18 February 2010 - Carlson Wagonlit Travel reported a 23 percent year-over-year decline in 2009 sales, to $21.4 billion, and 9.3 percent fewer transactions, with CWT president and CEO Doug Anderson citing drops in average airfares and room rates, as well as business travelers trading down and travelers trading air travel for rail in Europe.
The "extraordinary" economic environment impacted all regions for CWT: Asia Pacific was hardest hit, posting a 27.6 percent decline in volume, followed by a 27.1 percent drop in Europe, Middle East and Africa, a 21.2 percent decrease in Latin America and 17.4 percent decline in North America, the company reported.
Buoyed by the 96 percent client-retention rate and new sales of $1.86 billion last year, as well as some stabilization by year-end, Anderson expects "moderate growth" this year. "Small, single-digit growth is probably what we should expect and what we are planning for in 2010," Anderson said in an interview with
The Transnational to discuss the results--the worst since the post-9/11 slowdown in 2001-2002. An excerpt follows.
Your financial update refers to stabilization at year-end 2009. Is that in all regions, and has it continued in 2010?
The statement is more about our overall global consolidated basis. There's a lot of soft economic news, especially in Southern Europe. In the United States, we've seen some clear, visible, upward trends. Europe is near the bottom. Asia Pacific is growing nicely for us.
On a regional basis, we had what I'll call a good recovery in the last quarter and half of the year, especially in North America in our U.S. commercial business. Travel was up a bit, and we’ve seen that trend continue through the first month and a half of 2010. Our U.S. military and government business has remained strong throughout.
Europe, Middle East and Africa, which is one of our two largest regional operations, is still what I would call bouncing along the bottom. We're up a percent or two or three one week, down the next; no clear trend, no clear uptick. Some economies, especially in Western Europe are still meandering a bit. Spain is especially hard hit. Spain unemployment was approaching and may even be above 20 percent.
Some of our stability last year, if you can call minus 23 percent stability, we believe we performed better than the market. We had very high retention last year. We had some very good wins during the course of the year and were implementing accounts that we won in 2008, which was also a good sales year for us. So we had, I think, better performance than the market as we moved through 2009 and that sets up pretty nicely for 2010.
What is the biggest area for new revenue growth this year?
Similar to what we've seen in the last couple of years, clients are going to continue to be focused on more effectively managing their hotel programs, meetings and event spend and generally driving compliance with their overall programs around those two programs, along with rail and air travel.
We recently released a
survey of 169 travel managers around the world. What they told us is that optimizing their hotel spend, improving traveler compliance, optimizing simple bookings (another phrase for driving online adoption) and driving air and ground transportation savings are their three highest priorities in 2010. There's nothing new in any of that. I think there's more focus on online adoption perhaps as a way to more effectively manage transaction costs. But the main bellwethers of effectively managed travel programs are going to continue to be around meetings and events, putting the right policy in place and encouraging travelers to adopt policy. Those have been our main areas of focus for the last couple of years and will continue to be in 2010.
What is your sense for request for proposal activity in 2010, especially in light of the large number of RFPs issued in 2009?
The whole industry and everybody who talks about the industry saw higher levels of activity in '09. I think that will curtail a bit. Many companies came out in '09 because they were looking for ways to aggressively drive savings in their programs. We happened to have an unusually high rebid or renewal year in 2009. It was just one of those things, but we did very well per our retention numbers.
Our CWT portfolio up for rebid in 2010 is quite a bit smaller than in 2009. I am hoping that the drive to centralize and consolidate continues, and I think it will. That's good for us. That's one of our sweet spots, and we do very well when clients or prospects are looking to globalize their offerings because we have one of the few truly global platforms in the industry.
Given the travel reductions last year, how do you and your clients analyze travel data and predict trends going forward?
I think we're in a disruptive pattern around this recession. If you look back over the last 25 to 30 years, the long-term trend has been a business travel growth profile that's a couple of times gross domestic product growth. If GDP is three, business travel is somewhere up to six. You can actually see in the long-term trends around recessions or economic disruptions that correlation changes. We're in a period right now where it's changed.
When we get back to a more normal economic climate, that long-term growth profile will return. I don't personally think the correlation will be as strong as it has been in the past. Instead of two-to-one, it may be 1.5- or 1.75-to-1 because there have been some permanent changes in the way companies think about travel. One of those permanent changes will be around virtual meeting alternatives, especially for internal meetings, and curtailing some of the travel around internal meetings and reviews. I don't think it will be a sea change in terms of that growth profile, but it will be a small step down and will be permanent.
How does your employee count in 2009 compare to the 22,000 reported in 2008?
On a full-time equivalent basis, we reduced just under 4,300 positions. We finished the year with 17,400 FTEs. What worked well for us and will work well for us going forward is our regional leaders in many countries found ways to reduce work hours, give employees unpaid time off and adjust our cost structure, but not go through the pain of severing employees and the costs associated with that. That also enabled us to retain talented people and we can grow back into the full-time work week as we experience growth. Some of that is happening in the United States now, based on the growth profile. We actually reduced something like 2,200 people, but we were able to get another couple thousand full-time-equivalent benefits out of the work week adjustments and leave without pay where it made sense.
