Welcome to Travel Again presents the weekly travel roundup covering the headwinds and tailwinds impacting the business of travel. Please welcome our hosts Mike McCormack and Ed Silver.
Mike, it is so nice to be back with you. It’s been too long. How you doing? Good. How are you doing, Ed? Good to be here. Good to be here. I can’t believe it. It is season 3, episode 7. And Mike, this is the final episode of season three as we head into summer. And then we’ll be back. I well, we might as well break the news now. We’ll be back for season four in the fall. So, we’re gonna keep on rolling, man. Keep on rolling. It’s been I mean, look, this has been a great season. And we have had some amazing guests and as always today we’re going to wrap the season with a relatively new leader in our space and I’m just really excited to hear from him and what he’s got going on. He’s got his hands full and I’m excited to hear how he’s managing through all of it.
Mike, let’s bust right into the news. For article one today, Mike, I’ve made this a challenge for you because I’ve actually combined three articles into one. So, I’m going to just give you the headlines of the three articles and as you’re talking about them, I’ll bring them up and let’s see if you can figure out the theme of the three and bring some context and insights for our listeners. The first one, Mike, ASTA survey shows weakness in international travel. And there’s been a number of articles on this, but we’re going to talk about some weakness in international travel. The second one, and this happened while we were on break between seven and six episodes, disruptions as airlines cancel flights and reroute planes to avoid Middle East airspace. And lastly, just this week, Delta reinforces full-year guidance, but the outlook is still blurry. So, Mike, those are three articles all in the same space. Try to bring it all together for our listeners.
All right. So, first off, the thing I think the obvious we always talk about, but travel the travel industry at least short term doesn’t like uncertainty, right? Travelers don’t like uncertainty. When there’s always going to be on a global basis for different reasons, political, environmental, conflicts in different parts of the world, risk, short-term, an air disaster of some kind. I mean, there’s always things happening, right, that affect travel, affect the industry, and it does there. And then some have a longer effect in terms of that uncertainty changing travel demand, travel patterns etc.
But also travel’s very resilient. So even though like earlier in the year Delta being the effectively the market leader certainly when it comes to giving guidance around the market etc., United usually close to follow etc., and American right on the heels—I mean usually they all kind of have similar guidance at similar time being the three largest carriers—there’s a resiliency there. So earlier in the year I think there was there was a lot of concern about all the impact that the tariffs and governmental policies were having on international travel and then therefore affecting the ability to forecast at all this year.
Now we’ve kind of come back to guidance that says it’s not going to be as great a year as we’d hoped, but it’s going to be still a good year. And because of that, you could say again the headline being still blurry, but the realities are it’s still really good performance that is expected and again one that the stock price as a result boosted and there was kind of some renewed confidence in the airline sector. And the other thing we know too in the market there’s a lot of think as these things happen it does have a pretty, one to one obvious impact on the stock price of airlines, too. They tend to go up and down with some, like for the reasons we know about, but there seems to be more sensitivity to their stock prices than maybe other industries. And it’s just again all front and center. This is all just stuff that happens in our industry. And it’s interesting. It’s an interesting dynamic.
We during the pandemic and afterwards tracked a lot about traveler confidence and measuring that and tracking it as a way to look at how the industry will recover from something that devastating and we found that travelers do, even though something happens again in a certain part of the world, it can really have an impact on those patterns, right? And certainly international travel right now I think there’s a lot of concern about traveling internationally that normally isn’t there. And really a lot of it is kind of in effect unfounded, but it does affect perceptions and perceptions do drive people’s decisions about where they’re going to, you know, plan their vacation and maybe whether they how far out they plan it and their concerns about refundability and what happens if and all those things. So that’s the emotional part of the travel element that comes into play. So, a lot there in those three articles. Interestingly enough, none of it surprising given the but again it’s as always with travel never dull moment man interesting.
Good to see the airlines able to provide some forward guidance again. And we can talk more about that with our guest later. All right, Mike. I have our second technical article here for you. And this one’s going to throw you for a bit of a loop, so hang on. The Navan CTO is building an agentic AI platform with “zero critical hallucinations.” From the article, when Navan set out to build its artificial intelligence powered virtual travel agent called AVA, it faced the challenge of making sure the system didn’t hallucinate in corporate settings. Even one AI generated error like offering a refund that violates fair rules or showing the wrong flight details could lead to customer dissatisfaction, financial loss or regulatory penalties. So Mike, your thoughts on Navan’s entry into agentic AI platforms?
I have none. It’s over to you, Ed. Well, I don’t because again I think you can’t take a breath anymore without AI AI AI. Okay. And certainly announcements in general about what’s happening in this area. Again no surprises everybody’s trying to figure this out as they go. Huge investments are being made and with a lot of uncertainty about where the payoff is necessarily yet. But I’m curious from your perspective certainly about the zero critical hallucinations. What does that all mean from your perspective and what is this really saying?
