Juggling corporate and leisure travel

n 2001, the year business travelers stayed home, it was tough for those agencies that sell all or mostly corporate.

More than half-way into 2002, it's still tough, and many agents who do business travel are thankful it's not all they do.

Selling leisure travel, whether to business-travel clients or the general public, is the most common way corporate agencies have diversified their businesses, but it isn't the only way.

Corporate-centered agencies have shown ingenuity by developing niches in fields ranging from wholesaling to consulting.

Such diversification has afforded agencies a buffer against the slump in business travel. By most accounts, it's worth the effort and worth the risk.

Nashville agent Billy Caldwell said diversification helped him make ends meet.

For Caldwell, president of Caldwell Travel -- a $40 million agency -- diversification meant the acquisition of Enzor Travel, a Nashville- based leisure agency, in June 2001.

The events of Sept. 11 postponed some of the benefits of that acquisition, but Caldwell said he was glad he had added a leisure agency when vacation bookings started to pick up in 2002.

"Our region, middle Tennessee, is affluent," Caldwell said. "People have money to spend, and there was pent-up demand after Sept. 11, fueled by supplier discounts."

Double duty

Meanwhile, Caldwell said he encourages his corporate travel agents, who have time on their hands these days, to sell leisure travel. Many of them do.

"We have a really mature crew," Caldwell said. "If we can bring in the business, they can handle it."

There are a few agents who would rather not sell leisure, and Caldwell said those agents are on four-day schedules because there isn't enough corporate business to warrant a full workweek.

Also diversifying into leisure is Vicki Citarelli, president of Travelong, a $4 million agency in Morristown, N.J. Citarelli recalled that when corporate travel was thriving, Travelong farmed out vacation business to independent contractors. Not anymore.

"We've been starting to do more vacation bookings in the office," Citarelli said. "We have the time."

Caldwell has a similar approach to the leisure market as Terry Brennan, president of Williamsburg Travel Management, an $85 million agency in Atlanta.

Brennan said his company decided to expand its leisure offerings four years ago, and that meant putting corporate agents on fam trips to inspect ships and resorts.

Brennan considers the agency's decision a wise one, as its cruise and tour business has doubled since 1998. The agency now is 75% corporate, 20% leisure and 5% meetings.

In particular, Brennan said his agents have been successful selling cruise meetings to corporate clients.

"We're promoting company meetings on cruise ships, and we've sold several of them, with several more pending," Brennan said.

Creative thinking

Bannockburn Travel Management, a $90 million agency outside Chicago, expanded its leisure business by getting into tour packages, in a roundabout way.

Bannockburn manages corporate travel for WSCR, a sports-talk radio station in the Windy City.

When the station was promoting a trip to Las Vegas for listeners to attend a live broadcast, WSCR contracted the agency to handle the travel accommodations.

"Putting tour packages together for leisure consumers is an outgrowth of our corporate groups business," said Steve Weiner, chief operating officer of Bannockburn. "For our meeting planners, the transition to book group tour packages was fairly easy."

Valerie Wilson Travel, a $225 million agency in New York, is always exploring inventive ways to market leisure services to corporate clients, said executive vice president Kimberly Wilson Wetty.

"We remind the corporate account that we don't just sell corporate travel," she said.

"We've asked the travel manager or [human relations department] if we can advertise a cruise deal, like a two-category upgrade if you book a certain sailing, by putting promotional material in [employees'] paystubs or posting something in the lunch room or on the corporate intranet," Wilson Wetty said.

"Most clients are comfortable with these promotions. We provide a benefit that doesn't cost them any money, and we increase our business."

Like many agencies, Valerie Wilson Travel meets with some clients to craft travel-related incentive programs for the clients' sales teams. The agency also books golf outings for corporate customers.

Valerie Wilson also diversified its business by acquiring Dailey-Thorp Travel, a company that packages guided opera tours in the U.S.

Cautious optimism

While the development of other niches by corporate agencies seems like a no-brainer, not all executives are aggressive in diversifying.

Gateway Travel Management in Pittsburgh, a $135 million agency with 95% corporate business, has had the chance to augment leisure bookings over the past five years, but the agency has turned away leisure business from corporate clients, said Jim Pekins, president of Gateway.

"We have a good corporate business, and I didn't feel confident that we could provide the same quality of service for leisure travel," Pekins said.

However, current marketplace conditions may prompt Pekins to change his mind.

"We're finding that there are more good leisure agents available with some mom-and-pop agencies going out of business because they couldn't survive airline commission cuts and the Internet," Pekins said. "It may make sense to [hire them] and do more leisure business."

Furthermore, Pekins said, he glances at the Sunday travel section in the Pittsburgh Post-Gazette and sees opportunity.

"The only advertiser is Liberty Travel," Pekins said. "I see all these vacationers at the airport, and I know they all can't be booking on the Internet."

Tapping talent

Some agencies, like Bannockburn and Austin Travel in Melville, N.Y., already have turned the failure of small leisure operations into growth for themselves.

"We've taken on travel agents who used to have their own business but now don't have a place to operate," said Bannockburn's Weiner.

"They use our infrastructure and they either set up shop in their home or within our agency.

