Travel Leaders Group is "the largest travel agency no one's ever heard of," according to Mike Batt, its own co-chairman. When we originally invited him this past summer to sit for a one-on-one interview during The Beat Live, which took place here last month, we intended to ask him to clarify the unusual structure of his group__which on the business travel side includes Travel Leaders Corporate plus premium-service players Tzell Travel Group and Protravel, as well as an extensive franchisee network__and discuss the threats and opportunities TMCs face today. Of course we did not know the on-stage interview would occur less than one week after an investment group led by Certares pledged to inject up to $1 billion in American Express Business Travel in return for a 50 percent stake in the business. The leader of that investment group? None other than Batt's fellow co-chairman at Travel Leaders Group, Greg O'Hara. Interviewer Amon Cohen of The Beat simply had to start the conversation there by asking Batt to explain how one person could be so intimately involved in two separate, competing travel giants. An edited transcript, including questions posed by other attendees at the conference, follows.
Cohen: We need to talk about your co-chairman at Travel Leaders Group. Michael "Greg" O'Hara has two names and he seems to have at least two travel agency businesses, which I can't quite get my head round. Can you briefly explain how the two businesses fit together and why there is a man with a foot in both camps?
Batt: The two businesses don't come together at all. They are completely separate. What is common to both is a shareholder and a longtime supporter of the business. I met Greg when I was at Carlson and we were a Worldspan customer, and became a much bigger one. We became close then, and then when he went to a private equity role with J.P. Morgan, I was the one who brought Greg into the Carlson family. When Carlson decided to sell the leisure business, I was devastated. I didn't realize that it was the biggest opportunity that I and my team ever faced. Greg was fantastically supportive. J.P. Morgan eventually bought a stake in what is now Travel Leaders and it's been a great journey.
So when it comes to this news from last [month], it's not associated with us at all. The businesses are not linked. You have to understand that Greg is a private equity specialist who happens to know a huge amount about the travel industry. The only comment I would make is that if you look at it from a travel industry perspective, taking really the world's only global business travel brand and matching it with a lot of expansion capital, it is a phenomenally innovative and exciting prospect.
Cohen: I still don't understand though. You've got a co-chairman of your very big agency group and yet he's buying into another very large agency company but you say the two are not connected. Does he have an executive role with your company?
Batt: He does. He's co-chairman with me of the company. But with the deal being put together with American Express, the formation of that is basically [bringing together] capital with the existing management. It's really like a management buy-in. I have no idea what the management structure will be once this agreement closes in the second quarter of next year. All I do know is that if there are any competition issues, they will be fixed at that time. But right now, there is absolutely no link whatsoever between Travel Leaders and American Express. None.
Cohen: Is there going to be?
Batt: Not that I can see. There's none planned. They are going to do whatever they are going to do, and obviously it's a much bigger business than ours, so I can see Greg focusing a lot more on that than on us. And remember that Greg has investments with a lot of other travel businesses as well. You should look at him more as a fund manager with investments in the travel business.
Cohen: Do you anticipate a conflict of interest? Is he going to have to quit your company to carry on with Amex?
Batt: I doubt it, but maybe. In all honesty, I am not trying to dodge the question, I just don't know.
Cohen: I looked into Certares and there's another chap on the board, Henry Briance, who also used to served on your board. So there's a lot of connections there.
Batt: Private equity people sit on a lot of boards. That's what they do: they manage money.
Cohen: You have described Travel Leaders as the biggest travel agency no one's ever heard of. Is that something you are comfortable with? What is this beast, and on the corporate side what is your strategy for it?
Batt: We are comfortable being what we are. We are a very diverse combination of travel assets which work very well together. We're good at what we do and we don't pretend to be what we're not.
On the corporate side, we're not going to be bidding on business that is multinational and $100 million per year, but for small, midsize and in some cases what I would call semi-large businesses, we are a great alternative to the global leaders in the industry because we have fantastic people, we have technology we have developed ourselves and sourced from other people and we are hungry for business. Because of the leisure side in the composition of our group, if you go into the high-service area, we have expertise there that a lot of other travel agents don't.
Cohen: You have a number of different brands just in the corporate travel area alone. Do you see them targeting different types of clients?
