re-signed almost $700 million. That tells me we've done a decent job of owning mindshare in Europe of the people who are leading the online charge. Fresh numbers show additional movement in the past few months. In terms of service delivery, it's not just online, but telephonic delivery as well. Counselors' ability to move marketshare to preferred suppliers is something that our customers are really looking for. That's significant because travel in general is up. When travel goes up, capacity starts to go away. When capacity goes away, prices start coming up. Buyers are seeing it coming and they want somebody who is looking out for their interests. We are able to hedge them from the upside to spot-buy on the downside. It has created a lot of demand. Even prospects understand what the opportunities are out there—trying to find where there still are buyer's markets, then coaching them on how to do the deals. In some cases, we are the outsourced travel manager and doing the deals. Global Advisory Services' Mike Streit is filling us with the content and the tools we need to do that in a really effective way. For the multiregional customers, we are delivering consistent answers across the board. On the service-delivery side, if we're promoting one airline over another on behalf of the client, they know we're making the same recommendations in China as in France and New York, because we are doing business with them globally.

BTN: We're not just talking on the air side, but hotel as well?

DiLeo: There's a big need there. In Europe, there are about 230 low-cost carriers. That keeps prices level, because the flood of seats means that capacity didn't go away. In places where people are sleeping, you can't build hotel rooms that fast. The prices actually are looking to escalate faster there than in some of the other areas.

BTN: Which markets are less seller's markets than others?

DiLeo: We've never looked at it that way before, but we are going to do an analysis. We have looked at it by client or by airline alignment, but never in terms of destination. Within a month or so, we should be able to at least have data, and then try to draw conclusions from there.

BTN: The competitive situation also has been good for American Express, right?

DiLeo: It's helping. It's probably helping Carlson too, although they are doing their Navigant integration now. BCD and HRG are moving fast and furious in trying to create their future. It's nice for us to just be able to focus on our customers. In the first three months of the year, all those changes didn't facilitate decisions as fast as I thought they would in January. I thought that we'd be at the numbers we are at now earlier. They were kind of paralyzed and trying to figure out exactly what happened, who has gaps and who doesn't. The dust is now settling. The decisions that were being delayed before are now being made. That's contrary to history, which typically says that you don't close a lot of new business in July and August, particularly in Europe. We are going to have a huge July because I think people want to make decisions before they go on holiday. Some things that were supposed to happen in June, people are sawing those off. The contract decisions that we are having are designed around fourth-quarter implementations, because they don't want the opportunity to pass them by.

BTN: Do you have a sense that there is more in play this year than in the past?

DiLeo: The volume of proposals going out is pretty comparable. The wins are higher this year, with growth about 10 percent higher in Europe this year than last year. We are closing faster and the success rate is higher. The overall activity is probably about the same. We're just closing more.

BTN: Are advances in telephony in Europe because you have enhanced call centers or built new ones?

DiLeo: We've actually built a virtual call center network. It's just about complete. The idea behind it is: In this electronic environment, particularly on the reservations side, the biggest challenge travel management companies have is dealing with capacity. That may be in one center or another. Rather than be site-specific in our call-center strategy, we've built a virtual private network that enables us to identify where we have capacity, sell surgically into that capacity in a nongeographically centered way, and as a result use that capacity to price more competitively so that everybody wins. Every new piece of business becomes incremental revenue on an existing cost base, which is a pricing person's dream. Buyers like it because they see the benefit for them, that it has language sensitivities—

BTN: Shifting volume between different centers or all offices?

DiLeo: We're doing it within specific centers, and we're doing it in a client-managed way. If you have a requirement for 20 dedicated counselors, we'll give you 20, but 10 of them might be in Paris, five might be in Brussels and five might be in London. You would never know that because it's got language and intelligent call-routing capabilities. In a call center of 200 people, we can actually create the intimacy of a 10-person agency, because we can put the calls right to those 10 people. Susan Kereere, who heads operations for us there, and her capacity management team are building a network operations center—like the one that Rosenbluth International used to have in its Philadelphia headquarters—in London, probably by February.

BTN: That must be a huge investment.

DiLeo: A huge investment. It's an investment in workforce management software. It required us to swap in and out from the previous telecommunications network. The whole thing hangs off the American Express virtual private network. The big investment is there. All we had to do was to attach some components to it. Frankly, were it not for that, it would have been too big an investment for the travel business to do on its own. It's a sustainable competitive advantage for us for many years.

BTN: Is getting a return on an investment of that magnitude a multiyear plan?

DiLeo: Yeah. Every one of our investments has a cost-price analysis associated with it that takes into account investment lifespan, but in my opinion, this kind of an investment is such a core of the foundation of the business. The company just had to accept whether they wanted to make that kind of investment in travel. They did. I know that [Global Travel Services president] Charles Petruccelli has spoken to you about our play-to-win strategies. He got a tremendous amount of investment money for the travel business in addition to the money that was invested into the acquisition of Rosenbluth. Europe got a disproportionate amount of that because we needed to do a better job of connecting to the North American platform, which we are now. We can move calls across regions now.

BTN: When did that go into effect?

DiLeo: Well, we've been doing it in Miami for quite some time. If you think of hubs and spokes, Miami is one hub and Phoenix is another. It was just a matter of us being able to connect. From a business-continuity plan perspective, we use it for disaster recovery, such as tsunami, earthquakes and terrorists, and that has been in effect for quite some time. On a client-by-client basis, it's what we use for clients that want the "follow-the-sun" service configuration. Technically, you can do this and never leave a dedicated service environment, if you want a 24/7 configuration, as opposed to a daytime/after-hours configuration.

BTN: Has demand grown beyond the very biggest clients?

DiLeo: The interest is escalating. The take rate is still—I wouldn't lead you to believe that it's a mainstream thing, because it's a kind of premium offering.

BTN: Are the network component parts all in place?

DiLeo: Being put into place. It won't be finished until mid-next year, but we've been doing it since 2004, so we're way into it.

BTN: What remains to be done?

DiLeo: We clustered call centers into five different clusters. It's just the amount of time it takes to take one phone system out and drop a new one in. It's pure logistics and not like anything has to be invented. When you are fooling around with phone systems, if you move too quickly you jeopardize service delivery and start disappointing clients, which we are not going to do. Susan has a very deliberate plan and we haven't had any service disruptions. We run the systems in parallel for a period of time, but the investments are made. The technology doesn't need to be invented, it's just a matter of doing it in an organized way.

BTN: Meanwhile, what is the state of cross-border ticketing restrictions? They've been relaxed but they are still there.

DiLeo: They're still there, and we've had some success in working with the International Air Transport Association and the European Union to recognize that there will never be a United States of Europe, but from the travel perspective, the airfare should be the same on both sides of the borders, because it confuses travelers and encourages people to game the system. You know, buy all your tickets in Germany since the German originating fares are less expensive than the ones from France. That's not a good thing for the industry. We won't do it because that violates rules that we signed up to. We have one customer right now with whom we are experimenting with a single settlement plan for Europe, which would be the first time that would be accomplished.

BTN: What is the timing of that?

DiLeo: We already are experimenting with it. There are two or three countries, with IATA's OK, where we're doing it right now. It's all about reducing the costs of the supply chain. We have the ability to help do that, whether it's reducing the cost of GDS content and distribution or creating a settlement process that isn't fraught with debit memos months after the transaction. We are focused on creating a more economically balanced environment without costing anybody anything.