Conlin Travel’s Chris Conlin talks:
- Acquisition strategy in difficult times
- Why a leisure rebound is critical for a business travel comeback
- The viability of the transaction-fee model
Midsize regional travel agency Conlin Travel, which in 2019 had total sales of $180.2 million, 88 percent of which was generated by business travel, this month acquired a pair of small leisure-focused agencies. Conlin CEO Chris Conlin last week spoke with BTN managing editor Chris Davis about the ways Covid-19 has altered the Ann Arbor, Mich.-based agency’s strategy, both in terms of its mix of business and leisure travel as well as further acquisition plans. An edited transcript follows.
BTN: Given everything that’s going on in 2020, it’s interesting to see a travel company your size as an acquirer. What’s your strategy?
Chris Conlin: We’ve been around for quite some time, since the 1950s. It’s a family business, I’ve been in it all my life, and I bought my father out 20 years ago. So I know a lot of travel agencies. We’re a part of Signature on the leisure side, and part of BCD on the corporate side. So we run into the same people in a lot of different settings. And as these times have hit, I’ve reached out to some agencies, and they’ve reached out to me looking for different opportunities. I kind of put the sellers into three areas. There are owners that want to sell but want to stay on, to be relevant and help grow the business they’re selling. Then there are owners who want an exit plan within six months or a year and just want to do a nice transition. And then the third are owners that basically want to give you the keys to the car and say, I’m out of here.
A lot of it depends on the age of the owners or their risk tolerance. Do they want to see it through to some sort of a rebound, whenever that might be, or would they like to maybe leverage the client list they have and then leverage the additional tools and products and services we bring to the table to make their business more valuable over the next couple of years? That’s the kind of conversation I’ve had with different agencies. No two sellers are ever alike, but they’re good conversations to have these days.
BTN: How you see the Covid-19 trajectory in terms of getting back to business?
Conlin: It’s kind of interesting how things have changed. I mean, we all expected this to be two months. I mean, that’s what the [U.S. federal Paycheck Protection Program] started out at; it’s an eight-week program. The government thought we were going to rebound. Airlines were saying at least we’ll be back to 80 percent by the end of the year. All of that is proven not to be the case. So it’s almost like the reality is set in, and we have to look at the industry and our agencies as almost startups to a certain extent. But one really great thing is that we have terrific customers that are waiting to travel again, and they are going to come back. Not at the rate we had hoped. We have all kind of bottomed out at this point in time, and I think it’s going to be a slow growth. Then we hit a vaccine, and there’ll be a bit of a bump. I don’t think it’s going to be huge. And then we will grow slowly again.
BTN: Conventional wisdom at this point says leisure travel will lead any comeback. Do you agree with that, and does it change your strategy at all?
Conlin: Yes, it does. I do agree with that. First of all, all business travelers are leisure travelers. We need those business travelers to take their first leisure trip to really experience what the airports and airlines are like right now. I’m hoping that is a positive experience; I’ve traveled myself, and it’s a terrific time to travel, I think. To answer your question, it is changing us a little bit. The two acquisitions were both predominantly leisure travel agencies. We’ve always had a very viable leisure business here, but corporate has been larger for sure and growing faster. But there’s no question that there is more stickiness with leisure travel.
BTN: You mentioned those deals were borne of knowing those folks and their situations, but is there a deliberate attempt on your part to diversify your business-leisure mix?
Conlin: Yes, it definitely is. I would like to have more leisure business, absolutely. We have a strong backbone for it. And the Signature Network is just fabulous. The machine has been built; we just need to feed more product and more customers into this machine that we built. Would I say I have a newfound love affair with leisure travel? To a certain extent, yes. I’m not giving up on business travel. I love and I’m very passionate about business travel, but a situation like this exposes you. And as you pointed out earlier, leisure is and will be leading the comeback.
BTN: How does Covid and everything else that’s gone on affect your ability to evaluate an agency if you’re looking for a deal?
Conlin: We can all look at 2019 sales and see what the company sold or see what their value would have been pre-Covid. But past performance is just a metric at this point in time. I don’t think you can value an agency anywhere near like you could before. I think acquisitions that occurred or were occurring fell apart during all of this. Now it really comes down to the leadership of each organization, how well they will make it through this. I just want to make sure we’re not or other owners are not thinking that this is going to bounce back quickly or have large bounces. I just don’t think it is.
I’m not interested in every agency, but I’m interested in those that have had a long [history] or have a good relationship with their customers. Certainly geographically, right now I’m sticking to the Midwest. We’ve got some in the market of leisure travel, maybe under $25 million [in annual sales] with some great owners. They are the sellers, they are the Pied Pipers, but now they need business-minded agencies to come in and lend the tools and back-office marketing and sales to really bring those travelers back for 2021, and let the agency owner, the previous owner and their employees to continue to sell. Really what I’m looking for is that type of agency.
BTN: Have you had to take any actions in terms of cost reduction or raising capital in 2020?
Conlin: We’ve all had to when your business drops 90 percent as it did, and it’s a little bit better than that now but not a whole lot. You have to make changes. So we’ve had our share of furloughs and layoffs, and we have gone back to renegotiate some of our contracts and talk to landlords. We did accept a PPP loan, which has worked out well. That’s gone right into our daily working capital. Most agencies did that if they could. We feel pretty comfortable having that in our back pocket, having cut the expenses that we have cut. And then making these acquisitions, we feel pretty confident with the future being a slow return.
BTN: What do you think about some of the discussion of the viability of the transaction-fee model, and some efforts to charge clients based on different models?
Conlin: I don’t have any philosophical objections to [management-fee models] at all, but it is a tough time to introduce that to a client when they are booking 50 percent or even maybe just 25 percent of what they used to and approach them with a model as if they were booking 100 percent. We all look at, what are we making on a transaction basis for a corporate account? Tally it up. Would that be the estimate of what we would charge on a monthly basis? Maybe. I think that would be a starting point as you work your formula out, but that would be a tough thing to introduce right now when business is down so far. I love the model because we would all be in better shape right now if that were the case, and it makes sense. We are working hard for all of our customers right now when all of our customers are not traveling at all. We’re still spending money being in business for those customers, yet the transaction fees are obviously way down. So, I love the model. It’s just going to take a long time and I think better times for us to implement that.
BTN: Speaking of clients, is corporate client acquisition something that’s still going on? Are you still seeing requests for proposals?
Conlin: Yes. We have been closing deals every month. We are doing implementations right now. So, yes. There’s still activity out there. We’re conducting RFPs via Zoom, which is an awkward way to do it. And I’m glad it’s awkward, because that only demonstrates that people need to get back on airplanes and meet face to face.
BTN: We’ve been talking about your strategy in acquiring these two agencies. What about the other direction? Is there any possibility that you could be on the other end of one of these deals?
Conlin: Yes. There’s always that possibility, but I have a decade left in me, and even in these tougher times, I enjoy the business immensely. I have fielded calls in the past. Nothing’s ever off the table, but that’s not something that I’m very interested in right now.