Carlson Wagonlit Travel

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Carlson Wagonlit Travel

1405 Xenium Lane
Plymouth, Minnesota 55441
U.S.A.
Telephone: (763) 212-4000
Fax: (763) 212-2219
Web site: http://www.carlsonwagonlit.com

Private Company
Incorporated: 1994
Employees: 8,083
Sales: $11 billion (2001 est.)
NAIC: 561510 Travel Agencies; 561520 Tour Operators

With more than 3,000 offices in more than 140 countries, Carlson Wagonlit Travel (CWT) is the second-largest travel agency in the world. Although the combined name is relatively new, the company’s roots go back to the oldest travel businesses in Europe and America. Wagonlit Travel’s founder was the creator of the legendary Orient Express, while the Carlson Travel Network was based on Ask Mr. Foster Travel, one of the first travel agencies in the United States. Carlson also operates a separate, wholly-owned leisure and franchised travel agency network in North America under the Carlson Wagonlit Travel Associates name. In addition, Accor manages separate CWT Leisure operations in Europe.

Origins

Compagnie Internationale des Wagons-Lits et du Tourisme was founded in 1872 by Georges Nagelmakers, a Belgian, to market rides on railway sleeper cars (wagons-lits) of his own design. This culminated in the richly outfitted carriages of the legendary Orient Express, officially inaugurated in 1883. A network of Wagons-Lits travel agencies appeared in Europe in 1928.

Carlson Wagonlit’s origins in the United States date back to the country’s first travel agency. Ask Mr. Foster Travel began with a souvenir shop Ward Grenelle Foster opened in St. Augustine, Florida, in 1888. As a child in New York, Foster had been hospitalized for tuberculosis. While confined, he developed a passion for travel literature. He became sought after for travel advice, leading to a career as the father of the travel agency in the United States.

Foster started by publishing travel guides. During the 1920s, his travel agency grew to 70 offices in the United States. This era saw the professionalization of the business with the appearance of Foster Girls, who were dedicated to the travel business full time. Men did not begin working as travel agents in the United States until the 1940s.

Paxton Mendelssohn of Detroit bought Ask Mr. Foster in 1937. Within a few years, the outbreak of World War II curtailed leisure travel. After the war, demand was great—so great that the railroads did not need to advertise with Ask Mr. Foster, so the agency began to switch to a commission-based system.

Changing Hands in the 1970s

Peter Ueberroth, future Major League Baseball commissioner, acquired Ask Mr. Foster through his Los Angeles travel company, First Travel Corp., in 1972. Ueberroth paid $1 million for the agency, which had 29 branch offices. He placed his brother, John Ueberroth, in charge of its expansion.

In 1979, Ask Mr. Foster was sold to the Carlson Companies, Inc., which Curt Carlson had built up from a small trading stamp company to one of the biggest privately held firms in the United States. Ask Mr. Foster then had more than 100 branches and more than $100 million in sales a year.

Carlson entered the travel market just as deregulation of the airline industry was getting underway. With their newfound freedom, airlines introduced thousands of airfares using complex formulas to make the most profit from every flight. Corporations with large travel accounts turned to agencies like Ask Mr. Foster Travel to find the best deals and to provide reporting of travel expenses.

John Ueberroth remained with Ask Mr. Foster after it was acquired by Carlson and continued to direct its expansion. He eventually became president of Carlson Travel, which grew by acquisition through the first half of the 1980s, picking up Canada’s P. Lawson Travel and leisure travel agencies Cartan Tours and First Tours. Carlson acquired a 70 percent holding in P. Lawson in 1983 and had acquired the remainder by 1992.

Mixing Corporate and Leisure Travel in the 1980s

By the mid-1980s, Carlson Travel Group had become one of the largest travel companies in the world by focusing on corporate sales. It had 600 offices and accounted for nearly half of Carlson Companies’ 1986 revenues of $3.5 billion. The group’s only near rival was American Express Travel Management Services. The company owned 18 agencies inside Neiman-Marcus department stores (Neiman-Marcus Travel Service) in addition to its Ask Mr. Foster units.

