Skift Take
– Justin Bachman, Skift
The big players in the world of corporate travel management are preparing to get bigger: Amex GBT $570 million offer for CWT and ugly of Direct Travel to a consortium of investors are two of the latest examples of the race to bulk up through mergers. .
The trend is largely driven by two factors: travel providers – primarily airlines – seeking greater efficiencies in their distribution channels and the enormous capital required to invest in technology to sell and serve travelers in the world
“I think the customer needs are fundamentally consolidation in the industry,” Amex GBT CEO Paul Abbott told Skift. “I think the needs of suppliers have also changed. Suppliers want their distribution channels to offer a modern retail experience,” he said.
For example, airlines are moving an increasing part of their fares from the traditional model of the global distribution system to a direct NDC (New Distribution Capability) platform. And agencies are under pressure to adopt.
The merger of CWT into Amex GBT is “a perfect example of how it’s really only the big players who have the capital to do it,” Mike McCormick, a travel consultant and former head of the Global Business Travel Association, said. said on April 1 on Travel. Again podcast.
Larger corporate firms, such as Amex GBT, BCD Travel and Navan, have been forced “to make really big investments in technology and continued investments” given the aggressive push from American and others, McCormick noted.
Navan, for example, last month promoted his deeper integration with United Airlines to support the carrier’s fare strategy, along with other self-service tools and more personalization for travelers.
“Getting bigger is critical in terms of a lot of the changes and the negotiation of the airlines, and still the pressure on the earnings and the commissions and the business in general,” McCormick said.
Invest for the next generation of travel
Investor Steve Singh, the founder and former CEO of Concur, is the managing director of Madrona, the Seattle venture capital firm that is among the four investment firms that acquired Direct Travel Inc. on the 2nd of April.
Singh told Skift that the investor group wants to create a “the next generation” Travel management company that offers a seamlessly connected journey in which all of a traveler’s airlines, hotels, meetings, ground transportation and appointment bookings will be integrated, allowing for much simpler itinerary changes. For now, it’s an aspirational goal, one the industry has long wanted but has proven difficult to achieve.
Travel management companies sell multiple technology platforms to serve customers and “the result is that it is very expensive to build and run a TMC,” Singh wrote in a blog post explaining the investor group’s view of how the managed travel industry should evolve.
“The fact that these legacy solutions are built on non-open and non-extensible GDS platforms makes the goal of delivering an incredible customer experience at a better value proposition even more challenging.”
“As someone who has logged tens of millions of flight miles, I would like a system that allows me to book a hotel from the time I arrive in a city to the time I need to leave, not 3 a.m. “, Singh. he wrote in his post.
What’s next for travelers
Amex GBT customers can see a greater focus on particular industry verticals such as energy, US government, mining and marine for CWT. Those areas tend to present more complexity and transaction value, along with higher customer retention rates, Amex GBT told investors on March 25 explaining the CWT deal.
Abbott said successful travel management companies increasingly need software and services — not just one — that are effectively married.
“You have to have the best technology and the best people, you have to integrate better than anyone else, and you have to deliver consistently on a global basis,” he said. “And this is difficult and requires significant investment and significant experience.”