Yeah. I mean, look, first off, just on AI being everywhere, I, you know, we were talking the other day about past trends that come and get frothy and to me AI has kind of just moved into the blockchain kind of frothiness of several years ago where you can’t talk about travel without blockchain coming up. I look, as you know, I think this is very different than blockchain. I think AI is fundamentally going to change how everything works for us. As you know, I’m a big proponent and a major user of these platforms. What’s crazy is that you actually as you plan your corporate structure and your corporate methodology around integrating AI into your offerings, the fact that you have to consider the chance that your AI or agentic platform might actually hallucinate which is likely is really crazy but is a reality of using these large language models. You have to be careful.
What I liked about what Navan CTO Mr. Twigg did here is he has put guard rails around the platform. He has created structures and systems to really make sure that their implementation works very specifically for them. You can read the article on Payments, which is a great kind of place to get these kind of technical articles. But overall, I think they’re taking some actions to make sure that doesn’t happen. And look, I think these AI assistants are going to be everywhere, especially from a customer service chatbot perspective. But Navan’s taking it to that next level, putting it in front of agents, using it for workflow, using it to untangle problems.
And so, good on them for taking those efforts. And obviously there’ll be more to come with Navan, Mike, as you know, because soon we’ll see they may be actually a public company. Oh yeah, we got the IPO news. So they’re going; it’s just a matter of when. More to come on that for sure. I’m sure we will be talking about that as well. One thing I do want to say before we leave this topic is that, you know, I remember fondly a time when AI only meant all-inclusive and we were thinking about what vacation we were going on. Yeah. It’s a shame because sometimes you see AI and they mean all-inclusive. I think that’s forever changed.
That’s forever changed. All right, Mike. I have one more article for us. The title is “Amid competitive pressure, American elevates its customer experience.” From the article on Travel Weekly, with a slew of initiatives announced this year, American Airlines is beefing up its customer service to better compete for premium travelers. Analysts, however, want to see if American will have the wherewithal long-term to match what Delta and United are doing. So, a little context here, Mike, and then I’m sure we can throw this to our guest.
Yeah. So, first off, I really love at a time in the industry. It speaks to the overall health of the industry when you’ve got, you know, carriers investing more and more in the product, the premium product. That says generally good things about industry health because when, you know, times are hard, you don’t have the money, the customers aren’t coming. That’s the part of your market that tends to suffer because in a cost cutting, economy downsizing kind of mode. So, we’re clearly not there. So, that speaks to the economy in general, holding strong or as strong as and the health of the airlines, American being one of them, having the money to be investing in these product areas. And even if you can’t afford them and you’re not using them, it still even has the aspirational part of just, gee, hopefully save enough, fly enough, get enough points, find get an upgrade, I can also get to experience that product.
So again, and even things they’re doing on the just the coach product too, some better food options and different anything helps, right? The experience. So you know, good for American, speaks to their efforts to financially and otherwise to kind of turn the corner and you know, be investing back in the product is a good thing. So again, I think more just a bell weather for me of the continued health of the industry, which is really really good and good to see.
Yeah, I agree. I love the investment. I am looking forward to trying the steak and pimento cheese sandwich, which apparently is a big hit in their new menu. And the new app and the way you can do upgrades within the new app. Those are all innovations that as a huge American flyer—as you know it’s my primary airline flying out of Charlotte and Nashville. So you know big changes, so that is great.
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All right, download it today to discover the power of Safe Travel RX. Safe Travel RX, your prescription for better travel. All right, Mike. Thanks for that. And now on to our guest. Today we have the pleasure of having Lucas Martin on the show. Lucas Martin is the senior vice president of sales at American Airlines and oversees the team focused on corporate accounts, agency partners, and the AAdvantage business program. He is the chief architect of the evolution of American sales and distribution strategy. He joined American after spending a career in the industry as a partner with Bain & Company, a strategy consulting firm. And before that, Lucas served as an officer in the US Navy’s nuclear submarine program. I can’t wait to hear about that. Okay, please welcome to the stage, Lucas Martin. Hello, Lucas.
Hey, Lucas. Thanks for coming, man. Appreciate it. Thanks for being here, Lucas. Happy to be here and for the season finale. So, thanks for… yeah, you get to help us close out before summer. Make it a good one, Lucas. Make it a good one. Well, you know, Ed said it. I think a couple different things I want to talk about a little bit in your background just about you and getting to know you a little bit for our audience, but let’s start with Naval Academy, submarine officer. How do you translate that or at least the parts that do translate to working in a senior level job within the travel industry? Very and for an airline. I mean, tell us a little bit about that transition and what do you bring with you to the job that you learned there?