Company head John Ueberroth was trying to replicate this success on the leisure side of the market. CTN began an associates program from U.S. agencies in 1984. The number of participating agencies exceeded 600 in 1990. Ask Mr. Foster acquired Don Travel Service Inc. in 1986. This regional agency based in New York had annual sales of about $200 million.

Northwest and TWA’s PARS computer reservations system was installed in 80 Ask Mr. Foster offices in early 1988. Carlson acquired Gelco Travel Management Service Inc., a unit of GE Capital, in the same year. Gelco, a $250 million travel company with 660 employees, was folded into Ask Mr. Foster.

Going Global in the 1990s

In 1990, Carlson Travel acquired a 76 percent interest in the A.T. Mays travel agency chain, the fourth-largest in the United Kingdom. A.T. Mays had more than 300 offices, more than 2,400 employees, and annual revenues of $576 million. It was eventually renamed Carlson Worldchoice. Mays was Carlson’s first major overseas acquisition. A wave of consolidation had begun among travel agencies in the United States and United Kingdom.

The Ask Mr. Foster name was retired in April 1990, replaced by that of Carlson Travel Network. The new name conveyed both the connection to the Carlson-owned restaurants and hotels as well as the existence of a global distribution network. Also in 1990, operations at the company were restructured into commercial and retail sides, while computing and accounting operations were centralized at its Minneapolis headquarters. Carlson had acquired a company specializing in travel management software, CompuCheck Corp. Carlson Travel Network’s system-wide revenues rose 42 percent to $5.1 billion in 1990.

Travis Tanner was named president of Carlson Travel Group, which included the Carlson Travel Network, in January 1993. He was returning to the unit after four years as head of Walt Disney Travel Co. Carlson Travel Network soon underwent a restructuring aimed at delegating more decision-making to local and regional offices. The unit had about 6,000 employees at the time.

The next year, in March 1994, Carlson Travel announced the merger of its business travel operations with those of Paris-based Wagonlit Travel (Compagnie Internationale des Wagon-Lits et du Tourisme), a unit of the Accor Group SA, a French tourism and business service conglomerate that also owned Novotel, Sofitel, and Motel 6 hotels and car rental agencies. Accor was the largest travel and hospitality company operating outside the United States.

A global travel enterprise, named Carlson Wagonlit Travel (CWT), was formed with annual revenues of $10.8 billion. This was large enough to re-take the industry lead from American Express Travel Related Services (TRS), which till then had been the largest travel company in the world with 1993 sales of $8 billion. Carlson’s independent foreign franchises were not included in the deal. Carlson Wagonlit had 4,000 offices in 125 countries; 2,300 of these came from Carlson Travel. The combined operations booked 24 million airline and train tickets a year, plus seven million hotel stays and six million days of car rentals.

The merger made Carlson Wagonlit competitive for large multinational businesses, such as GE, that were beginning to switch to single vendors for their travel needs. The merger created new possibilities for monitoring global spending trends for these clients. The process of integrating Wagonlit Travel’s information systems with Carlson Travel’s was a five-year endeavor.

A London-based joint venture, Carlson Wagonlit Development Co., was created to develop markets in Australia, Singapore, and Hong Kong. Carlson and Accor agreed to each invest $45 million in the joint venture over three years.

Carlson Wagonlit soon unveiled a branded Visa credit card for 85,000 of its accounts, intensifying its competition with American Express (AmEx). In September 1994, AmEx leapfrogged Carlson Wagonlit in size by acquiring Thomas Cook Ltd.’s North American operations. Carlson Travel president described the consolidation trend in Business Week: “In 1985, you had to be national. In 1995, you have to be global.”

