Pat McDonagh is chief executive officer of UK-based Clarity Business Travel
The ongoing investigation by the UK Competition and Markets Authority (CMA) into American Express Global Business Travel’s (Amex GBT) acquisition of CWT raises important questions about competition in the global corporate travel industry. Specifically, will this merger give Amex GBT an unfair advantage, resulting in a substantial lessening of competition and fewer options for larger corporates? It is one of the CMA's principal concerns.
Having experienced a similar scenario during my time in leisure travel, when the Competition Commission investigated the 2011 merger of Thomas Cook and The Co-operative Travel, I’ve seen firsthand how these situations unfold. I was part of a team that managed the Co-operative Travel’s submissions to the process, working with legal teams and economists as well as subject matter experts across the business to convince the authority that the deal was good for the customer and wasn’t to the detriment of the market.
At the time, that deal was projected to save the combined business over £35 million each year and create the UK’s largest high-street travel retailer. In a similar way to today there were concerns of creating an unassailable giant, and with it, unfair advantage and reduced market competition. But history tells us that rather than creating an unfair advantage, the 2011 deal was ultimately a factor in the demise of the Thomas Cook Group in 2019.
In that case, as with Amex GBT and CWT today, there was a further investigation. Months were spent submitting evidence and arguments for and against the deal, finally concluding that the deal may pass with no required remedies. It may well be the case that the same thing happens now, but whether it does or not, I feel obliged to reflect on the aspect of competition in this deal.
If there’s one thing I learned from that experience, it’s that the travel industry is fiercely competitive and highly innovative. New players regularly enter the market, often challenging the status quo. Barriers to entry are generally low, making it possible for ambitious entrepreneurs to launch new ventures with the help of consortia or independent counsellors, for example, where they are given the tools and licences necessary to deploy their skill and expertise.
In the leisure market, dynamic packaging agents and OTAs have run rings around the once-dominant vertically integrated tour operators of the past. Meanwhile, niche businesses specialising in luxury travel or off-the-beaten-path destinations have also thrived. The leisure market is as healthy and competitive as ever, so the concerns about the Thomas Cook merger never materialised.
But is corporate travel really that competitive? Long story short, yes it is. But don’t go anywhere yet. The corporate travel sector is highly competitive, driven by disruptors, global challengers, and niche providers, all leveraging technology and service innovations. In recent years we’ve seen the rise of tech-first companies like Navan, TravelPerk and Spotnana, but also the emergence of specialist and service-first agencies. But sometimes you also have to look beyond the end of your nose to find competition and innovation.
If as a travel manager you look after a large global programme, it’s natural to gravitate toward the traditional global giants. You might also consider those tech-driven disruptors or growing global challengers – and many buyers stop there.
But there is another way to think about it. Consider the legal profession: if you need legal advice outside your home country, your legal team will likely connect you with a trusted associate firm of theirs, so you can access someone who knows the law in that jurisdiction because they deal with it day-in, day-out. It’s understood that local expertise is essential because laws vary across regions. You wouldn’t expect your lawyer to know every law in every country – and the same goes for travel.
From one market to the next, travel content, booking preferences, languages, currencies, tax laws, and cost bases vary significantly. One of the CMA’s concerns with the Amex GBT/CWT deal is that new entrants or smaller competitors may struggle to meet these global needs, and that barriers to entry could become higher. So, how do the rest of us deal with that?
Even traditional ‘megas’ don’t own everything in every market. Their solutions vary depending on a region’s idiosyncrasies and reflect the need to be different in different markets – offering a ‘one size fits all’ solution just isn’t practical. Each market demands a particular approach, which is why you won’t find one solution for all, because it doesn’t exist.
What’s the alternative? Like many other mid-market or smaller TMCs, Clarity is a member – founding member, in fact – of a community of travel management companies (OneGlobal). Members in such organisations are local market experts who know everything there is to know about their territory and are equipped with the people and technology to serve those markets in the very best way possible. What they don’t know about their region isn’t worth knowing.
It might appear more complicated than going with a single global player, but such communities do everything you’d expect from a global data and account management perspective, with all the right people in the right places. In the same way you wouldn’t want to find yourself on the wrong side of the law in an unfamiliar country without local expertise, you don’t want to get your travel arrangements wrong either. It’s not an obvious alternative to the ‘global megas’ to some, but it’s certainly competitive, and maybe the CMA shouldn’t be too concerned about a lack of competition after all.