Exclusive Interview with Jamie Pherous, CEO, CTM

Consultant and GBTA Director in Australia and New Zealand, Tony O’Connor, had the opportunity to put several questions to CTM CEO Jamie Pherous, following CTM’s acquisition of Travel and Transport.

TOC:  You’ve paid around 7 times T&T’s 2019 earnings for the purchase. It’s a large transaction. CTM must have an underpinning view on the recovery. How do you see business travel panning out over 2021 and 2022?

JP:  Like the best businesses in the industry, T&T moved early and swiftly to take out structural costs that will never come back. So most of the synergies are already baked in. On that basis, we paid 4.3 times. It is a large transaction but in our view, T&T was the very best business left in the world that was stand-alone. Our very strong financial position afforded us this opportunity; one that would not have arisen without Covid-19.

Our strong view is that travel will recover. It’s not “if” but “when”. The proof is our experiences in New Zealand and several states in Australia where we have seen full domestic travel recoveries where there are no travel restrictions. In fact, New Zealand is tracking above last year!

Given the diversity of the CTM business, and the high proportion of domestic  travel in CTM (which T&T also shares), we believe we can break even very quickly and run a profitable business centred around domestic-only travel until international returns. I don’t think many if any other travel companies can make that claim. So we are well positioned to be profitable on domestic-only business, and sit tight until international opens up.


TOC:  With T&T comes the Radius network. Do you see this as strengthening CTM as a truly global travel manager? How does this network of independent agents fit with your fully owned model? Are there plans for Radius?

JP:  Yes we do. The Radius hotel program is one of the very best corporate accommodation programs in the world. We plan to keep the Radius brand as a stand-alone business, but enhance the value to Radius partners though an enhanced hotel program. For example, we are one of the largest TMCs in APAC. And we believe our strength in distributing our Asian hotel deals will be beneficial to the Radius network.

From a network point of view, we encourage Radius partners to continue to collaborate across their network. And should they want to, they can now also network with CTM where it makes sense to do so. But we will not be forcing this on Radius partners. It is already a successful group and we only want to enhance the value for all members. As part of this review, we will be re- assessing membership and business networking fees downwards to ensure there are no barriers for current partners. We don’t want to dilute the positive impact we can have on Radius.


TOC:  The purchase is a big investment in the US market. The recovery will likely vary per region. How does CTM now sit now with these possible future shifts in regional activity?

JP:  On calendar 2019 basis, total annual transaction value for the entire group will be just shy of $11billion, making us the 5th largest TMC in the world, with North America representing just under half the global annual volume.

The USA is a global feeder market for corporate travel. So we think this is the right weighting to be a true global TMC and a challenger brand to the traditional 3 mega-TMC’s.

It is our geographic and client diversity that has been our strength through Covid 19. Our global revenues are running at much higher recovery rates than those of our peers because of this. For example, we have regions that have already been profitable in the July-September quarter. It is this diversity that underpins our financial strength and our confidence that we can return to profitability very quickly even with the smallest of improvements in client activity. We simply do not need international travel to open up again to run a very successful business. Given that we have zero debt and net liquidity of approximately $300m, our clients can feel very confident that we will be here tomorrow, next year and in the next decade.


TOC:  You’ve identified $25 million in potential cost reductions and efficiencies in the new operations. T&T was regarded as a fairly high-cost TMC. Do you think this fairly conservative figure might increase?

JP:  What has impressed us about T&T is just how pragmatic their wider leadership team has been. We are all aligned on being the best we can be. And the timing gives us the opportunity to reset and focus on what “best practice” client delivery and solutions should now look like, and then move rapidly towards that. I’m fact, nearly all key decisions have already been agreed across the wider team. This is an outstanding achievement this early, and only reinforces our combined commitment to being the best TMC in the market.

As a result, we expect not only a more efficient combined business, but a business that will have enhanced client facing solutions, complementing the high service reputation of both businesses.


TOC:  The capital raising was substantially more than was needed to fund the acquisition. Is further expansion in the wings? Or are you maintaining a very comfortable cash buffer to protect CTM from a lengthy downturn?

JP:  It is a combination of both. There are a few smaller acquisition opportunities that will no doubt come to fruition. We have worked hard to find ourselves in the enviable position of strong financial liquidity. In this environment, it is prudent to raise a little more than required to protect this position.


TOC:  CTM has taken the less travelled and costlier road of in-house development of IT. Can this be sustained over a depressed 2021 and maybe beyond? Does the acquisition affect your IT strategy?

JP:  One thing we have not stopped investing in is our technology hubs and sales team. The T&T acquisition enhances this opportunity as we create a larger team spread over a much larger client base. Our unique philosophy is to develop in each market to capture the specific market nuances, and to work with our clients to capture their individual needs. This strategy has been particularly successful for us with our Lightning booking tool and SMART suite, which are truly global. In fact in calendar 2019, Lightning was used in over seven million transactions globally.

Additionally, we have developed our own content layers and platform that enable our clients to access content from anywhere, including GDS, API and NDC sourced content, all delivered seamlessly in one interface. Now, the Radius hotel program can also be delivered through this interface. So the decisions we took five years ago to develop in-house and in-region are certainly coming home to roost for us.


TOC:  Do you see the role and the services of the TMC changing due to Covid? With all the new complexities, do you think there will have to be a shift back towards human services?

JP:  There is no doubt we will be more valued in the supply chain, particularly around safety and security. In the new environment, the expert advice needed to enable travel will often necessarily be more complex. We have already seen large growth in our charter and logistic services, especially where regular commercial schedules have not allowed clients to operate their businesses.

Again, having our own client facing technology suite has been advantageous. Being in control of their development, we already had supplier Covid-19 safety features and product updates built into our tech suite and Lightning booking tool as of May. The enhancements gave travelers up to date critical information specific to their travel plans. Some of the traveler tracking features and ticket credit features we have been reinforcing to clients for many years are now seen as critical in this new environment.

Our philosophy remains … Make it simple to work with us, and automate as much information as we can for clients on the run. Free our travel counsellors up for the high touch, high value clients that will need us more than ever to clear waitlists and get them safely into and out of countries at short notice.


TOC:  Do you think that the travel distribution chain will change due to the downturn? For instance, there’s talk of surviving airlines pushing harder for direct corporate sales. Do TMCs need to further consolidate and scale-up to protect their market position?

JP:  There is no doubt that when an industry like travel has all participants in the supply chain losing money, there has to be both consolidation and new ways of doing things. The longer this goes on, the more players will become insolvent. So that creates opportunities to acquire and to win market share. But to do this, you need a flexible model, and at the risk of repeating myself, our technology strategy coupled with our strong liquidity puts us in the box seat.

TOC:  What advantages will the acquisition bring to your existing clients?

JP:  Good acquisitions deliver great strategic rationale to our combined client base and prospective clients. For CTM, our clients can enjoy the Radius hotel program. And they will see a “doubling down” of technology investment corresponding with the larger scale of business that we have created. For T&T clients, they will be able to enjoy the Lightning booking tool and NDC content that we add. And they can now participate in how we develop locally for the North American market, as we have done in Europe and APAC. Global travel programs have historically struggled with services in Asia. For T&T’s customer base and other new clients, we offer integrated strength across the APAC region, underpinned by our SMART technology suite which operates across CTM offices.


Tony O’Connor is an independent travel procurement consultant. He is a member of the PTC Group, and has run the Butler Caroye consultancy since 1998. He is CEO of travel audit company Airocheck, and is the Regional Director for GBTA in Australasia.