Nuclear submarines done. Yeah. No less. Sometimes at night I glow, you know. Yeah. Well, but look, my time in the Navy was probably some of the most exotic adventures of my life. But also probably some of the most formative experiences that I had. A lot of those kind of being transferable for here. So, with regards to what you’re describing on these complex sales relationships and partnerships, there’s a couple of things from that period in my life that have informed my approach. One is really kind of building the team and how I work with the team every day. The second is dealing with ambiguity and I’ll talk a little bit more about that. And then the third is having allies.
So let me let me just start with the team, right? The most important lesson that I took away from my time in the Navy is that it truly takes a team, right? And amazing things happen when you put together the best team, give them clear objectives, trust them to make good decisions, empower them to do their job and to move at speed and honestly just advocate for them. So, a big part of that is creating this culture of accountability and there’s another part of it which is differentially focused on the customer. You kind of led with that a little bit in the openings of the article. It’s something that’s starting to permeate the broader organization and it also means fostering a bit of a culture that encourages innovation and I would say being risk neutral which I sometimes feel in the airline world can be interpreted as almost risk seeking. But I think we have the best team, right? We have a resilient team. I’ve really been impressed by what they’ve been able to accomplish with what they’ve been given and I couldn’t be more fortunate to have that as a foundation.
The second piece that I was talking about was the ambiguity, right? Like driving a nuclear-powered submarine, driving a 7,000 ton nuclear-powered submarine hundreds of feet deep and you’re basically doing it with your eyes closed, right? So, you have to really be comfortable in managing ambiguity and piecing together kind of different data sources to create what is the real picture. And so that means you have to think probabilistically and not anchor on one view of the world, but instead kind of continuously evaluate where things are at. Set up the right listening posts and data feeds and continuing to challenge where you’re at in kind of a red team, blue team kind of way so that you’re always thinking about what’s around the corner and are we ready for it? And so that’s how I think about the ambiguity piece.
And then the last part is allies matter and if you’re going to go far you need a lot of great partners. So true in the military and in the airline space. There’s so many partners both on the distribution side. I would also say even with our joint business partners, we have the best joint business partners which give us, you know, incredible global coverage. And really in the broader ecosystem, right? We our view is that we have an obligation to be great partners to those that want to be great partners to us and that’s honestly something that we lean into.
That’s great. And then, you know, so you were you also though complement that had time at Bain. So you know I’m sure you know some of those same when you’re doing those kind of senior level advisory roles it’s work we do you know at Travel Again Advisory all the time for our industry. It is interesting you do get a very different maybe more holistic view of the businesses of industry. It allows you to step back kind of in a way you don’t when you’re actually inside of an organization and see different organizations sometimes competitive companies and really get you you start to get a bigger just a bigger view. I’m assuming that you know in a similar way though you that’s been helpful to you so far as well.
Oh yeah, for sure. I mean you guys mentioned a couple of those senior level type or macro trends in the industry when it comes to AI, when it comes to the realities of managing disruptions and you mentioned a couple of the uncertainties with either tariffs or you know just travel policies and all of those things create a world that we’re seeing more of these. We’re seeing them more frequently. We’re seeing them more severe and so just being able to manage these disruptions is a requirement of leadership. And what we’re doing at American here and the transformation that we’re doing here at American is honestly another major disruption.
Kind of having led those and having gone through there, there’s a couple things that that I take from my Bain experience in how we do this. And the first part is just recognizing that these transformations and change in general is rarely a steady up and to the right, right? Things often happen slowly and then suddenly. And that can be an uncomfortable way of thinking, but it means that agility matters. It means that having leading indicators to know you’re on the right path matters. It means being ready for opportunities when they come is also super critical. And that’s because I see these disruptions and you’ve kind of mentioned a couple of them as opportunities, opportunities to redefine the playing field, right?
And I see them as being there’s micro disruptions like kind of these small ones. There’s also seismic ones and as those occur, it’s important to for an organization, you know, for American to play to our strengths to leverage those and use those opportunities to win in that disruption and reset that playing field and to to also appreciate that, you know, this is a constantly evolving marketplace, right? Customer expectations are always evolving. You’ve kind of mentioned that a bit with the customer experience work that we’re doing here. The competitive landscape is something that is certainly not stagnant. So that means as we think about our approach to these macro trends or these macro strategies, we have to appreciate that these strategies have a half-life to them and they have to continuously be re-evaluated. They have to continuously be reviewed and reassessed. And all that needs to be taken into account.
And then I’ll maybe one final point on that is that I’ll stop where I started which is change is hard and so we need to be very data driven and firm in our ambition and our approach and you to be very respectful in the industry too, right? This in appreciating that this isn’t just change for us it’s changed for the entire ecosystem and there’s a lot of emotion in air travel and so we need to be really thoughtful and how do we engage that environment in what really is the most productive way and supported way for everyone?
