Arlington, Va. – Since becoming president and CEO of BCD Travel last year, 20-plus-year company vet John Snyder has overseen the mega travel management company's strategic, commercial, financial and operational direction. Last week, he sat down with David Meyer, editorial director of The BTN Group, which publishes The Beat, at The Beat Live conference here to address consolidation, client pricing, the competitive set, Lufthansa and technology investment strategy. A condensed and edited transcript of that on-stage interview follows.
Meyer: There's a huge opportunity when it comes to serving midmarket clients. How critical is it to your business to pursue that group, and how are you going after that opportunity?
Snyder: That varies from market to market. In Europe, we sell heavily in the small to midmarket space pretty aggressively. Maybe a little less so in the U.S. marketplace. I think everyone heard we most recently did an acquisition in Knoxville, World Travel Services, which is one of our affiliates. They operate in the small to midmarket space. But in no form or fashion do we want to get into a real competitive environment with our U.S. affiliate program. We sort of acquired that with the understanding that the owners wanted to get out and we didn't want it to go to one of our competitors, so we brought it on board and we will, obviously, grow in the small to midmarket space as a result of that acquisition. Still, a big part of the strategy is our affiliate network and what we do with them here in the U.S. It varies depending on the region of the world, and here in the U.S., we still highly support our affiliate network.
Meyer: Will there be other acquisitions in that realm?
Snyder: If we have other affiliates or players that are looking at exiting the business, we're definitely in acquisition mode. We have a pretty aggressive acquisition strategy. We're in a pretty fortunate situation: We've got low debt, we've got an owner that loves this business and he wants to grow it. So he's given me a pretty big task to increase the size of the company pretty significantly over the next three to five years. So, we're looking at acquisitions, really, across the board. Some to strengthen our global network, strategically, some to open up new lines of business, mostly on the meeting and events side. We did an acquisition late last year of a meeting and events company up in North Carolina that had some great technology for the pharma industry. So we took that on as an acquisition strategically to increase our product offering to our pharma customers.
Meyer: What are you seeing as you forecast the year ahead?
Snyder: It varies dramatically from region to region. In the U.S., initial numbers are coming in that we're going to be projecting a low-single-digit increase year over year. Asia/Pacific is probably going to be a high-single-digit growth rate. We've been achieving double-digit growth rates in the Asia/Pacific for quite a few years now, and it seems like that has slowed down a little bit. In Europe, pretty much flat year over year. It really varies significantly from region to region.
Meyer: When you look at the area of technology, are you looking to buy, build or partner?
Snyder: All of the above. I'm a big believer that if there's a good technology out there, let's buy it and adapt it to our environment. It's a cheaper approach; it's a more effective approach. If you tried to go out as a TMC and develop every piece of technology that you needed to service your customers, you'd go bankrupt. We take a very methodical approach to that. There are a couple core platforms. Our DecisionSource data platform is one that we absolutely want to keep in-house and develop ourselves. Our mobile platform and our mobile technology is one that we absolutely want to keep in-house and manage our own development on. Anything outside of that, we're pretty much in the buy or partner arena.
Meyer: Are you increasing investment, then?
Snyder: We have in those two core spaces that I talked about. One thing that has been pretty unique within BCD Travel is, as we all know, we hit a huge dip in the industry five or six years ago, and within BCD we continued to invest even through the worst days. That's one of the advantages of having a private owner. He isn't always looking at the next quarter of profits or the annual profits. He's really trying to build the business for the next, next generation. If you look at our investment model over the last 10 years, it's been very consistent. It's ramped up for sure in the last couple years, but even through the worst years, we continued to redeploy 40 percent to 50 percent of our bottom line back into the business in investment.
Meyer: What's the vision for where your investment in mobile is going to lead, and how significant is your investment in that specific category?
Snyder: It's multimillions of dollars every year that we're investing in that. … I may be a believer in a mini Swiss Army knife or something a little bit scaled back. You need to have a mobile platform that offers about 70 percent to 80 percent of the total service offerings that you want to offer on a mobile platform. We're taking that approach. We believe it's going to be not only a servicing platform but also a selling platform for us moving forward. Without a doubt, the trend is mobile and we're starting to see the early phases of that, and we feel we need to invest heavily in it.
Meyer: There seems to be a lag among corporate travel buyers in having a comprehensive mobile strategy. Are people starting to get there? Why aren't travel buyers more aggressive in coming to the table with a strategy?
Snyder: There are a lot of different reasons. Probably one of the biggest driving reasons is there's no perfect travel app out there that does everything that the buyers want it to do. They're sort of waiting for that perfect travel app to be developed and be out on the market. We're well along the way on that. By the middle to the end of next year, it will be the all-encompassing app that folks are looking for. There isn't a fully developed app out there that does everything they want it to do, so they've allowed travelers to go off and do their own thing. That will change significantly at the tail end of this year going into 2016.
Meyer: Does that include capturing the data and providing travel managers with the data they need to manage their programs?
