Ian Sinderson, chief executive officer, ATPI
Rare is the occasion a travel management company would hail total sales less than
half the previous year’s achievement, but relative to the market ATPI has
performed well during the pandemic.
That has been largely down to some of the sectors in which it operates, including marine and energy, where the critical nature of the work
means employees have continued to travel amid the most complex restrictions.
ATPI’s group sales totalled £500 million in 2020 – down from
£1100 million in 2019 when around £390 million originated in the UK – as the
pandemic took its toll. Underlying EBITDA was £11 million for 2020, compared to
£22 million in 2019.
Sales for 2021 to date are around 40 per cent up on last
year, says ATPI’s CEO Ian Sinderson, while transaction levels currently stand
at 55 to 60 per cent of pre-pandemic volumes. It is the first time the TMC has openly talked about its financial results.
“What we want the buying community to know is that not every
travel management group that’s out there right now is in a position where they are
incurring significant losses or having to mothball their business,” says
Sinderson. “It’s easy to get tarred with the same brush if you’re not out there
explaining that we are still a profitable cash-generative business with a
strong balance sheet. We are riding the pandemic relatively well.”
Restructuring measures
The TMC has been profitable every month since June last year
after cost-cutting and restructuring during the early months of the pandemic.
It was at this time that the group’s previous CEO Andrew Waller left the
business and Sinderson stepped into the position.
“I've been
in the business since 2006 so I wasn’t coming in cold… I know the people, the
infrastructure, the clientbase… and I knew how I wanted to restructure [the
business], to take the right level of cost out and ensure the viability of it
going forward,” he explains.
“We're in a much better shape to
be able to manage the organic recovery of the clientbase that we've got but also
to better manage new business as it comes on. We think we've now got a
structure that is very, very strong. The management structure is strong,
we've got a lot of good young people coming through, and we've been able to
give them a lot more opportunity. I'm quite excited now for the future of the
group.”
Some 15 to 20 per cent of ATPI’s workforce in Europe and the
US – where corporate travel takes the lion’s share of the business – were lost to
redundancies. Cuts were less severe in Asia-Pacific where energy and marine
travel dominates the TMC’s activities.
Keep on keeping on
“Corporate travel fell off a cliff but boats still need to
get around the world and oil still needs to be pumped from offshore platforms.
That area held up but we had to get innovative where the [travel] supply chain
wasn’t delivering,” says Sinderson.
That meant establishing a significant charter flight operation. “We provided the supply to our
clients but also to the industry as a whole because a number of non-clients were
starting to work with us by taking blocks of seats within a charter plane.”
As scheduled flights have increased, that pressure has eased
but the TMC is still operating a number of charter services “where supply is
difficult – Australia being a case in point”, Sinderson explains.
Client retention during the pandemic stands at 99 per cent but Sinderson has not been
surprised by the level of RFP activity in the industry. ITV is among its major
client wins in the past year.
“Some companies
have just rolled forward their existing relationships a year or two with us or with
some of our competitors, but I think a number of companies have used the
downtime to actually go out and prospect the market.
“We’ve deepened our relationship with clients. They've
seen that this has been the most difficult it’s ever been to travel but we’ve
continued to deliver the service and in a way that’s more hands-on than ever
before.
Sinderson adds: “And coming back to that
financial viability aspect, I think what that probably has done is to favour
the larger TMC groups who probably got the financial backing to be able to be
seen to be weathering this, perhaps more than the smaller niche independents who are
probably not in a position to be able to do that.”
TMC models and revenue streams
RFP activity and talk of TMC
models and their revenue streams are intrinsically linked, but Sinderson does
not buy into the hype around the much-vaunted subscription concept.
“It’s horses for courses. Some
clients want to go back on to management fees because they want to know that
they have the total stability of a team who are dedicated to them. That
obviously tends to be the larger client who has the budget to be able to do
that," he says.
“Otherwise, there's probably
going to be some sort of knee-jerk reaction – subscription and all that sort of
stuff. I still think that the transaction fee model, especially as things do
start to recover, will still remain pretty prevalent within the industry.
“Of course there will be companies
who want to do everything online and a tech subscription could work but they’ll
pay through the nose when they need help.”
Sinderson points to TripActions
who started off with an online focus but have changed tack with the acquisition
of Reed & Mackay.