Well, so there’s a lot in what you said. I’m going to drill into a couple different areas. Kind of look at it from an agency perspective, a buyer perspective, a little bit of just different aspects of the industry. But I think you said a couple things really stood out when what you’re talking about which is you know first off you know look it’s been well documented and well reported everything about you know your kind of predecessor and kind of the crash course and the fact that the American was on because of it.
And I think one of the things to me like in stepping back and looking at it it was a lot of times it wasn’t about what was being attempted in terms of “hey we want to modernize, we want to move to a dynamic pricing, we want to have, we need to change our relationship with agencies, we need to change our relationship with buyers.” It wasn’t about trying to do those things but it was with the kind of lack of respect for the industry that was missing. That there was an attitude of “well we’re doing this with or without you” kind of attitude and it’s like no it doesn’t work that way to your point you do need allies.
We have an industry that is highly interdependent on all the links and you just can’t just to say “hey I’m going to like try to force everybody down a path.” Now again because of that our industry can tend to be a little slow and a little risk adverse but I mean I always come back around to there’s a reason for that because there are a we’re dealing with in particular with airlines I mean but all segments the industry look we’re dealing with travel is also a lot about people’s health and well-being and in a very real direct way so it’s not something you take lightly and you know the technology behind it everything there’s a lot of reasons why we are where we are why it takes as much as time it does.
Yeah, it’s like it was niche in terms of its importance, but it was—that’s true. It was, reflecting back, kind of a real change. It was the beginnings of your whole transition of the whole bigger picture, right? And that, like you said, really doubling down on events and starting to really focus on data, which has been a long play. But yeah, that’s—you’re right, I never really thought about it that way. It was kind of the little spark, your injection for you.
Yeah, because it not only—it did a lot of things. One, it obviously got us into research and content and data and subscription information products. Through that was the foundation of Phocuswright, as you well know, is that how it started with Lorraine and Philip. It got us into high-quality events. Instead of like a trade show like a GBTA, for instance, Phocuswright is really a content-driven event of leaders in the industry. Wasn’t so much about the trade show portion of that was minor compared to the networking, the content, and the interaction in the industry.
It also got us into a new segment. We were largely in the retail travel advisory segment, which was the biggest segment, which still is to this day. But it got us into—going up to Philip’s office in Connecticut, there’s that street sign that had the intersection of travel and technology. And so it got us into the cutting-edge part of the future instead of travel agents. Of course, everyone at that point in time thought travel agents were dying and they were all going to be gone and dinosaurs. Of course, that hasn’t happened, but the transition from traditional distribution channels to online distribution channels and the OTA market and the whole travel technology space.
Strategically, by far Phocuswright was our most important acquisition, and also bringing in a new culture into the business. People like Douglas Quimby and Lorraine Sileo, and working with Philip and Bruce Rosard and the whole team—it really was different, much more entrepreneurial than the traditional business had been. Successful Meetings and SMU International, which was another very important face-to-face event. Then both the Burba Hotel Network, which includes the ALIS show, which is the largest hotel investment conference in the world, really put us in a different space in terms of hospitality.
Then Centaur travel shows, Business Travel Show and the Meeting Show in London—those were more traditional trade shows, but we’ve turned it into hosted buyer events as well for high-quality corporate travel advisors. With the combination of organic growth—I mean, out of our 125 shows now, I think about 35 to 40 of those events were acquisitions and the rest were green shoots startups. In fact, our—we’re having the anniversary, I think the 15th anniversary this week of our Cruise World event, which was our first internal launch that Bob Sullivan and I launched back in 2010. That’s become a bulwark of the company. We’ve really expanded into Singapore with our events. Singapore and APAC has been a real growth area and that ties in with JTB and wanting to expand into APAC as well.
So with JTB, what was—did you know—I think when the deal was announced, it was a little like, “Well, why?” It was a head-scratcher. Come on. A little bit. It was—well, just because it was kind of—well, it was a surprise. Yeah, maybe it was. It was. But I think—it was a surprise.
While our investment bankers BrightTower, who did a fantastic job for us throughout this whole process, right—while they might want to take credit for it, I can tell you that in terms of our list of potential buyers, both financial buyers and strategic buyers, JTB was not high on that list. I’m sure. Right. Yeah.
JTB had approached us sometime last year, late last year, and said that they were potentially interested in Northstar. Actually, they approached Eagle Tree, and Eagle Tree also owns PRA Corporate Events, of which I’m chairman and was interim CEO for a period of time this year. They have the largest DMC; JTB owns the largest DMC in Hawaii. Originally, Eagle Tree thought they were interested in PRA. Instead, they said, “No, no, no, we’re interested in Northstar.”