Company Perspectives:

Carlson Wagonlit Travel is one of the leading travel and expense management companies in the world, serving both corporate and leisure clients. Carlson Wagonlit created the first truly multinational presence for corporate travel management. Our global strength was enhanced when U.S.-based Carlson Travel Group and French-based Wagon-Lits merged to form Carlson Wagonlit Travel. Carlson Wagonlit continues to develop in key markets, including Asia Pacific and Latin America. With offices in more than 140 countries worldwide, Carlson Wagonlit is a true global leader in travel and expense management. As a worldwide leader in the corporate travel industry, Carlson Wagonlit offers our clients a comprehensive, resourceful, and, above all, forward-thinking approach to travel and expense management—all with an eye toward balancing corporate objectives with cost savings, personalized service, and quality.

CWT acquired Sweden’s third-largest travel agency group, Resecenter, in October 1996. Resecenter had 1995 revenues of $90 million and 110 employees, compared to $13.3 billion for CWT, which had more than 20,000 employees.

Expanding Online and in the UK in late 1990s

CWT introduced enQuest, its Internet-based travel agency in September 1997. Around the same time, it rolled out Mercavia, an extranet for providing travel agents with information that included video clips.

CWT’s online debut lagged behind the Travelocity and American Express Travel on the Web by more than a year. The first online travel agency had been rolled out in 1995, and the field was already crowded, including offerings from Microsoft Corp. and other technology-based companies. However, CWT executives believed their bricks-and-mortar agencies offered unparalleled customer service opportunities.

CWT continued to expand in Britain. It acquired Inspirations, a packager of summer holidays, for £42 million. In October 1998, CWT merged the British package holiday interests of Thomas Cook with its own UK operations. This tied it for third place among UK tour operators. The merger also included Cook’s travel businesses in Canada, Australia, and India, financial services operations, as well as Carlson’s Caledonian and Peach Airways charter airlines and the tour operator Inspirations. Thomas Cook, which was owned by Westdeutsche Landesbank, had annual sales of more than £23 billion. It had been founded in 1841.

Jon Madonna, a former executive with the Travelers Group and KPMG Peat Marwick, replaced Travis Tanner as CWT CEO in late 1998. Tanner had left to join the Atlanta-based leisure start-up Luxury Travel Co. CWT was reorganizing around customers’ needs, rather than geographical divisions.

Herve Gourio, president of Wagonlit Travel at the time of the merger with Carlson, returned to lead CWT after the departure of Madonna in October 2000.

Scaling Back After 2000

CWT cut several hundred positions in early 2001 due to a softening economy. CWT employed 15,000 people around the world, including 6,000 in North America. About 200 telephone reservationists were let go. Airlines were also suffering from a downturn in the travel business even before the September 11, 2001 terror attacks and were reducing commissions to travel agencies by as much as 60 percent. Overall revenues fell 8.3 percent in 2001, to $11 billion, mostly due to a slump in the U.S. market, which was down 20 percent.

In early 2003, Carlson Wagonlit announced a joint venture with China Air Service, the leading corporate travel management company in the People’s Republic. A joint venture with the Japan Travel Bureau had been formed in 2001.

Principal Competitors

American Express Company; Kuoni Travel Holding Ltd.; Rosenbluth International; TUI AG; WorldTravel BTI.

Key Dates:

1872:: Compagnie Internationale des Wagons-Lits et du Tourisme is founded.
1888:: Ask Mr. Foster Travel is founded.
1972:: Peter Ueberroth acquires Ask Mr. Foster.
1979:: Carlson enters the travel market by purchasing Ask Mr. Foster Travel.
1983:: Carlson Travel buys 70 percent of Canadian travel firm P. Lawson.
1990:: Ask Mr. Foster becomes Carlson Travel Network.
1992:: The remainder of P. Lawson is acquired.
1994:: Carlson merges its business travel operations with Wagonlit Travel.
1998:: Thomas Cook’s British package holiday business merges with Carlson Wagonlit Travel.
2001:: U.S. revenues fall due to lower commissions and wary travelers.