HRG CEO Sees Focus On Savings, Loosening Of Restrictions
After announcing last month that publicly traded travel management company HRG's revenues had declined 6 percent annually in the October-through-February period, CEO David Radcliffe spoke with travel management editor Seth Harris about spending behavior, contract negotiating activity and industry growth.
Business Travel News: Are revenues down from less traveling, spending per trip or both?
David Radcliffe: The client is very focused still on saving money, focused on saving all types of money in relation to their travel expenditure. Within that, sometimes you see transactions going up and gross sales going down. Sometimes you see revenues going down as the mix changes. For instance, in Europe we are seeing a lot more people travel by train than go by air. Your actual revenue will go down because what we charge them for traveling by train is less than what we charge them for more complex transactions.
BTN: Even with the slight rebound in corporate travel in the past few months, how do you see the near term playing out?
Radcliffe: It's very difficult at the moment to get forward visibility as a lot of companies are coming up to their year-end. A lot of companies are saying they don't know what this year holds for them and they don't know yet how they are going to move forward in terms of their travel expenditure. All they know is they want more of the same in terms of us telling them how to save money and new technology, etc.
BTN: At the end of 2008, you noted the rapid pace of travel management company bid activity. Have those levels subsided?
Radcliffe: I don't see any sign of it slowing down. I do see a sign of more predictability coming in or more natural contract discussions. What we are now going to see is less drive for short-term gains. A lot more clients now have realized that short-term gain can actually cost them long-term benefits. We are now starting to see far more of a return to looking at how our expenditure can add to long-term value rather than just how we can reduce cost compared to some of our competitors.
In the late part of 2008, there was a big focus by clients on each TMC's costs. Now, they've stood back and said, it's what that cost does for us that we should be quite focused on. We are seeing more of a calming in our client base. We are involved in a number of tenders of unnatural contract dates in some of our competitors. We believe we've seen an end to the sporadic, uncertain and surprising level and now see in our company a return to more normalized contract extensions and discussions.
BTN: Are you seeing a loosening in policies restricting premium-class air travel?
Radcliffe: Globally, there is a trend toward some companies now relaxing the time continuum necessary to travel in premium. Where they used to have to travel 6 hours before they allowed you into premium, maybe now it's only four hours. There are some companies that have already moved back up front, but most of them still put a caveat around it related to time or expense.
BTN: Will business travel return to pre-recession levels?
Radcliffe: Business travel will return to previous levels purely because in overall terms it is a growth industry. For all of those companies that are pulling back on expenditure, there will be companies that are growing and going into different markets. We will see a change in the way we offer our services and the way we get paid for our services. This is a timing issue. Maybe it is this year, maybe the year after if you are talking about in comparisons to 2008 levels. This is still a growth industry, but how people will deal with it will change. No doubt about that.