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The New Business Travel Mega Merger
Today's podcast looks at a corporate travel mega merger, Boeing's C-suite shuffle, and Booking.Com's sustainability retreat.
Good morning from Skift. It's Tuesday, March 26. Here's what you need to know about the business of travel today.
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Episode NotesAmex GBT announced plans on Monday to acquire CWT for $570 million, a deal that would combine two of the world's largest corporate travel agencies. Travel Technology Reporter Justin Dawes explains why Amex GBT executives are pushing for the megadeal.
Amex GBT CEO Paul Abbott said acquisitions are a key part of its growth strategy, noting the combined company would generate revenue of at least $3 billion. Abbott added acquiring CWT would strengthen several areas of Amex GBT, citing CWT's footprint in industries such as the media, entertainment and sports.
In addition, Amex GBT also said the acquisition would help produce savings of $155 million within three years.
Next, Boeing's senior leadership team is undergoing a major overhaul. CEO Dave Calhoun announced he's leaving the role at the end of the year, writes Airlines Editor Gordon Smith and Airlines Reporter Meghna Maharishi.
In addition to Calhoun stepping down, Commercial Airplanes Division CEO Stan Deal is retiring while board chair Larry Kellner will not run for re-election. Those senior personnel changes come as Boeing has experienced a rough start to 2024, including a blowout aboard an Alaska Airlines flight in January. Smith and Maharishi note that major airline CEOs and the U.S. Government have been increasingly critical of Boeing in recent weeks.
Finally, Booking.Com is ending a program that highlighted properties the company believed were standouts in sustainability, writes Executive Editor Dennis Schaal.
Dutch regulators said that Amsterdam-based Booking.Com's "Travel Sustainable" program, which awarded certain properties green leaves as badges, was possibly misleading. Dutch officials said properties might be conducting sustainable practices that weren't recognized. Booking.Com reported last year that more than 100,000 properties on its site had received a Travel Sustainable badge.
Producer/Presenter: Jose Marmolejos
Business Travel Could Stage A Full Pandemic Recovery In 2024
Corporate travel remains below 2019 levels, but airlines and hotels see a steady recovery.
Business travel has lagged leisure throughout the pandemic recovery as corporate road warriors – and their finance chiefs – grew content with video calls and sporadic trips into offices.
There are signs, however, that U.S. Business travelers are making their way back, albeit at a very measured pace. West Coast technology companies — long the laggards in business travel — are also returning.
Business travel will regain 95% of its 2019 level in 2024, up from 89% last year, the U.S. Travel Association forecast in January. However, if the U.S. Economy achieves a so-called "soft landing," with inflation slowing and interest rates easing, large tech and financial services companies may send more people out on the road.
Fortune 500 Green ShootsSpeaking Tuesday at an investor conference, Alaska and Delta Air Lines executives specifically cited growing travel demand by Fortune 500 member companies. The airline industry has relied heavily on leisure traffic for the past four years. Today, global business travelers are becoming a nice bonus.
"What's really been helpful is the return of business and corporate traffic for us in our West Coast hubs," Alaska Airlines CEO Ben Minicucci said at the J.P. Morgan Industrials Conference. "We kept saying on every analyst call there's upside for us, there's dry powder, as it starts coming back. And that's what we're seeing. We're seeing more business traffic come back."
Travel volume by Amazon has surpassed its 2019 level, and Microsoft spending is twice the level of 2023, Minicucci said. Seattle-based Alaska has travel programs with both Washington-based tech companies.
At the same investor event, Delta also called out growth among business, and said it sees robust demand into the second quarter and summer. Delta President Glen Hauenstein cited "continued strength in premium products and growing demand for corporate travel, and the more traditional corporate travel, the Fortune 500 companies," underlying the carrier's financial optimism.
In January, Hauenstein had said that "nearly 95%" of those queried in Delta's most recent corporate survey said they expected to travel as much or more in the first quarter as in the fourth quarter, "a double-digit improvement in travel intentions from our last survey."
AmEx GBT Is BullishAmerican Express Global Business Travel has detected a travel uptick among large global multinationals.
"We've also seen a pickup, particularly in the tech sector and professional services and I think we will see a narrowing of the gap, if you like, between SME (small-to-medium-sized enterprise) and global multinational as we go through 2024," CEO Paul Abbott said on the company's March 5 earnings call.
AmEx GBT is forecasting sales to increase by as much as 9% this year. The company acquired Egencia, the corporate travel management platform, from Expedia Group in 2021.
Amex GBT also sees airfare and hotels' average daily rate moderating in 2024, Abbott said. "We expect revenue outperformance as business travel stabilizes at or above GDP growth and Amex GBT continues to win and gain share," he said.
Not Everything's RosyThis good news for travel companies comes with plenty of caveats.
Video conferencing technology is well-established as suitable for many meetings and training events.
Corporate travel managers are contending with higher prices across the travel ecosystem as airlines, hotels and rental car chains all enjoy pricing power. Hotels' average daily rate (ADR) is at a record, according to data compiled by CoStar Group. Airline fares have declined from 2022 but still remain high, and highly volatile.
The work from home ethos is here to stay for many in the corporate world, and reduced time in an office tends to naturally shrink the amount of business travel professionals do.
Corporate sustainability goals also factor into how much travel companies are inclined to book. A third of U.S. Companies and 40% of those in Europe said they must trim travel per employee by more than 20% by 2030 to meet their sustainability targets, according to the 2023 Deloitte Corporate Travel Survey.
Yet for all the headwinds facing travel companies, a vigorous U.S. Economy with low unemployment — combined with return-to-office policies for many employers — is persuading the largest corporations that more business trips make sense.
"By the time we finish this year, assuming sort of the broader consensus view of a reasonably soft landing that by the time we get to the end of the year, we think you'll be at more normalized levels of demand," Hilton CEO Christopher Nassetta told analysts Feb. 7 on a quarterly call.
Marriott International, the largest hotel chain by room count, is also bullish about business travelers taking a slow-but-steady approach this year. "We continue to see incremental growth even coming out of the large corporates quarter‐over‐quarter," Marriott CEO Tony Capuano said in mid-February.
Global Business Travel: Amex GBT To Buy CWT In $570 Mln Deal
(RTTNews) - B2B software and services company Global Business Travel Group, Inc. (GBTG) announced Monday that its American Express Global Business Travel or Amex GBT has entered into a definitive agreement to acquire CWT, a business travel and meetings solutions provider, in a transaction valued at around $570 million on a cash-free, debt-free basis.
The acquisition is expected to be break-even to earnings per share in the first year of transaction close and accretive thereafter.
The deal is expected to close in the second half of 2024, subject to the satisfaction of customary closing conditions, including the receipt of certain regulatory approvals.
The purchase price is subject to certain assumptions and purchase price adjustments, and the deal will be funded by a combination of stock and cash.
At the closing of the transaction, Amex GBT expects to issue approximately 71.7 million shares of its common stock at a fixed price of $6.00 per share and to use cash on hand to fund the retirement of CWT debt and the remaining transaction consideration.
With the deal, Amex GBT has identified around $155 million of annual run-rate synergies within three years, with approximately 35% expected to be realized in 2025.
CWT, which serves 4,000 customers, is expected to generate around $850 million of revenues and $70 million-$80 million of Adjusted EBITDA in 2024.
Following the deal closure, CWT customers would have access to Amex GBT's proprietary software and services for travel and expense, including Neo1, Neo and Egencia. This is in addition to Select, which enables customers to integrate with technology partners.
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