BTN's annual answer book for business travel managers.
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Carlson Wagonlit Travel Kurt Ekert talks:
Carlson Wagonlit Travel president and CEO Kurt Ekert talked with BTN contributing editor Amon Cohen about the competitive landscape and the digital innovations his mega travel management company is working on for customers.
BTN: How's business?
Ekert: We're filling the equivalent of 260 Boeing 787s and 100,000 hotel rooms each day, and we handle 105 to 110 corporate events. We are seeing very healthy transaction growth of 3.5 percent or so. We are seeing revenue growth in our RoomIt hotel distribution business in the mid-teens. We're now up to 1.1 million users of our mobile app, CWT To Go, so we're really beginning to see our strategy take hold. This year, we have already sold over $1 billion of new business.
BTN: To what do you attribute the disproportionately high growth for RoomIt?
Ekert: In addition to growing from 100,000 to nearly a million properties in our portfolio, we are also now able to aggregate rates, so when you look at a given property, we show the negotiated corporate deal, the best retail rate, the best aggregator rate and the CWT proprietary rate. We are effectively helping you understand and arbritrage the rate.
BTN: What changes are you seeing in the rate mix for corporate clients? Some people argue that corporate rates are losing their importance.
Ekert: Corporate negotiated rates account for 40 to 70 percent of what is bought, and I don't expect that to change. They remain especially important with larger corporate clients who have purchasing power with hoteliers. All things being equal, we prefer to show a corporate rate above anything else. What we are seeing is clients concentrating on buying at less hotels. They realize they don't need to get as long in the tail anymore because we have effectively done that on their behalf, and because we do $6 billion of turnover ourselves, we are able to get good deals for them.
BTN: So is there a big shift to rates negotiated by CWT?
Ekert: We've seen traction with third-party as well as RoomIt preferred rates, but I think RoomIt rates are going to be the fastest-growing channel for us.
BTN: What's your feeling about the proposed acquisition of Hogg Robinson by American Express Global Business Travel?
Ekert: You have two large competitors whom we respect going into one, and they'll compete under one or two brands, assuming the transaction actually closes. We're very focused on our 3.0 strategy and a great hotel offering, so the beauty for us is that while others are focused on things that might require a lot of internal effort, our focus is 100 percent on the market and our customers.
BTN: Do you need to respond by making your own acquisitions?
Ekert: We are very comfortable, with the strategy and scale we have, that we can separate ourselves from the rest of the pack, and we are not compelled to do a similar acquisition.
BTN: Venture capital is flowing into smaller digital startups that claim that the current model, dominated by complacent mega TMCs and corporate booking tool providers, is broken. Does that concern you?
Ekert: The business travel sector is a $1.2 to $1.3 trillion global industry. It's a good sector, growing at a 5 percent-ish compound annual growth rate, and it's ripe for disruption in that the pace of digital change in B2B has been slower than in B2C. There are reasons for that. There is more complexity. While there are a lot of things we build and are proprietary to us, there's no pride of ownership if [you're not] enhancing the value proposition. So if there's a third-party technology company out there that we can bring into our ecosystem and make it seamless for the buyer, that's what we do. We have partnered with two early-stage venture capital technology incubators, one in Silicon Valley and one in Paris. We look at about 1,000 different early-stage companies each year. We bring in a subset of those and beta them with a subset of our clients to ask if the technology is scalable and works in their environment. In some cases, we [go on to] invest in and scale that for our network.
BTN: But a lot of money is being pumped into these startup competitors. Do you worry about disruption of the mega TMCs the way Airbnb has disrupted accommodation or Uber and Lyft have disrupted taxis?
Ekert: Any sector or company that does not innovate will die. The key for us is to see changes in the marketplace and seize that opportunity. If we had the philosophy of saying we have to solve all those things ourselves, well we're just not that smart. But we are smart enough to say, "That's pretty cool. How do we make it work in this environment?" And that we're pretty good at, so I'm excited when I see interesting third-party capabilities coming up and seeing if there's a symbiosis there. Our whole strategy is to become the leading digital TMC in the world. There is no leading digital TMC today. I think we have maybe a marginal lead, but we really want to move the needle on what a TMC looks and feels like.
BTN: Not the leading travel management company in the world but the leading digital TMC?