Snyder: Yeah, that's part of the total integration of the mobile platform. The biggest thing we're focused on right now is hotels. There are not great hotel solutions out in the marketplace today, and mobile is the perfect delivery platform for hotels. We're investing a lot of money in our TripSource hotel platform that will be released on mobile in the first quarter of 2016. It's going to have a broader inventory than anyone's ever really had in the hotel space. We're going to be bringing in content from Expedia and HRS and corporate negotiated rates. We're going to have all of that in one place and it's going to be a pretty slick platform.
Meyer: Is that something that your clients are going to have to pay an additional charge for?
Snyder: Oh no. It'll be a free service and we'll make our money obviously on the commission side of that. Everyone knows this industry is woefully poor on hotel bookings, with attachment rates being down around 50 percent. With an effective mobile app, we can drive that up to around 60, 70 maybe 80 percent over time. The economics are definitely there that we won't have to charge for that service.
Meyer: We got a question from a reader of The Beat. When is BCD going to offer a standardized alternative to the existing fee-per-booking model?
Snyder: We've looked at and tried other pricing models, but without almost any exception, our customers continue to migrate back to the current pricing models. We've tried subscription pricing; we've tested that with a few customers and pretty much abandoned that. It seems the big customers that we typically are dealing with want a lot of visibility and transparency in the overall pricing. They want to see what the costs of their programs are, the revenues involved in that program, and at BCD, we're a big believer in having an open book policy and sharing that with our customers and really having a very transparent pricing agreement. Quite honestly, that's what the customers are buying today.
Meyer: You don't see the transaction-based pricing model on the wane?
Snyder: No. It has morphed and migrated over time, for sure. The transaction pricing models of 10 years ago don't really exist today because there's been a lot of morphing and changing.
The Beat editor-in-chief Jay Boehmer: American Express Global Business Travel got a hefty injection of cash. Since going to a joint-venture structure, is it a fiercer competitor?
Snyder: Yeah, without a doubt they've got deep pockets. They've got a lot of money, and they have become more fierce. When you have a lot of money, you get more aggressive with pricing, you get more aggressive with trying to capture new business. And it has created a more competitive environment without a doubt. I'm still sort of waiting to see what they're going to do with that big pile of cash. For sure, it has caused them to be a little more competitive in the marketplace.
Meyer: How much of a meaningful consolidation opportunity remains at the top of the TMC category? Is there still room for consolidation there?
Snyder: I believe there is. We've got three big players and three or four sort of fringe players. There's definitely room for consolidation at the high end of the industry. We plan to be a player in that consolidation. I know there were a lot of rumors floating around at the end of last year, early this year, that BCD was prepping itself for sale because they were doing these acquisitions and they were tightening down their workforce. Quite honestly, we were doing that so we could grow. I do want to dispel those rumors: BCD is not for sale—never will be for sale in my lifetime. We have an owner who wants to build this business for the next, next generation, so there will be consolidation at the top of the industry, and BCD will be a player in that. We will be one of the consolidators.
Meyer: Another rumor going around was that it would be logical for BCD to buy HRG, especially since BCD owner John Fentener van Vlissingen has a stake in HRG. What do you say to that?
Snyder: John is the biggest or one of the biggest shareholders; he holds close to 25 percent of HRG. But it is held in a totally separate holding company—nothing to do with BCD Travel. Quite honestly, he has never tried to impress that upon me that that is a long-term strategy of his. We are going to look for the best deal out in the marketplace. If HRG is the best deal, great. If another player out there is the best deal and makes the most sense for us, that's what we'll focus on. There are no plans today to go out and deepen that ownership of HRG. They're just one of the opportunities that we'll look at over time.
Meyer: Let's revisit the Hot Seat topic of the day, Lufthansa. What are you advising your clients, especially those in Europe where Lufthansa is dominant?
Snyder: Obviously this is tough situation for us specifically. We are hands down the largest agency in Germany, I think by two- or three-fold over our next largest competitor. We have a very deep partnership with Lufthansa, not only in Germany but across the globe.
Obviously, we need to tread a bit lightly on that. Have I agreed with the approach that Lufthansa has taken? No. To go out with a plan in the environment that we're in without a technology solution and without a compelling value proposition for the end customer, which is our corporate customer, is a little bit ahead of schedule. They tried this five or six years ago without a lot of success. We'll see how it works today.
We've got a range of different emotion across our German client base. There are some who are very angry and are booking away from Lufthansa. It was interesting to hear [Lufthansa German Airlines' Juergen Siebenrock] talk about no change. I think there is a change, quite honestly. I know we've seen it within our client base. We've seen some migration away from Lufthansa. There are some other customers taking a wait-and-see approach. It's really across the board. Really, our advice is: Let's do the right thing for the corporation at the end of the day. Part of the value proposition we drive is making sure our customers get the most value out of their travel investment. If it means not booking with Lufthansa because they're €16 more, then that might be the reality of the situation.
Meyer: What about the customers you represent that have the biggest clout? Is anybody able to negotiate around that fee?
Snyder: I think Lufthansa has had discussions but has pretty much shut down doing anything specific for an individual customer. We handle some of the biggest customers in Germany. To my knowledge, there's been no back-end discussions or back-end remuneration to make the situation right, even for the large customers in Germany.