And so we signed an NDA and gave them all the information they wanted. We didn’t hear anything from them for a while. We were preparing—we sold off Inntopia earlier this year to Outside, which fits into their position because Inntopia is a SaaS e-commerce company, white-label software mainly in the ski resort and mountain destination industry. So that was a good fit with Outside.
But we were getting ready to—a lot depended on market conditions and interest rates and financing and all those kind of things that go into M&A, which is still kind of fraught a bit in spite of the stock market being strong. And so, we were preparing to go out, and then all of a sudden last summer, we got an LOI from JTB. Kind of like—and it was a serious, well-thought-out LOI from the chairman, at a very good double-digit valuation of the business.
We started engaging with them, and they said to us, “If we can get some more information, we might be able to increase our purchase price.” And so we worked with them for the next several weeks and months. They were just—they did what they said. It wasn’t like negotiating with a financial buyer of your business and looking to re-trade or looking for the “gotcha,” or having a swarm of young MBAs who are asking for stupid things from five years ago and trying to pick apart every aspect of your business. We’ve been there, done that. Exactly.
And so their approach was very different. They were very diligent, very much when they laid out a timeline, they kept to it. We worked through that timeline. We kept to it to the day, every step of the way, and they were really good partners to work with. Now, there were some cultural issues and some legal issues because of a Japanese company.
As you probably know, JTB is a multi-billion dollar, 100% travel-related company. Started off as kind of a tour operator and travel advisory company. They have been looking to expand more and more globally, which fits in with us. What they really want to do is expand the, particularly inbound tourism into Japan, and to really drive that business. They feel—in fact, the CEO was at our Web in Travel conference shortly after the transaction was announced in early October—he talked about looking at the demographics or looking at the inbound tourism in Japan compared to other major destinations and how they had a long way to go to really open it up. To open up the whole country and to deal with both not only technology and booking, but also destinations and language barriers and things that made it more difficult.
But Japan’s a great destination and it’s not just Kyoto and Tokyo. They feel they have a lot of upside to bring collectively into the business. What they really want to do is move upscale in terms of the food chain and the travel industry. That’s why you saw Northstar, because of what they describe as the intelligence—the intelligence part of the travel community. With everything from our data, our first-party data, our research—the love of Phocuswright, for instance, Mike—our research capabilities, our deep relationships with 1,500 of the major travel suppliers in the industry.
And we have a strong—we’ve been expanding our position in Southeast Asia, particularly in Singapore. We’d like—we do a little bit in Japan, but we’d like to do a lot more in Japan. And so I think from our perspective, with Northstar’s perspective, opening up more in Southeast Asia—but what they really want to do is move upscale, become more globalized, build their brand.
And they just came to—and as a seller, having a strategic buyer who’s not a financial buyer is like—you know, what kind of return of multiples of invested capital over the next three to four years and measuring the value of the business and their purchase price based on that? For JTB, they were fair and equitable, but it was their strategic buyer. They had strategic reasons to buy the business, as opposed to—and instead of thinking in three-to-five-year terms, they think in hundred-year terms.
Well, I was going to say that’s also—yeah, that’s their model, right? Generally that’s the model. It’s like for Japanese ownership, it’s more like you’re thinking long-term, you’re thinking big strategic play, buy and hold, not a three, four year flip model, right?
In the opening LOI, they informed us that they were sitting on two billion US of cash and that they would just write us a check. They didn’t have to worry about the financing markets or interest rates. You always like to hear that as a seller. That’s—you don’t hear that every day. You know, what kind of leverage can you put on this business? Yeah. Right. Normal. Exactly.
We were—it was like from the outside looking in, it was like the first reaction right away was like, “Oh, this was—one of those deals like you said, it had to be strategic.” It had to be a very good, a very good solid offer. It was clear, because there would be no other way, otherwise it would be more of a bidding situation. But clearly it wasn’t.
So, yeah, when we were thinking about strategic buyers, we were thinking about companies like Informa or Clarion Events for the data. Companies like that and the events, of course. Particularly our event business, which was two events and was 1% of our revenue back in 2009. Now the majority of our revenue, 55% or 56%, comes from events. Our event business bounced tremendously coming back from COVID; we’re way past where we were.
Think about—think about in terms of the future of the media and information space and the technology. We’re thinking about Steve Hafner’s interview with Rafat about the impact on Kayak. Steve is, as we all know, quite the character, inspirational guy, fun guy, sense of humor. The “nothing burger”—I agree with you, Mike, it’s only a nothing burger from—I mean, I think his point is it’s a non-cash impact on the business and is an accounting write-down.