"They pay us a monthly fee that is a derivative of their production. Almost 40 people are a part of the program. Some specialize in tours, some are cruise people, honeymoon specialists or Australian specialists. Some work full-time and some work part-time."

Jeffrey Austin, president of Austin Travel, said his agency has secured independent contractors in a couple of ways.

Austin acquired two agencies on Long Island last year and converted one of the locations into an office for independent contractors.

Also, unemployed agents approached Austin Travel about becoming independent contractors, and the agency hired them to work in the newly formed office.

"We pay them anywhere from 40% to 75% of commission and split a variety of expenses," Austin said. "We provide the infrastructure, and they sell. We're going that route fairly heavily."

A benefit of the independent-contractor model is that the agency doesn't pay health insurance for agents.

So far, the independent-contractor office has been successful, as the location generates about $7 million in annual sales.

"We need to grow our leisure business," Austin said. "It's a struggle to bring on new corporate customers, and often we are not making a big enough margin on corporate business."

Making your mark-up

San Diego Travel Group, a $90 million agency, increased its margins in corporate travel through a thriving air consolidator business.

SDTG has several corporate clients that travel to Europe and Asia; thus it made sense to enter the internationally focused air consolidator industry -- buying airline tickets wholesale and marking up the price.

SDTG decided to grow its consolidator business last year by acquiring Travel Connoisseur in San Diego, an agency with an even larger consolidator business than SDTG's.

"When we bought Travel Connoisseur, it had a nice consolidator business, selling flights to the U.K., mainly from Florida, California and Texas," said Karl Dring, general manager of SDTG.

After SDTG purchased Travel Connoisseur, its net-fare contracts rose from a few to 15.

"In spite of the downturn in international air volume, our sales and revenue have increased every single month in 2002," Dring said.

A service at SDTG that goes hand in hand with the consolidator business is a visa/passport procurement service.

"Many corporations don't want the hassle of doing this themselves," Dring said. "We can expedite the process and hand-deliver the visa or passport."

Diversifying essential?

Terry McCabe, president of Stratton Travel Management -- a $100 million agency in Oakland, N.J. -- said her agency would be profitable if 95% of the business were composed of corporate travel.

But diversifying has made the business even more lucrative.

"You can make money in corporate travel, but leisure is a more profitable business," said McCabe, whose agency's corporate-leisure split is 80-20.

"We've always had a big leisure presence, and now we're putting even more emphasis on it.

"Yes, there is the ability for consumers to book everything on line out there, but there still is a need for leisure counselors who know something about a destination and manage information."

And Stratton intends to sell more luxury tours and cruises since becoming a member of Virtuoso, the upscale consortium for leisure travel.

Besides providing agencies with the opportunity to make more profits, having a strong leisure business can act as a buffer against having to lay off agents when corporate travel is down.

Caldwell, of Caldwell Travel in Nashville, calls the rebound of leisure travel a "godsend."

"Corporate people aren't traveling as much," said Caldwell. "Leisure travel has helped us pay the bills."

Austin of Austin Travel said, "Our corporate business is so-so.

"Most of our corporate customers continue to hold off on major travel expenses. The corporate side of the business has a lot of difficulty."

That's why Austin Travel, has several initiatives under way to offset the downturn in business travel.

Some are in the germinal stage. One is a public Web site that sells only hotels (at www.myhotelsonline.com), and another is OmniChannels, a subsidiary that develops Web sites for travel agencies.

"We've got a lot of irons in the fire," said Austin.

"You never know which ones will get hot."

Consulting, a tool for diversity

hile leisure travel is clearly the most popular way for corporate agencies to diversify their businesses, it's not the only way. Some large agencies, like Carlson Wagonlit Travel and Northwestern Travel Management, have diversified by expanding their corporate travel services into the field of consulting, to help clients deal with broader cost-management issues.

Steve Shook, who heads CWT's solutions group, said the company has offered consulting since the early 1990s, but until about a year ago, the service was supplier-centric -- CWT identified travel patterns and corporations took that information to the negotiating table.

"Now we're spending time on the demand side, managing traveler behavior -- helping travelers make better choices," Shook said.

Shook said the company's solutions group has "turned the corner" in the past year, developing automation that tracks ever-changing airline fares and services.

Within the solutions group there are seven consultants dedicated to interpreting that data and offering a plan of action to companies, some of whom only do business with CWT's solutions group.

"In the past month, the solutions group has taken on seven new customers," Shook said. "Some are CWT transaction clients and some aren't."

Consulting appears to be a logical way for corporate agencies to diversify their businesses, but agencies must prove that any cost savings outweigh the expense.

In 1999, Belinda Muehlbauer, director of consulting for Minneapolis-based Northwestern Travel Management, asked clients if Northwestern could demonstrate the value of an ongoing consulting program by offering the service at a reduced fee.

"We did those case studies and showed them that a consulting program really does work," Muehlbauer said. "We're now working with 15 customers on a continual basis. It's a profitable venture."

Northwestern now is looking to expand its consulting business into meetings, which Muehlbauer says is an "untapped market" because most corporations don't have as good control of meeting spending as they do of transient business travel. -- J.L.