Business Travel Media Group editorial director Jay Campbell met with BCD Holdings chairman John Fentener Van Vlissingen and CEO Joop Drechsel last week at the company's headquarters in the Netherlands to talk about the business environment since the Great Recession. BCD Travel is the largest part of the $17.7 billion company, which also owns Park 'N Fly, a majority piece of TRX and other travel industry interests.
Campbell: Joop, the last time we spoke, it was a tough year. There was a lot of headcount reduction. How are things going these past couple of years?
Drechsel: It has been a learning experience. We came through that period much stronger and not at all beaten. We were at the forefront of cutting our costs and rightsizing the company. It was done at the expense of some very good people who unfortunately we had to let go, but as a result we remain financially robust despite taking the hit.
It's still a scary world out there. Every now and then in the global political arena, we go from crisis to crisis, which potentially has impact. So I want to be very cautious. Fortunately, having a strong shareholder helps because it was one of those times where I was very glad to not be a public company but rather being privately owned.
2010 turned out to be more than a satisfactory year. If you look at 2011, overall you can see that customers have come back to travel, very rapidly as a matter of fact. We tend to look very much at the American market or at the U.K. but I can see the growth pockets in Asia, in South America and even in certain parts of Europe. We have a lot of successful German customers who all seem to be really exporting like crazy to Asia.
Campbell: Do you expect big clients to adjust their travel budgets as they run out due to higher prices and increased demand?
Drechsel: What I have seen coming out of the crisis is that a lot of our customers have redefined some of their travel budgets, and that is pretty wise. Here in Europe, a lot of our clients had in the past planned meetings at 9 a.m. in London and, effectively, staff would travel the evening before to go to London, spend the night in a hotel, have a dinner, have a meeting the next morning at 9 a.m. and come back in the afternoon.
Now I can see them scheduling those meetings at 10 a.m. and even airline schedules have been adapted, because some of the flights have gone forward and it enables people to take an early morning flight and then, with London, you have the advantage of an hour time difference so you arrive still at 8 a.m. when you leave at 8 a.m. and you are in the City in time for a meeting at 10 a.m. For a corporation, that makes a lot of difference in certain expenses. In some ways, it's just smart expense managing. They have cut out a lot of their original fat.
Van Vlissingen: We were at first surprised that Park 'N Fly did not pick up at the same speed as the travel did, and then we analyzed it and found that people stayed one day shorter in the parking lot. They just go shorter and they go earlier. Now it's changing a little bit and people are now getting a little bit more relaxed, but it's still shorter. So they are cutting their costs, but not in traveling. We even see movement back to business class.
Drechsel: The premium economy approach from KLM in Europe has worked extremely well. That's a class that is normally 100 percent booked. It's more politically correct to sit there than in the front.
The other thing is that I can see meetings and incentives coming back. That is traditionally the first area that is cut. On the M&A side, we can see a lot of activity coming back because people like to buy when things are cheap, and so you see quite a lot of hunters in the world at the moment looking for potential things to pick up.
Campbell: There are so many more tools now for companies to see what they are spending even at the business unit level.
Drechsel: That is definitely an issue. We have all become so much more sophisticated than helping them managing their budget, that the budget itself becomes also no longer an excuse anymore. In the past you could actually overspend without knowing it.
Campbell: When we last saw each other, John, you said you prefer to take a back seat. How's that going?
Van Vlissingen: I am totally not involved in the day-to-day management. I do a lot on charity; I do a lot of going with the grandchildren and having fun. I do sometimes — but only if there is a wish from the management or the customers — go to customers.
We as a family have a lucky situation in that we are not dependent on the dividend of BCD. We are in it for the long play, and we are in for the next generation, so we are not open for any discussions which will change that.
Campbell: One thing that I remember you were passionate about was that if something changed with HRG, you'd want a seat at the table. I guess nothing has changed?
Van Vlissingen: No. Our percentage is up 1 percent; now we have 22 percent. I have a very good relationship with David [Radcliffe, chief executive of HRG]. We phone each other, and we see each other at least twice a year. It was important to do this because, at that time [of the Business Travel International breakup], we had about $1.5 billion in sales together, and that is naturally coming down because now we are on our own.
It would have been, at that time, very dangerous if they would be taken over by somebody else. So the situation has not changed, and I will still sit at that table if something happens.
Drechsel: We still have a number of joint clients. That is of course at some stage running out, but it is still existing and is going very well.
Campbell: There was a restructuring of revenue for TMCs starting in the mid-1990s, then there was a shift of some of the income to clients from suppliers. Has that been pretty stable since then?
Drechsel: I think we've moved more and more toward income from the customer side, which is healthy for the industry. On the other hand, we still receive compensation for our part in the distribution chain, which is normal because we do make a lot of cost in helping others to sell product — and that would be strange to see that only compensated and paid off by a customer.
So I think we've come to a more balanced approach here where customers realize that there's a lot we do for them, which they pay for either on a transaction or on a management fee basis and we sort of have a part in the supply chain toward suppliers, and sometimes we agree with our customers that we pass on that compensation back to them as part of our transaction.
Campbell: The trend was shifting toward more the client. But has that settled out and is it no longer moving in that direction?
Drechsel: No I think it would still go on, although it will never be 100 percent only, again because we would not do everything that we do for our suppliers for nothing.
We have some choices here. I can bring customers toward one or the other and that is something that we also do on behalf of the customer. So we actually leverage the customer position to those suppliers, and then we hand it back to the customer and that is part of what we need to do.
Lauren Darson assisted in compiling this article, which originally appeared in sister publication The Beat.
CORRECTION: The Beat regrets publishing hearsay last week in a reference to headcount at American Express Global Business Travel's Advisory Services. What follows is an unedited letter from the company.
An article in The Beat last week suggested there have been recent cuts at American Express Global Business Travel's Advisory Services and we would like to set the record straight.
In fact, Advisory Services is a thriving, vibrant part of American Express Global Business Travel and we have been adding team members to Advisory Services as we have been globalizing this business area to align with client demand.
Year-over-year, to handle the increase in client demand for expert advice on how to optimize their global travel program, we have had strong double-digit percentage increase in the Advisory Services team, at all levels, including the introduction of a new global VP/GM Kirsten Neuman. This team growth supports the accelerated business growth that we have been experiencing.
We are thrilled with the interest and engagement Advisory Services is driving with our clients and the innovative services and solutions it provides. We are focused on continued global talent recruitment and retention as we aim to deliver the value of our Advisory Services offerings to more and more clients around the world.