Hogg Robinson Group on Tuesday reported improved revenue and
profitability for the six months ending Sept. 30, the first half of its trading
year. Chief executive David Radcliffe said he expects continued growth for the
second half of the year.
Radcliffe told BTN
sister publication The Beat that his
company's service configuration is starting to more closely resemble that of its
competitors in terms of booking automation and consolidation of reservation
centers, but he also claimed that HRG differentiates itself through data
analysis and consultancy—the usefulness of which will not be threatened by
airline consolidation.
Revenue for the first half of HRG's 2010-2011 financial year
grew 9 percent to £169 million (US$267 million), although in constant-currency
terms the growth was 6 percent. Underlying operating profit rose from £11.3
million (US$17.9 million) to £19.3 million (US$30.5 million) and pre-tax profit
jumped from £7.5 million (US$11.9 million) to £15.3 million (US$24.2 million).
HRG experienced growth in all geographic regions, with
client travel spending increasing 18 percent in constant-currency terms. The
ash crisis resulted in more rather than less work for HRG.
Ash aside, Radcliffe said he expects more of the same in the
next six months, although prior-year comparisons will become more challenging
as they reflect the beginnings of the travel market's recovery from the
recession.
HRG officials also attributed the firm's improved
performance to managing more activity than last year with fewer staff, leading
to 10 percent higher average revenue per employee. "We controlled our
costs very well," Radcliffe told The
Beat. "Our staff are doing a lot more work and the company has
benefitted. Will that continue? Our expectations for the full year are that we
will be ahead of forecasts."
Operational Change
HRG once again has begun investing in staff recruitment to
maintain service levels and support anticipated growth, but improved
productivity has also been made possible by changes to its booking operations.
The TMC reported significant increases in online booking adoption, now
accounting for almost half of all its reservations in the United States and
Australia. In addition, it has consolidated its branch network and increased
the flexibility of its telephone call flow. Staffers working at home are
processing more reservations. "Increasingly, we expect to provide service
to our clients through fewer strategic hubs," according to a published
statement by chief executive, which accompanied the results.
The changes in operating strategy are of note because
Radcliffe has repeatedly distanced HRG from its major competitors, which he has
suggested have pursued a policy of low-price, transaction-based service—in
contrast to his own company, which is taking a value-based approach of
management and consulting services.
"In terms of service delivery, we are closer to our
competitors [than we were], but in terms of how we make our money we are still
different," Radcliffe said Tuesday. "We still make more money from
fees. Where I hope we are different is in our range of consultancy.
Transactions are one part of the breadth of service we offer, such as supplying
data and data analytics, benchmarking and supplier negotiations, which makes us
more of a travel services company."
Radcliffe dismissed the suggestion that increasing
consolidation of the airline market will lead to less competition and therefore
fewer opportunities for TMCs to help corporate clients negotiate smart deals
based on detailed data analysis.
"I'm on a different page to that," he said.
"There will be mega-alliances competing with each other and a huge range
of airlines that will not be in mega-alliances. You only have to look at the
Middle East—airlines like Etihad or Qatar Airways—and the Far East, which are
all providing competition where they weren't competing before. We will get new
entrants, so it won't lead to less competition. If anything, there will be
more."
Performance By Region
HRG's revenue in Europe grew from £109 million (US$172
million) to £115 million (US$182 million), while underlying operating profit
was up from £8.9 million (US$14 million) to £13.6 million (US$21.5 million).
Client spend was up 14 percent and travel activity, measured in transaction
numbers, was up 12 percent. HRG cited particularly strong growth in the United
Kingdom, Germany and Switzerland.
In North America, revenue edged up from £37 million (US$58
million) to £38 million (US$60 million) but underlying operating profit more
than doubled from £2.3 million (US$3.6 million) to £5.6 million (US$8.9
million), with client travel spend up 28 percent and travel activity up 33
percent. HRG made an underlying operating loss of roughly £100,000 (US$158,000)
in Asia/Pacific, but this was reduced from £500,000 (US$790,000) the previous
year. Expense management subsidiary Spendvision saw its underlying profit fall
from £500,000 (US$790,000) to £300,000 (US$474,000), which HRG attributed to
continuing investment in product delivery and customer support.
Globally, HRG noted an increase in travel especially by
clients in pharmaceuticals and healthcare, which accounts for 12 percent of its
business, and manufacturing, which accounts for 10 percent, but a fall in
public sector travel, a sector that comprises 11 percent of HRG's business. In
addition to more online booking, the main client trends HRG observed during the
six-month reporting period were stronger compliance, increased demand for data,
stronger meetings management and better control of hotel bookings. HRG also
said it won more business than it lost.