Jeff Clarke CEO & President, Travelport, Ltd Chairman, Orbitz Worldwide SGTP 2008 EDCON Government Travel Conference, Washington D.C. September 4, 2008
2008 SGTP EDCON Government Travel Conference What I ll talk about today > Travelport > Government and the Travel Sector > Operating in an Economic Downturn > GDS and Future Next Generation Technology > Sustainable Travel > Travel Sector Impact on Global Economic Growth/Stability > SGTP Opportunity to Change the Travel Industry
Travelport
Travelport overview Travelport is a leading business services provider to the global travel industry Private firm owned by The Blackstone Group Cendant spin off in 2006 $2.7 billion in revenue; 6,000 employees; based in New York City Major offices in London, Atlanta, Denver, Sydney, Tokyo, Jakarta and Rome 48% ownership of Orbitz Worldwide
Travelport GDS Apollo/Galileo/Worldspan GDSs can shop, price, book and integrate content from multiple suppliers on behalf of multiple travel agencies on behalf of millions of travellers ~450 Airlines 84,500 Hotel properties Over 25 Car rental companies Over 400 Cruises and tour operators 13 Major rail networks > $100bn of airline tickets booked annually > 4.3bn stored fares (updated 7x per day) > 46 million air searches per day > Dynamic connection build > 19 million hotel/car transactions per day > Up to 1.1 billion transactions per day > 145 countries > Real time booking > Guaranteed fares and rates > Travel intelligence services > Mission critical IT services and software 63,000+ travel agencies Travel management companies Corporate self-booking tools Tour operators Travellers Central role in the travel industry value chain
Government and the Global Travel Sector
Global Travel and Tourism A $2 Trillion Sector 2 > Global GDP $54 trillion (USD) 1 > U.S. GDP $13 trillion (USD) 1 > Travel and tourism 3.6% of global GDP or roughly $2 trillion 2 > 231 million jobs globally 2 > Government is 1% of global travel or $20 billion in travel expenditures 3 > 2.3 billion passenger boardings 4 International arrivals grew by 6% in 2007 to 900 million 5 1. World Development Indicators Database, World Bank 2. World Travel and Tourism Council 3. SGTP 4. International Civil Aviation Organization 5. United Nations WTO
Key U.S. Travel Sector Statistics for 2007 > Total annual travel expenditures were $642bn 1 > Air travel accounts for $163.8 bn in sales 2 25% of total travel expenditures > 18,000 U.S. travel agents account for less than half of air sales or $79bn 3 > Hotel sales topped $139 bn, and for the first time, lagged air sales 4 > Online Travel Agencies produced $137bn; offline agencies $129bn 5 1. TIA 2. ATA 3. ARC 4. American Lodging Assoc. 5. PhocusWright
Federal Government Travel Spend--$14.8 Billion (OMB) Agency 2007 Spending Agency 2007 Spending (in millions) (in millions) Defense $9,689 Homeland Security 1,185 Justice 465 Veterans Affairs 442 State 400 Agriculture 382 Treasury 276 Transportation 239 HHS 230 Interior 217 Commerce 149 Int l. Assistance Programs 108 NASA 88 Energy 69 EPA 58 Labor 58 SSA 46 FDIC 44 GSA 39 OPM 27 TVA 24 National Science Foundation 22 HUD 21 NRC 20 National Credit Union Admin. 14 Education 11 Source: Office of Management and Budget
US Government GDS Utilization Travelport GDS 20% 80% Our Competitor! Source: Travelport estimates based on MIDT data
Government Travel Media Coverage
Government Travel Today s Issues > The economy, of course > New administration s impact on GSA and government travel > Future-looking (Next Generation) technology that can differentiate services/costs > Travel distribution products and services that are scalable/customizable to meet specific needs > Improved adoption of online booking > End-to-end travel system that integrates multiple processes (i.e.: approval, payment and booking) with financial systems > Pursuit of airline discounts and better utilization of GSA s City Pair Program > Solutions for reporting new airline fees and surcharges
Impact of Economic Downturn on the Travel Sector
Dow Jones Industrial Average (2008 YTD) Source: Yahoo Finance
Comparison of US Dollar to Euro (2006-08) Source: Yahoo Finance
Price of Oil (2008 YTD) $140 $130 $120 $110 $100 $90 $80 $70 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Source: U.S. Energy Information Administration
Economy and Oil s Impact on the Travel Sector
Economy and Oil s Impact on Airline Capacity
Impact of Economic Downturn 1. Travel Sector Travel industry hit hard, could lose up to $9bn in 2008 Major airlines reduced capacity (60 million seats) - Southwest, Delta, British Airways, American Airlines, United, Continental, U.S. Airways, Virgin America, AirTran, Air Canada, Northwest and India s Jet Airway Several airlines filed for bankruptcy - MaxJet, Aloha, ATA, Frontier, Eos and Champion Airlines Qantas, Lufthansa, Northwest, United, Delta and British Airways raised fuel surcharges Delta and Northwest to merge Smaller carriers pessimistic about their futures
