Survival Of The Biggest

In Seattle, Microsoft Corp. executives make travel reservations on their own computers, then E-mail them for review by American Express Co. agents. In Phoenix, 250 Carlson Travel Network agents attend to the needs of General Electric Co.'s 222,000 employees around the globe. And in Moscow, Rosenbluth International is handling Russia travel for Chevron Corp. and other oil giants.

The travel agency business has come a long way from the storefront shop at Main and Elm. Sure, there are still some 30,000 smaller agencies around the U.S. But airline deregulation, computers, and the zeal for cost-cutting mean the $100 billion corporate travel business is increasingly being handled by huge agencies. On Sept. 12, American Express, already the titan of travel, got even bigger by acquiring The Thomas Cook Group's Travel agency business. The $375 million deal will boost American Express' agency sales to $10 billion from about $7 billion.

The buyout is the latest in a string of acquisitions the charge-card giant hopes will help maintain American Express as "the Wal-Mart of the travel agency business," says Roger Ballou, president of American Express Travel Related Services Co. Carlson, the second-largest agency, has also been beefing up. Earlier this year, it merged with Paris-based Wagonlit Travel for sales of $7 billion. "In 1985, you had to be national," says Travis Tanner, president of Carlson Travel. "In 1995, you have to be global."

CRITICAL MASS. The need to grow is a response to huge forces redefining the economics of corporate travel. Larger agencies specializing in business travel now make nearly half their fees from corporate clients--not from airlines. Big investments in computer networks let agencies charge corporations for analyzing travel patterns. And software can alert corporate travel managers when workers abuse travel guidelines.

Meanwhile, airlines are making noises about cutting their commissions to agencies, now typically about 10%. The mega-agencies can counter such threats through purchasing muscle. But for smaller agencies who are far more reliant on airline commissions, the future is troubled. Many are forming alliances, such as Woodside Travel Trust, a Maryland-based consortium of 160 agencies with combined sales of $9 billion. Others are on the block or on the verge of folding.

"As an industry, we're at a critical juncture," says Hal F. Rosenbluth, CEO of Rosenbluth International. "Unless you have the capital and technology to get growth, you're in trouble." That's why the consolidation wave in travel agencies isn't likely to go away.

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