Ekert: Absolutely correct. And that is a fundamental change. Out of our top 100 leaders in the company, nearly 50 percent were not here when I joined the company. We've brought in a lot of talent from e-commerce, consumer travel and technology. Our entire product technology team is different, and we've massively upgraded our capital expenditure spending. We really are becoming more of a technology and e-commerce company.
BTN: Some of the startups receiving investment are big advocates of traveler incentivization. CWT has introduced Loyalty Booster, which rewards travelers who book preferred hotels through RoomIt, your hotel distribution division. Do your customers like this, or do they look on it with distrust?
Ekert: For the vast majority of clients who opt into Loyalty Booster, we see definitive improvement in hotel attachment and user satisfaction, which is good for the corporation because it gives them control of their spend. There are also third-party companies which do similar things. We've worked to incubate a few of those and test them with our clients, with varied success. Each client looks at this differently. Some say it's pro-user experience and they want to do that for their Millennials. Others say, "Why should the traveler get a perk?" We understand it's not a one-size-fits-all mentality about that.
BTN: Some think payments is an area that has been overlooked. How are you going to address it?
Ekert: Approaching 90 percent of our transactions globally are on credit card. The world where the TMC played the role of banker is still present, but it's much smaller than it was.
BTN: You're talking about payment by invoicing?
Ekert: Correct. That's not a game I'm interested in playing long term. It's less than 10 percent, but it's certainly more concentrated in some key European markets. If you look at the consumer world, there are massive changes, and I think that's going to find its way into B2B. We haven't figured out the optimal-scaled mousetrap yet, but there is going to be disruption in payments in corporate travel. We want to understand that, capitalize on it and bring it in as soon as we can. Instead of inventing one ourselves, we're going to test a few emerging technologies, and if there's one that looks right, we're going to figure out how to implement it on a scaled basis.
BTN: Do you think blockchain could play a role?
Ekert: Blockchain could dramatically simplify our workflow processes, including payments. We have a couple of people focused on if and how blockchain could be an influence. It's much more theoretical at this point, but if you look forward five or 10 years from now, it will probably be prevalent in what we do.
BTN: What other technologies have you been working on?
Ekert: We're doing a lot with robotic process automation, so we can free travel counselors up to interface primarily with the client. [For example],when we implement a client … we have to input the profiles of what can be 10,000 or more different users for our largest clients. In the old times, we would have to enter them again several times for other steps in the process. Now you press a button and they transfer across all the platforms. That's RPA. It's so simple, but it exponentially reduces the time to do things. We've improved our implementation time with a typical customer by 40 percent since I joined the company.
BTN: How about artificial intelligence?
Ekert: With AI, the real opportunity is in personalization. The biggest thing we are doing there is around search algorithms. We have a team of about 60 data scientists which did not exist two years ago. They work on analytics projects and the personalization engine. We are in the very early stages of this. We think we can drive a much more intelligent search response.It's moving much more in that direction of our knowing who you are, what you're doing and what your colleagues are doing. If you are booking a flight to New York, we are saying: "Here are two hotels for you to go to, [based on] your loyalty, preferences and corporate policy." We don't assume; we know with great confidence what you want before you even book it.
BTN: What else are your corporate customers asking for?
Ekert: One of the biggest things is analytics. CWT AnalytIQs is our data product, which by all reports is the best in the industry, with good levels of customer satisfaction, but it's a real-time look backwards at what happened with your program data and doesn't always marry with your card or expense data, for example, or out-of-program data. So we've done two things that are pretty innovative. We've built a new front end called AnswerIQ. This will be rolled out in the second half of this year. Basically, it's a Google search box with drill-down capabilities. Instead of us [providing] 20 canned reports, and with some effort you can create another report, you basically act like you're Googling. You click through and you search your data in any way possible. We spent the last 18 months with the engineers building a "data lake." It's a much more enhanced way to get around your program data. The second thing is a product called Travel Consolidator. We've integrated feeds from all the key card and expense providers, etc., and we've married that with program information, so in one place you have one version of the truth. You can match it to a traveller. You can match it to a trip. You can see exactly what's going on. We're able with that to do a lot of "what if" analysis—for example, to optimize supplier relationships.
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