CEO, Carlson Wagonlit Travel
There’s a lot of hotel capacity coming on, and demand is falling, but I think it’s hard to tell what the
dynamic will be in 2009. There are a number of moving parts; it’s city by city. Beijing rates will come down
3.5% to 4%, but Austin, Tex., for some reason, will go
up 8.6%. There will be pockets where it’s in balance. But
this research was done in September, and I’m not sure
how current September is any more.
was done in
but I’m not
We do still believe that rates will not come down significantly in the first half-to-two-thirds of ’09, but as
the impact on demand is more broadly felt, buyers will
have more leverage. When companies were negotiating
their ’09 rates in the middle of the third quarter of ’08,
there were some indicators about the economy, but it
wasn’t clear how deep the slowdown would be. Some
buyers will go back to hotels and will want to revisit
pricing, but I’m not sure how that will play out.
Some corporate customers still buy hotels at negotiated rates, but more are moving to best available rate,
and we think hotels might become more reliant on that.
We’re helping clients to look not just at a room-night,
but to try to package room-night, wi-fi and other services to improve their position.
Our acquisitions program is alive and well. We made
four acquisitions in the last half of 2007 and six in 2008.
The opportunity to find strong management teams,
strong client portfolios and good technology is self-evident. We’re looking at some deals. And multiples aren’t
quite as strong as a year ago, which is good for us.
But our first priority is to make sure we have a clear
understanding of our top line, to generate earnings
and cash flow, and maintain the balance sheet of this
company. We have to make sure we don’t get ahead of
An opportunity definitely exists in this time of uncertainty to broaden our base. As things become less
certain, safety is a concern, and clients are looking for
tracking and alerts so they understand where their travelers are. People are looking for ways to travel smarter
and to optimize ground transportation, cars and rail.
Compliance is a big deal. Top-line, purely transaction
al growth is challenged, but the opportunity to bring in
new clients is stronger than ever.
We’re in uncharted territory. This is the 21st century
version of the 1930s. It’s bad. But you can’t read back to
the 1930s [because] in the ’30s international travel was
the privilege of the few. Now, it’s the right of the many.
People will fall into one of three categories: those
who can’t afford to travel, those who could travel internationally but who think that for appearances’ sake, this
is not the year to do it, and those who realize that there
will be some very keen deals and can do what they’ve
never done before at prices that are the best in the better part of the last decade.
‘ As an indus-
try, if we
e rate and
get people to
t ravel, we’re
If you had to pick a
number for the range of people who might be unemployed or otherwise can’t afford travel, you’d say 10% to
15%. The real challenge is to make sure that the other
85% do travel, that the pie shrinks as little as possible.
We all have to work together to make sure people
don’t fall into the middle group, who won’t travel for
appearances’ sake. As an industry, if we don’t cooperate
and get people to travel, we’re dead. Afterward, we can
take off our gloves and have the fisticuffs over market
share. Ultimately, two traditional consumer concerns
have to be addressed that always need to be addressed:
First, are you selling some place on the list of places
people want to visit? It’s hard to get on someone’s short
list on short notice, no matter how good the deal is.
Then, why should they pick this place, this year?
But how will all the tectonic shifts in the airline industry play out? If there’s a lot of capacity and it’s being priced right, that’s a great incentive to travel. But if
capacity is cut and it costs $2,000 to come to Britain,
nobody will come, even if our currency offers a 30%
discount once someone has arrived.
And this has to be addressed sooner than later to
make travel affordable. Killer prices at the last minute
may not overcome reluctance to travel.
I think that from the consumer demand side of it, the
earliest we’re going to come out of this recession, from
a travel industry perspective, is spring-summer 2010. It
could take longer.
A lot comes down to the issue of whether people will
regard travel as a right or a privilege. We’ll soon find out