Impact of Economic Downturn 2. Government Travel > Higher airfares, fewer routes under GSA s City Pair Program > Average domestic fares at BWI to increase by 19 percent; Dulles by 17 percent; and Reagan National by 11 percent > Airtran, one of BWI s largest carriers, to cut 10% of capacity > Pressure to find alternatives to travel Videoconferencing Online training Source: GSA, as reported in Federal Times
GDS and Future Technology
GDS and Future Technology > GDS used by online travel sites (OTA s) Expedia, Travelocity, Priceline and Orbitz use GDS as a content source Late 90 s Web becomes viable tool for suppliers to reach consumers directly
Future Technology Agency Desktop
Future Technology Agency Desktop > Travelport s Rapid Reprice TM Automatically researches old and new fares and rules, generating a new, accurate price in less than one minute Number of keystrokes reduced by as much as 75% Powers Automated Refunds and Exchanges (ARNE)
Future Technology Agency Desktop > Travelport s Fare Verified SM The first pre-ticketing fare audit tool built to stop revenue leakage Incorrectly priced tickets result in millions of dollars in losses for the airlines each year Revenue protection tool authenticates fares, rules and taxes prior to ticketing Immediate access to audit reports
Future Technology Agency Desktop > Worktopia one stop sourcing for meeting accommodations Partnership of Worktopia and Worldspan by Travelport Meeting properties in 150 U.S. cities and 65 countries Simple Web-based application provides sourcing, pricing, tracking and booking for meetings of up to 100 attendees Arrange for audio-visual equipment and catering WORKTOPIA IS A REGISTERED TRADEMARK OF WORKTOPIA INC.
Sustainable Travel
Sustainable Travel Transcends Economic Environments Travelers inclined to select travel companies that protect and preserve a destination s environment Travelers who would pay more to use these companies 61 million 59 million Americans classified as sustainable tourists or Geotourists 55 million Source: TIA
Average Annual CO 2 Emissions 1. U.S. Car 4.5 tons 2. Average Global Citizen 4.5 tons 3. Average U.S. Resident 2.1 tons 4. Household Electricity 6.2 tons 5. 500MW Gas Power Plant 1.5 million tons 6. 1000MW Coal Plant 8.3 million tons 7. Total for Planet Earth 25 billion tons Source: Clean Air Cool Planet
Sustainable Travel Transcends Economic Environments > The climate and global warming remain critical issues > Travelers are concerned with the carbon footprints they leave behind > We re at a pivotal moment in our industry s history > Our future depends on our ability to deliver sustainable travel
Sustainable Growth Transcends Economic Environments > Travel is an important driver for the global economy but also a significant source of carbon emissions > Emissions disclosure is quickly becoming an integral part of corporate life > Address critical environmental issues through development of innovative technologies and informed solutions > Management and reduction of an organization s carbon footprint begins with measurement
Sustainable Growth Transcends Economic Environments > Travelport developed Carbon Tracker, a unique post booking carbon emissions reporting system Uses the two key standards DEFRA and GHG Protocol These standards deliver average emissions values by weight, distance and energy use Carbon Tracker also uses an advanced carbon calculator The multi-gds tool helps businesses and travel management companies understand their carbon emissions at a granular level
Travel Sector Contributions to Global Stability and Economic Growth
Travel Sector s Contributions to Global Stability and Economic Growth > Travel sector is in a unique position vs. other industries Intrinsic value of bringing diverse cultures together > Mass communications was a democracy enabler during the mid-to-late 1980 s Berlin Wall, Soviet collapse > Mass travel can serve as an enabler of respect, tolerance and peace; brings stability to conflict regions 900 million international arrivals in 2007; growth to 1.5 billion by 2020 1 The alternative is isolationism and protectionism > Sustainable growth must be considered in the context of what travel brings to the world Should not result in less travel but rather smarter and more efficient travel Source: UN World Tourism Organization
SGTP Opportunity to Change the Travel Industry
SGTP Opportunity to Change the Travel Industry > SGTP = 1% of global travel > Government is the largest purchaser of travel > Wield tremendous influence and power 1. Insist on new technology lower cost and better service 2. Customer service Quality standards Special treatment for military and other government VIPs 3. Information Integrated expenditures Real time passenger tracking Environment 4. Disaster Recovery Airlines, Tech Providers and even the FAA don t have back-up data centers 5. Security Special privileges for all government travelers Security checks at time of government bookings Technology to expedite airport security clearance Travel services to lessen the hassle factor
Thank you