Big companies will be dispatching even more executives on globetrotting missions for business, and many will rely on corporate travel agents. That’s the simple assumption behind the $900 million deal for a 50 percent stake in the American Express Global Business Travel division, which will become a separate company this year co-owned by BlackRock (BLK), Certares International Bank, Macquarie Capital, and a fund controlled by the Qatari government.
The new joint venture will retain the American Express name and use all of the investment to expand and create new travel products, says Bill Glenn, the new company’s president and chief executive officer. American Express (AXP) also owns a 14 percent stake in Concur Technologies (CNQR), which helps companies oversee their employees’ spending and travel. That stake will remain part of American Express.
U.S. spending for business travel is expected to rise 6.6 percent this year, to $290 billion, after a 3.8 percent increase last year, according to data from the Global Business Travel Association. The forecast sees a 6.1 percent increase in 2015.
Glenn believes U.S. and European multinationals locating their businesses closer to customers in emerging markets will also fuel the corporate travel boom. “Our plans are very much to make sure that we’re solidified and to expand our footprint globally,” he said in an interview Tuesday.
Still, commissions and fees have been steadily declining for travel agents as airlines push to reduce distribution costs. The travel business has also migrated online, with road warriors demanding assistance en route and a range of digital tools to alter their trips as needed. American Express cut 5,400 jobs last year, and those reductions fell heavily in the increasingly automated travel division. Those cuts have been completed, and Glenn said his company’s workforce of 14,000 would remain stable.
“You shouldn’t just equate online with lower margins,” Glenn added. “There’s premium service that needs to take place,” given the huge sums of money spent by wealthy travelers on personalized service. “Not everything’s going to be online, and there’s premium travel out there.”
Glenn declined to discuss whether the unit would pursue a public offering at some point. “I think the business model itself, today and where we’re landing in the next couple of years, will be very attractive,” he said.