But you were absolutely right, Mike, in that what it means is that there’s been a significant impact and anticipated—not a short-term impact, the longer-term impact—on the cash flow of the business, the EBITDA of the business, because of the rising cost for customer acquisition and impact of AI. I think that the OTAs have done a pretty good job so far with integrating AI, but I think the larger term—and they’ve been dealing with Google for years and years, and everyone thought Google was going to steal their business and that hasn’t happened.
But AI and OpenAI and the resources and the amount of cash going into AI are tremendous. And even though Booking is the largest travel company in the world, compared to the big tech giants who are pouring billions and billions of dollars into AI, they’re relatively small. We’ll see what happens.
But I think one of the things—one of the things that attracted JTB to Northstar, and one of the things that gives me a great sense of optimism about the future of certainly of Northstar, is that from an AI perspective, what we’re seeing in the event space generally—and I’m on the board of directors of an event association called SISO (Society of Independent Show Organizers)—is that the drive for face-to-face events, if anything, is going to be a positive from AI.
Because when people get together face-to-face in person, they don’t have to worry about: Is this AI generated? Is this real? Is this really the person talking? And to, particularly as technology generally has impacted our world, and AI is going to accelerate that, and hopefully a very positive. The value of having face-to-face interaction and bringing buyers and sellers and a community together becomes that much more valuable. We’re certainly seeing it. We’re up close to 20% this year on our face-to-face events at Northstar.
We’re having a very good year at PRA Corporate Events. PRA is a DMC serving corporate and incentive events, working with major suppliers, and our business is up double digits this year. So that value of bringing people together and particularly as—I assume we’re all in our home office with the remote work environment—not only getting together and seeing your customers face-to-face, which has become more difficult in a distributed environment. You can’t just call on someone in their office anymore.
But also our own people and building the culture of your business. That’s why we see in the corporate event space, a lot of major companies are using industry events, for instance, to have their own in conjunction with events for their suppliers, their partners, their clients, as well as their own teams to have that. Because as a CEO, one thing I worry about with remote environment is losing that culture.
To me, there’s nothing more important in the success of a business than the culture of a business. Someone once said that culture eats strategy every day for breakfast. Because you can have the greatest strategic plans in the world, but it’s really execution. It comes down to people and building that culture. I’m very proud of the culture that we’ve built at Northstar and the team that we’ve been interacting with.
I’m no longer part of for the first time in 16 years. You go to the leadership page; I’m no longer chairman. But JTB paid a very nice price to become chairman of the company. But one of the things we liked about them is they’re keeping the whole team together. They want to invest.
I was going to say that a testament to the Northstar, the big umbrella and certainly the people within it, is that you look at the longevity of the people who stayed and stayed in all through. You’ve been there a long time and after even through all the pieces you put together, you kept the teams intact. Your comments on the event industry—I’m totally bullish on that whole sector for the long foreseeable future because your point of people crave the interaction. The things you took for granted about being in an office, being together, the teamwork that gets done, the ideas that get generated, that focus about it. You’re right.
Serendipity of that—there is. And as good as this technology is, it’s not the same as us sitting down and having lunch together and all the different ways in which we communicate, including the emotions that come across. And so I think the face-to-face event business, but I think the media—and going back even to Hafner’s comments about customer acquisition, marketing costs are changing dramatically.
Certainly it’s not digital broadly speaking. But what we’re trying to do—and I think Jason has done a great job, brought in Nino Tasker from Google, who was working in Google AI, as our chief digital officer—and really focusing on the data-driven marketing spend and trying to move down the funnel. In the old days, you buy a page of advertising in Travel Weekly for Royal Caribbean and it was nice branding and whatever, but what did it do to drive business? It was always hard to measure that.
Right now, people are looking for not only where to spend their money, but what are the analytics associated with that spend. And the more we can move down the funnel to draw a direct comparison—this is what Jason and Nino are really working on and using AI partially to do. This is the connection between the amount you’re spending with us on branding and advertising online and the direct impact on your business, and being able to measure that and put that in place. Because you—more you can go back to your clients. There’s unlimited spend if you can say that for every dollar you spend with us, you’re going to generate $10 of incremental revenue for your business, right?
And we have that analytics. So I think—and for us, I think the other thing that’s an advantage to us as opposed to the broader digital media industry is that we have very valuable first-party data. We have almost 1.5 million travel professionals across leisure travel, retail segment, the MICE segment, travel technology, the corporate TMC corporate travel industry, the hotel investment community. These are major buyers. It’s not consumers who do two vacations in three years. These are volume buyers and drive a disproportionate amount of spend in travel by being travel professionals. That’s all we do: B2B travel.
And then that data associated with it and the other thing is that trust of brands. We’ve seen the proliferation of brands and I think the brands that we have that we’ve built up within Northstar create that sense of community and that they can believe us and have that sense of trust.
