The economic turbulence seems to be easing - all the more reason to exercise prudence, CWT chief Douglas Anderson tells Jonathan Hart
IF UBIQUITOUS WIT AND tweeter Stephen Fry was famously the first guest at London's expensively restyled Savoy hotel, then fellow globetrotter and self-confessed Anglophile Douglas Anderson wasn't far behind.
A primary difference between the two early arrivals was that the modest, low profile president and CEO of Carlson Wagonlit Travel was at the hotel strictly on company business - delighted, he says, to be able to join clients in a high-end experience at the sponsor venue for CWT's annual UK exchange, despite carrying a message of ongoing caution distinctly at odds with the sumptuous surroundings.
The day after the exchange, Anderson appears eager to separate message from moment. Although fulsome in his praise of the host hotel, he evidently has little personal time for the fanciful. Sitting for our interview in one of The Savoy's freshly gilded salons, you sense he would be happier talking shop somewhere less overtly extravagant.
So what was that message? "It was about the rough weather we as a company and the industry generally have been through; about the modest growth achieved and the prospects going forward," he says.
"I don't and I won't make predictions about transactions or traffic but, in my eyes, industry indicators are looking a bit grey. We're expecting relatively modest growth as we go into 2011, yet what growth the industry experienced in recent quarters seems to have flattened out. So although the sky's not exactly black, it's certainly not bright blue, either."
Anderson claims he avoids making predictions because he's constantly pushed to do so by company investors - and it can be counterproductive. "Instead, we drill down to the financial. We talk about products and services and where we are as a company, where we come from and what we think may be happening in the market. Then, if we're right, the difference between what happens to us and what happens to the market is share, and capturing a little more of that."
Clearly a no-nonsense tactician for tough times, Anderson has spent the past two years steering the global travel management company (TMC) through turbulent economic waters.
There was no question of playacting through recession, he says. "It's all too easy to turn off business travel and we experienced such a massive drop in demand - 20 to 25 per cent - that, like other service sector companies, we didn't do anything just for sport. In some cases, if clients didn't completely turn off the lights, they certainly dimmed them by as much as 50 per cent, although none shut off travel completely.
"In any event, we needed to pull back and do some positive restructuring that was overdue. We had to do what was necessary to get the job done. It was the smart thing to do and the right time to do it because, in a declining market when the numbers are going to be weak, they might as well be a little weaker in favour of stronger numbers in future."
With a company that's 80 per cent powered by people, that restructuring involved cutting cash costs - firstly by freezing pay for the top three layers of the organisation, says Anderson, and then by reducing full-time equivalent staffing by 20 per cent, or 4,000 people globally for up to a year.
"We did that by reducing head count by about 2,000 while keeping the other 2,000 flexible, on a shorter working week or paid leave, until business started to expand again in the latter part of 2009. In that way, we held onto resources, and managed to save 50 per cent of our head count reduction plus a chunk of restructuring costs by avoiding re-hiring and re-training.
"All in all, it worked pretty well for us. Our structure is now leaner - salary levels have been revived and earnings are looking relatively good. We're back to early 2008 levels for client bookings and close, although still a few points down, on the sales value of those bookings. Overall, we're going through the bottom of a cycle and I think we're looking at single digit growth for while yet. It all depends on the economy."
So how are CWT's clients faring? "Generally they say they want be travelling as much, or more, over the next 12 months, compared with the last 12 months, but will be trying to do that at the same costs. Those clients who have gigantic increases in their travel plans are looking at some form of unit cost. Those who have moderate increases are looking to absorb that increase at the same cost. That's obviously not going to be easy to do because of increasing fares and rates." In most markets, air capacity is not keeping pace with demand, and inevitably this means higher fares, Anderson says. The same goes for hotel rates, up about four per cent in the economy sector and five or six per cent in the deluxe sector. "There are also pockets across the world where the hikes will be considerably higher, perhaps 10 per cent in Paris or London and up 12 or 13 per cent in Asia-Pacific, for example."
Anderson says CWT offers help specific to this challenge through its Solutions Group consultants who not only do program design but also support air, hotel and car requests for proposal (RFPs) for clients.
"We help them understand their buying patterns, aggregate their demand and develop policies and programs that lead them to concentrate their demand on a limited number of suppliers, all of which gives them better negotiating leverage," he says.
Anderson sees CWT's role as providing a global platform and applications, with localised management tailored to high-touch servicing to meet individual client-, country- or regional-specific models.
"The platform is almost independent from the service," he says. "The platform underpins operations and facilitates the aggregation that every client wants. The service is then delivered at a personal level. In my view, the price of admission to our sector is a very efficient, high quality processing capability.
"It's like the price of a ticket - if you want to come into the TMC sector you've got to have that. Then the value element - the consulting, solutions and servicing benefits - surrounds that, with technology at both the front and back ends."
- DOUGLAS ANDERSON joined Carlson Wagonlit Travel (CWT) as executive vice president and chief financial officer in 2007, a year before his appointment as president and chief executive. The holder of a BSc degree from the University of Nebraska, Anderson formerly held Switzerland-based senior financial positions with both the SITA Group and Eastman Kodak Company as well as being based in London and Brussels in similar roles with global giant UPS. He attributes his 25-year stint with UPS as instilling in him the sense of service quality, measure, management and recovery he brings to CWT. He also credits for his sense of the value of well-engineered operations and processes. Doug is married with three children and, though currently based in Paris, sees himself eventually settling in the UK.