Travel management companies are linking up to survive a volatile future. But that can mean big changes for your travel program
By Mark Rowh
If it's true that the only constant is change, then constancy must be the word of the day in the current TMC landscape. Recent months have seen travel management companies garnering attention with a spate of acquisitions and new partnerships, and the trend doesn't seem to be waning.
Last year American Express Global Business Travel made headlines when it acquired Egencia, bolstering its technology underpinning in the process. That followed GBT’s acquisitions of Ovation Travel Group and AI start-up 30SecondsToFly. In a similar expansion, TripActions acquired the UK's Reed & Mackay, also in 2021. The California-based firm then followed that move with this year's addition of Comtravo, a travel solution in Germany, Austria and Switzerland, and the northern Europe travel agency Resia.
The news behind the news is that it’s far from the exception. Across the globe, a variety of companies are exploring mergers, acquisitions and other partnerships.
One company considering such moves is JTB Business Travel, which already boasts a network of more than 500 locations in 39 countries. "At the moment, all options are on the table and we are just in a discovery phase," says Geert de Boo, general manager and vice president of global business travel. “We're looking at what needs are out there, especially with agencies that struggle with necessary investments and for which our strengths can be a solution."
He cites a number of factors making it difficult for agencies to survive on their own. "Efficiency, new distribution channels, global consolidation, sustainability are just a few hot topics that face many agencies," he says. "And they may have lost the ability to make new investments in these areas, burning through their reserves when trying to stay afloat during the pandemic."
Facing such changes, not to mention the disappearance of some TMCs entirely, corporate travel buyers are finding both challenges and opportunities in maintaining mutually beneficial TMC relationships.
Pandemic Pressures As with just about everything else during the past couple of years, COVID-19 has been a major factor in the M&A trend. "The TMC industry saw many years of strong consolidation momentum before the pandemic, especially in the middle market," says Julia Kou, chief strategy officer for CWT. "But the pandemic’s financial strain on the travel industry has definitely accelerated the consolidation trend across the industry."
That perspective is echoed by Andrew Menkes, founder and CEO of Partnership Travel Consulting. Menkes notes that what was a pre-COVID trend has picked up speed, largely as a result of the pandemic’s financial impact on the travel industry. "I’m confident that we will see more M&A activity as we go into next year, as the past few months of renewed transaction activity make an acquisition of a TMC more appealing," Menkes says. He notes that a review of ARC agency locations is a good indicator of the consolidation of travel agencies in the US. And on the international scene some very large legacy TMCs have been involved in shutdowns or mergers, with this global trend likely to continue into 2023.
James Stevenson, the CEO of GlobalStar Travel Management, sees significant growth ahead for some of those larger players. "The mega-TMCs will be looking to grow through an M&A strategy," he says. That might include considering acquisitions in specialist areas such as high-touch, or into the additional verticals of meetings and events or the SME market. "The mega-TMCs have shareholders to satisfy who will expect the business to meet aggressive growth targets and deliver a return on shareholder investment."
The online TMCs might also consider an M&A program, Stevenson adds. "It’s likely they will have realized that to grow they require both footprint and touch," he says. "A strategic acquisition could make both a reality."
Other possibilities include opportunist acquisitions aimed at growing market share and obtaining competitors. "These will likely be at a relatively low cost – and a mix of equity and debt – by the smaller but successful TMC," he predicts.
It's also likely to see some of the networks targeted. "A successful network acquisition provides control, an extended global footprint and capability without the overhead of ownership costs in market," Stevenson notes.
Kou points out that while the specific motivation behind each deal differs fundamentally with the buyer, recent consolidation in the TMC space has been driven by acquiring clients in a strategic geography or vertical, and strategically strengthening the buyer’s servicing capability and platform.
"Platform and technology investments by TMCs are critical to meeting the demands of travel managers and business travelers, especially with the level of travel disruptions and industry-wide labor constraints," she says. "Anecdotally, many smaller TMCs were unable to survive the drastic drop in business travel and the unpredictable pace of recovery that followed." At the same time, many mid-market TMCs are either unwilling or unable to invest the large amounts of capital needed to make their technology infrastructure and platform meet the demands of clients and prospects. "This is where building partnerships to access that technology can be a good option," Kou explains.
At CWT, Kou says, a combination of in-house development and strategic partnerships has been used in building out its platform and product offerings. This has included a partnership introduced earlier this year with ZYTLYN Technologies, an AI predictive analytics company, aimed at predicting forthcoming travel demand to and from specific routes, as well as at a global level. Another partnership, begun this year with carbon intelligence platform Thrust Carbon, focuses on further enhancements to existing carbon dioxide reporting capabilities.
Coping With Change While mergers and acquisitions may bring new horizons for some, the prospect of the changes they cause can be unsettling for travel managers. "When your corporate TMC gets acquired, your first reaction is probably to cringe," says Greeley Koch, managing director, 490 Consulting.
That's an understandable response given the range of questions that may take some time to answer. What happens to my service levels? What happens to the agents and account manager on my team? Will we still command the same gravitas in the new environment? Koch adds you might really be concerned if your smaller agency was acquired by a much larger TMC. Suddenly moving from being a big fish in a little pond to a little fish in a big pond can create months of challenges and uncertainty as you wait to see if the initial promises of “nothing is going to change” in the integration really hold true. "Of course, you hope things get better and you have access to more services and support," he notes. "But chances are you'll be a skeptic until the integration is fully completed."
Of course all firms aren’t necessarily vulnerable to being absorbed in such a way that transforms long-standing service levels. GlobalStar, for example, is insulated and protected to a certain degree from any one partner taking total control and then selling, according to Stevenson. This provides guarantees around surety, business continuity and service to partners and clients. "Clients are further protected as we have multiple partner options in key markets," he says. "If a partner were to be acquired, our client has the ability to move their business to another GlobalStar partner in market."
For those who do face unavoidable changes, the old truism of regarding a perceived problem as an opportunity may actually hold some value. "Many travel managers and buyers are finding themselves without a TMC because it went out of business, or they’re finding themselves with one that is in the midst of a long, distracting M&A integration process," Koch says. "Now is the time for travel managers and buyers to rethink their travel programs and what they really need from their TMC."
This means having a Plan B in place should your TMC be acquired and service issues develop, Koch advises. Such a strategy can eliminate surprises if you’re ready with your contingencies and your leadership knows you are on top of things.
Even with good planning, though, the need for some adjustment time can be expected. "When your TCM is purchased, be ready for some time of uncertainty as your day-to-day staff wonders about their roles," he says. "Talk to the leadership of the new company to find out how they see the integration working, and push them to support what is important to you from staffing to service levels and technology." To supplement these discussions, scheduling regular check-in meetings with the new team can help assure your needs are met.
Stevenson says the first step in adapting to the current situation is to make sure your contract gives you the ability to move if there is an acquisition or merger that you don’t like. In addition, it's best to remain open to moving back to a TMC you might have left previously. "Be very clear on what you want from a global program," Koch advises. "Understand the local market needs and requirements.”
Kou advises travel managers to connect with more than one TMC to get the latest thinking and strategies. "Survey your travelers’ pain points," she says. "Business travel is a complex and interconnected ecosystem, and companies need a TMC partner to collaborate and innovate to address their particular pain points and help navigate the uncertainty."