Well, and you’re hitting on a topic to wrap up on, but you’re right in terms of the trust element. In the advent of AI and everything we’re seeing—you joked about it before about being in person with people—but I think there’s—we’re also just having a whole—there’s going to be a whole reinvention around trusted sources. Back to your point, like the brands and the people behind them. Because when Phocuswright research comes out and Lorraine and her team, those people are behind it, I trust that it’s a trusted source, not just some cobbled-together random thing that’s been generated. I have to be really much more aware about where information is coming from and the way—what I’m using to base the decisions on. It’s like that’s—I think we’re seeing it every day. And we’re still not even at the depths of—very early. Yeah.
But well Tom, I’d say we covered a lot of ground. But the wrap-up question I have for you is more of an interesting one. You’ve got tremendous perspective both about the travel industry of course, but also media and kind of the intersection of all that. You’re sitting at a really interesting vantage point. But if you look ahead, what areas do you find compelling still for reinvention or opportunity in travel or media or events or anything? If you had to pick out an area that you would focus on reinvention, what would it be?
Yeah. Well, I think two things. One of the things that we’ve really built almost from scratch in the travel industry was not just events, but hosted buyer events. Where we qualify our attendees or buyers based on how much money they spend, recommendations from their clients, and to bring in well-qualified buyers in one-on-one situations with travel suppliers.
I think continuing to build the face-to-face—I think the face-to-face industry generally has real long-term upside, particularly in an AI-generated world, for trusted resources and trusted data. So I think the marrying of data with well-qualified buyers and being able to measure—as a travel supplier being able to have a direct measurement of the impact your dollars are having on your business. So I think that—and I think marrying the data and measurement tools and being able to go down-funnel and be able to demonstrate to our supplier partners if you spend this amount of money and being able to measure the incremental impact on your business and how much you can increase it.
In terms of me personally, the reason I stepped down in 2023—my private equity firm didn’t want me to step down. This was my decision. But we had originally gone out in the market in January of 2020. And at that point, I’d had three private equity partners. I wasn’t looking forward to rolling over with a fourth private equity partner being tied up—no one expected nine years, but even another five years. And so the investment bankers said, “Well, you can’t tell people that you’re just there for a transition and you’re leaving. You’ve built this business.” And he said the strategics may not care as much, but any financial buyer, that’s a big red flag.
And so with Mike Struble and Anup Bagaria, our leaders at Eagle Tree, we came to the conclusion that before we went out next time, I did not want to find myself in that position. And that’s why we had to install—you can’t just bring in a new CEO six months before you go out. They need to be there at least a year, two years to have an impact and to execute. And the way I saw it, we brought in Jason from the outside from the tech space because it’s like when I first joined the company, I came with a strong background in events and really transformed the company from that standpoint. The next transformation is going to be technology-driven. Bringing in Jason and bringing in his background and experience for the future: data-driven and ad-tech.
So we stepped down at that point, but it’s been great for me because up until last month I was chairman of Northstar. Weekly calls, attending a lot of our events, not as many as I did as CEO, but being active in the community and keeping those connections because I love the travel industry. In my career, I’ve been a lot of different—we sure do—in technology. I’ve been in healthcare and med-tech and a lot of different industries.
But the thing about travel I love is that it is a very collegial—your comment Mike about the community and the congeniality of the industry and even our suppliers. We get together and we bring people together because we’re kind of Switzerland and everyone can come together on our stage. But to see what are otherwise highly competitive companies like the ocean cruise industry and you get those people together and all of a sudden they’re friends with each other. They have a sense of community because their goal is not to steal market share from NCL to Royal Caribbean to Carnival, but is to grow the industry. Because there’s still a relatively small number of consistent cruisers, although their business has recovered.
Biggest impact on—COVID was on the cruise industry. But they’re having the most sustainable long-term positive effect and their bookings for—bookings are really, really strong. But the sense of—it’s a fun industry. As Vicky Freed likes to say, our job is to make people’s dreams come true. How can you be in a better industry than travel? Everyone loves to travel. And even on the corporate side, well, we all love to complain about how much we’re on the road and how much we’re traveling, whatever. As soon as it was taken away—oh my god, I got to stay home every day. We all miss that. And so, it’s a great industry. The people are great. Smart people, fun people, and it’s just a wonderful industry.
I think we’ve got some short-term challenges. You were talking earlier about how some of the things that we’ve done—we were expecting to have full recovery because we never really fully recovered for inbound travel into the US. We’re expecting to hit it this year and then all of a sudden we’ve got tariffs. We’ve got the messaging. In fact, my wife and I just got back from three weeks in Spain and Portugal and talked to a lot of locals about traveling to the United States. People generally say, “Well, we’re kind of worried about traveling now. We hear these stories about getting through the border and the costs of it and the cost of a visa.” I’m not sure where we are in the $10,000 liability insurance that people have to buy.