Batt: Totally. We have a franchise group as well. If you're in Dallas or Austin, Texas, we might have a $150 million franchisee who is fabulous in that area, and they will get all our technology and all our help. We don't compete with them; we're there to support them, we negotiate with suppliers for them, we make sure they comply with our preferred supplier policies and we make them look like they're a lot bigger.
Cohen: Are you planning to rationalize, realign or rebrand this portfolio that you have?
Batt: No. It's a great question to ask. Every consultant that comes in basically says, "Let's make stew. Let's take all these vegetables that look great on their own and stick them in a pot." Sometimes it makes sense. For example, if you take Tzell and Protravel, which are both very strong premium-end agencies, and there is a mid-office system that is excellent at Protravel, we would put that into Tzell, but we wouldn't take the Tzell brand and Protravel brand and squish them together to make stew. What do we need to put one name on that for? We don't.
Cohen: Are you looking to bring even more brands into the corporate portfolio?
Batt: We are active buyers of travel businesses. We are active buyers at a price that is fair, and we only buy businesses where the people running it stay with us. If the owners don't stay, it's generally not a good acquisition.
Mark Hollyhead, Egencia: How much do you integrate across the group?
Batt: There is some integration at Tzell and Protravel but it tends to be back- and mid-office systems__things like hotel commission reclamation systems. But there would be no integration, for example, on the sales front. We're not embarrassed by that. We say, "Let the customer choose."
Cohen: Do your brands find themselves in competitive situations against each other?
Batt: Sure. The only thing is that if we find it's a Travel Leaders franchisee, we tend to be kinder to the franchisee unless we think it doesn't have a good chance of winning.
Andy Menkes, Partnership Travel Consulting: Two questions that we would typically ask when sizing up a TMC. What percentage of your mix is business versus leisure and what percentage of your staff is on the payroll versus independent contractors?
Batt: Our mix is probably 60 to 65 percent business travel. In terms of permanent employees, we have 42,000 travel agents, and servicing all of those people we have about 1,700 employees actually on our payroll.
David Jonas, The Beat: Earlier in the conversation you talked about how you either build or source technology. How do you make that determination?
Batt: Generally cost. I've been in too many businesses where I've seen huge expenditures. You see businesses where people say, "We're not a travel agency, we're a travel technology company." No, you're a travel agency. You really are. How about picking up the phone? I'm not going to spend lots of money where everybody else is spending it, because how can I ever outspend [Concur CEO and chairman] Steve Singh? How can I outspend Vic Pynn [North America executive vice president] at Amadeus? There are parts of our technology which are unique to us and work for our business, so yes, we are going to spend there, but where I like to spend money is on training and bringing young people into the business.
Cohen: If your name isn't well-known in the United States, it is even less-known in the rest of the world. Do you have big plans to expand elsewhere?
Batt: London is our priority at the moment. We're about to move Tzell and Protravel into a combined office__at $140 per square foot, awfully expensive, but they will be nice offices__although we will continue to use two brands. In terms of acquisition strategy, we think there is so much more to be done in the U.S. It's better for us to focus on what we know rather than go to countries where we really don't know enough to be buying businesses intelligently.
Cohen: This is a time of great flux in the travel industry, with TMCs facing a number of asymmetric threats from other companies that aren't TMCs themselves. How are TMCs going navigate their way through this?
Batt: I'm very bullish. The announcement of the amount of investment going into American Express is staggering. It says there are a lot of people who have a lot of confidence in this business and I'll give you two reasons why. The first is the size of this business. It's huge. The U.S., for example, grows at 4 percent a year. It's a $400 billion market. That's $16 billion of [annual] growth. Expedia's not going to take $16 billion. Priceline's not going to take it. That's what has kept us growing.
The other thing that motivates me is society is getting richer all the time. People have more money and less time. There are fantastic opportunities in serving other people. It's honorable and it's profitable. We've grown to 42,000 agents and I'd love to see us get to 60,000.
Cohen: So your message to TMCs is stay optimistic, there's plenty to be positive about?
Batt: It's a huge market that is growing and there is a consumer need for people to help you. I'm as optimistic as I could be about any business and that's why I invested in it.