“They are probably the
highest-touch TMC in the UK and TripActions have gone and bought them. They are
almost reverting to our sort of business model – they recognise the importance
of that full-service requirement especially among larger enterprises,” he says.
Time for
Change, a white paper published last October by the
Business Travel Association and consultancy Nina & Pinta, assessed
the diversification of TMC models and remuneration, reporting that revenue from
suppliers accounts for two-thirds of the average revenue of a TMC. Sinderson
refutes that.
“That’s not necessarily true. From our
perspective about 30 per cent of our trading margin comes from supplier
incentive revenues. Most of the rest comes from transaction and management fees,” he says.
The TMC was thrust into the
spotlight last November when the Amsterdam District Court convicted ATPI’s
Dutch subsidiary and former managing director Willem Starink of forging
invoices that disguised fare mark-ups to two corporate clients between 2010-2012.
An appeal is ongoing.
“We were actually acquitted of
just about everything,” says Sinderson. “What we were convicted of was a couple
of very technical things. We appealed it and now we're working out exactly what
we do next, but we're hoping that we'll be able to bring that to a final
conclusion in the next couple of months or so. It’s a decade old and the
management team at the time are no longer in the business.”
He continues: “There are certain air
fares that we are given access to by airlines which we are allowed to mark up
as long as the contract with the client doesn't prohibit it. The whole aspect
around the Dutch case was the wording that was in certain contracts.
“Three years ago we brought on
our own legal counsel who now will make sure that every single contract that we
sign is crystal clear what the relationship is between ourselves and our
customer as to what the terms of that trade is.
“I think the problem with the
industry in the past is that that hasn't necessarily been the case in all
relationships. And I think that has probably been an industry-wide issue. I
don't believe those revenues are particularly opaque; [the problem is], it's
when contracts are vague.”
Expansion plans
The TMC has more than 100 offices worldwide, but Sinderson
says it is seeking to strengthen its position in certain
territories following the acquisition of Germany’s Hamburg Sud
Reiseagentur GmbH in March, a deal made possible by additional funds from
investors.
“It was almost the last piece of the jigsaw for us from a point of view
of our network of offices worldwide looking after marine clients,” he says. The
TMC had previously served Germany through offices in Greece and Denmark.
Africa is the next focus area. “We see
big opportunities there. It’s a very difficult place to do business but we’ve already
got a network of offices in about 13 African countries and we’re looking to
build that up to 19 or 20 in the next six months. That will give us a platform
to manage pan-African clients which very few of our competitors are able to do.”
The TMC is also weighing up
expansion in the Middle East and has been “deepening” its relationship with
Direct Travel in the United States. “It allows us to show international clients
that it’s a single offering with a single technology platform and a consistent
level of service. It’s a joint venture in everything but for the fact we don’t
own 50 per cent of each other,” says Sinderson.
Technology evolution
Elsewhere, he says the
organisation’s 25 per cent stake in booking technology provider TapTrip will
enable it to influence its evolution and bring a degree of diversification to
ATPI.
“We’re online booking tool
agnostic and will continue to be. There are two or three that we work with very
closely, but we wanted to be able to work with a company – a young company – where
we could look to build a product that would work very, very much for the SME
market.
“The companies that generate
between £50,000 and £250,000 worth of travel every year – that is a market we
can operate in and operate in successfully, but in order to be able to do that
we would need to have a self-service system that really works for that market.”
Sinderson continues: “That market needs something a
lot more simple with just the functionality that it needs – not a whole ton of
spurious stuff that makes it very difficult for a traveller to operate
themselves. I think a lot of companies start in that market space and then move
away from it because they go chasing the big fish and as a result this
market gets left behind.”
ATPI is also working with TapTrip
on a tool for clients to self-manage small rotations within the marine sector. Both will be progressed in the fourth quarter of the year.
Another year-end ambition is to
see transactions recover to 75 per cent of 2019 levels, with even greater goals
for next year, albeit with a cautionary note.
“We’re targeting a 2022 financial
year that is better than 2019 and that’s not necessarily just because of what
we’re building with the German acquisition and expansion in Africa with hopefully
a couple of acquisitions. Of course, that growth is all subject to a couple of really
nasty Covid variants not arriving on the scene though.”