But we’re sending messages and it’s not just through specific things like making it more difficult to come into our country, but also kind of putting up a bit of a cross the world through tariffs. Our reputation has really gone, in spite of what you hear from Washington. Our global reputation in terms of us not being welcoming to the world is really deteriorating and it breaks my heart because we have such a great country. We have such a wonderful destination. Just seeing what’s happened to Brand USA, 80% of their funding getting cut, which is crazy. We should be doing the opposite. We should because we have such a wonderful destination. You talk about from Asheville to Colorado to all over the country to be able to demonstrate and to be able to showcase that for people around the world. People love our country but right now we’re going through some hits.
The uncertainty of the economy is not good. Unemployment, macro view on unemployment is not moving the right direction. From our standpoint at Northstar, our business has grown very well this year. We’ve done because a lot of our focus is on the leisure side, is on luxury travel because that’s who utilize high-value travel advisors. So luxury travel has held up well. Domestic travel, corporate travel generally—the second quarter was a little bumpy, but that seems to be still solid. Although not 100% recovered either, but certainly you read the earnings reports from Delta and from the airlines, they’re seeing a recovery there.
The hotel community—rates got so high post-COVID that it was just—it got a little too pricey and we’re seeing the impact this year. RevPAR will be flat or slightly down year on year. But it’s still a tremendous industry, one that we all love. One that I think if nothing else COVID demonstrated to the world, not just those of us in the industry, how important travel is to us as a human being and those experiences. We went more towards the things community as opposed to the experience community and we were forced to by COVID because we couldn’t have those. So coming out of COVID is that people cherish that, the time that you can spend with your family and friends in destinations going to different places.
And also I from a global standpoint, I think our impact on the world and building those connections—when you have more familiarity with different cultures and different languages and different parts of the world, we break down those barriers. It’s when things that we don’t know are things that we fear. And when we go out and travel the world, we realize how much more we have in common than opposed to each other.
So, I’m bullish in the long term. I think we’ll be fine in the short term. We’ve got some bumps here and there, but overall people love to travel. It’s now they consider it a right. And it’s not negotiable. They’ll put off remodeling a kitchen or a bathroom or something to be able to spend time, particularly with your teenage kids if you have—get them off their handsets and off their iPhones. But it’s a great business. Well, I love it.
Well, Tom, again, thanks for coming today. We covered a lot of ground, a lot of insight and we’ll certainly be staying in touch as we continue to maneuver through the industry. But again, I love your insight and congratulations on the Northstar transaction. I think it’s great and—by the way, it was the biggest—and not just the travel industry but also the B2B information and event industries. It’s the largest transaction in the last two years that’s been done in that part of the industry.
And what I love about being—I’m still connected even though I’ve had to step down from Northstar by being chairman of PRA Corporate Events and on the board of MMGY, a great company. And Katie Brisco, who’s the CEO, is just wonderful. Anyway, so keeping connected that way, but I didn’t want to roll over for another five years with another private equity department.
Well, thank you so much, Tom, for your time. You’ve been very generous. Tom Kemp is former chairman and CEO of Northstar Travel Group and chairman of PRA Business Events. Tom, thanks for joining us on the podcast.
Thanks, Mike. Great seeing you. Cheers.
Well, Mike, what do you think? Well, it’s great. I mean Tom, of course, just what a terrific leader in the industry and continues to be right on the forefront of the issues. I love the perspective when we can step back and look at the bigger broader picture of what’s happening and that—like I said—where we started some of the big macro pieces, levers that are driving the industry. It’s always really important. It’s easy to get myopic and kind of get focused in on a particular area as opposed to kind of stepping back and saying, “Here’s what’s really happening and here are the key drivers.” And also really interesting to get his insight on the—insider view of that deal was cool.
Yeah, I think that that was some of the best clearly. I mean he was the one to give us that insight but I thought again he was really generous and open about giving some real insight into that transaction in a way I much better understand now. It makes a lot of sense. The other thing too is that it really comes back to makes me feel good about that all those brands and that media is going to be in good hands for the industry, right? That’s really important because we need the coverage and the integrity of the information and the news and the research and the events. It’s how we all grow our businesses, all of us. So it’s critical to our infrastructure. So really cool to hear.
Yeah, it is. It is. And I hope they invest, really invest, in growing the brands, which would be fantastic. All right, Mike. Thanks very much. That is our show today. If you have a challenge in your business, reach out to Travel Again Advisory to see how we can help bring clarity to your business strategy and outcomes. Mike, that’s it. I will see you back here again for our next episode. Right. Cheers. Cheers.