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5 Sep, 2011

PATA Seeks “Clean Slate” Before New CEO Announcement

Bangkok — Heavy-duty restructuring is under way at the Pacific Asia Travel Association as it prepares to “start off with a clean slate” before the announcement of a new CEO at the annual PATA Travel Mart in New Delhi this week.

Three of its regional directors in Europe and North America will not have their contracts renewed as of October, two staff in the Strategic Intelligence Centre have been “restructured” as of September and five staff moved to the newly established marketing and membership services unit.

Two of PATA’s key membership-service functions – research/intelligence and events – are to be outsourced as of October to two companies to be set up by the two people who presently head these units within PATA itself, respectively Mr John Koldowski and Ms Sheila Leong.

PATA is finalising 15-month contracts with the two companies which will continue to provide the same services to PATA, except as part of an external arrangement that, according to Interim CEO Bill Calderwood, will be “much more flexible” for both PATA as well as the two outgoing staffers.

The shake-up comes just a month after two new directors, Mr Stu Lloyd and Mr Reid Ridgway, took up positions to run respectively the marketing/membership unit and the Asia division. Both are responsible for generating products and services designed to retain existing members and recruit new ones by helping them “build the business” – the over-arching theme of Mr Calderwood’s future strategy.

Asked if these key decisions should have been left to the incoming CEO, PATA Chairman Hiran Cooray of Jetwing Hotels, Sri Lanka, said the association wanted to have the new CEO “start off with a clean slate” and get stuck immediately into implementing the strategy rather than getting bogged down with housekeeping.

No Choice

He said this house-cleaning was part of the mandate assigned to Mr Calderwood when he took up office in February, initially for a six month period but now extended by two months until November to facilitate a smooth handover transition to the new CEO. Asked if too much change was being made too quickly in too many critical areas of the association, Mr Cooray said, “We had no other choice.”

In an interview last week, Mr Calderwood acknowledged that among the most important issues now was to retain the confidence and the membership of the major airlines, national tourism organisations and hotel chains, the so-called “big boys”, who comprise 20% of PATA’s membership but pay 80% of its dues. Many of these institutions, with their global networks and massive data-gathering/analysis divisions, say they now believe PATA needs them more than they need PATA, and are trying to figure out precisely what they get for their thousands of dollars in membership dues.

The upcoming PATA Travel Mart, board meetings and other associated events to begin this week in New Delhi, will probably be a last chance for these groups to evaluate the situation before PATA’s membership renewal requests hit their desks by the end of this year.

To nudge the evaluation in the right direction, Mr Calderwood said, a number of “strategic workshops” are being organised in Delhi to offer insights into global and regional travel flows, industry trends and future issues that will drive consumer behavior, including the impact of technology. He said PATA has recently surveyed its members to identify and prioritise the key issues they felt to be of future importance to their businesses. These issues will be discussed in detail at one of the workshops with a view to helping PATA formulate future advocacy positions and “go to bat on the members behalf.”

However, these insights will probably help PATA’s small and medium sized members far more than the “big boys”, many of whom will also be evaluating their future participation in the PTM against its rapidly-rising competitor ITB Asia, due to be held in October in Singapore.

Unique Selling Proposition

Mr Calderwood said he was confident PTM would be able to hold its ground. This year’s PTM is being attended by 530 sellers from 295 organisations and 38 destinations, including 122 first timers. The buyers tally is 303 people from 269 organisations and 53 source markets, including 94 first timers. He said the PTM’s unique selling proposition is that it is not fixed in one place at one time, like ITB Asia, but rather rotates around the region, giving both the regional destinations and their smaller players a chance to market themselves, as well as for buyers to become familiar with.

Mr Calderwood claims full confidence that this “new business model” will set in place the processes that will deliver the right value-for-money output for members, which is what he says PATA eventually be judged by. He says that the new CEO has been chosen specifically for his ability to “motivate the troops” and deliver on the strategy but will be free to change it, with approval from the executive board.

The rapid changes have caused some internal consternation, especially amongst the Thai staff who have had to suddenly deal with new people, new systems and structures, while fearing for their own jobs. There is also the mounting trepidation of having to adjust to life under a new CEO. But Mr Calderwood claimed this would no longer be an issue once the staff fully understand what is being done and why.

He says that the outsourcing arrangements will give both PATA and the new companies a chance to be flexible in their working arrangements. As sub-contractors to PATA, both Ms Leong and Mr Koldowksi will have to meet set performance criteria to justify their retainer. Their 15-month contracts will expire at the end of 2012, which will be followed by a one-year renewable option. However, it is quite possible that other companies, who are also members of PATA, will seek to get a piece of the action.

Also of concern is the possible interruption in delivery of services in the transition period of the outsourcing arrangement, as Mr Koldowski and Ms Leong are adjusting to their new working realities, including the entirely new ballgame of setting up companies, hiring staff and getting their own systems and procedures sorted out.

As far as PATA is concerned, Mr Calderwood, said the new arrangement means “they will be performing the same functions under a different delivery platform. I don’t believe we will see any hiatus in terms of delivery to members. In fact, we want the whole experience to be enhanced. I am less interested in the process because members will judge us by the delivery out of the outcome. This is not a revolution. It is not as if we are losing two skills. We still have them, just in a different type of relationship.” He said both would be free to find and deliver services to other clients, “as long as there no direct conflict with PATA.”

Mr Koldowski claims he will be able to manage the transition (See details below). Ms Leong has declined comment, pending finalisation of the new contractual arrangement with PATA.

Mr Calderwood says he is confident in their abilities to manage the transition. He said, “John and Sheila will continue to devote majority of time to PATA but not all their time. We have to recognise that they have long wanted to move on to do other things, and this gives them an opportunity to do that in a way that also respects their long-standing linkage to the organisation.”

Other Funding Sources

Mr Calderwood said that the savings accruing to PATA by cancelling many of the fixed overheads would allow resources to be redeployed to other areas and perhaps make PATA less reliant on membership dues. In future, he says, PATA could tap other funding sources such as grants from multilateral institutions, or work with sponsorship arrangements or training academies.

“The moves we have made will make PATA more responsive, much leaner and stronger and able to get things done by accessing the different skills that we need.” He says that rather than referring to it as “downsizing,” he would prefer to describe it as “redeployment, restructuring and the development of a new business model” that will enhance delivery of membership services.

“My approach has been to first look at the structure, model, costs and get that fixed, then look at the membership, recruitment and get that fixed, and now the next step is to start looking at the revenue base. In future, you will see more focus on research, events, advocacy and strategic themes. You will see that (being reflected) in the way in which we rework our publications and website.”

He said that all organisations, not matter whether they are associations or corporations, need to refresh the way they do things. Sooner or later, all fall into the trap of doing the same thing same way and sometimes, they have to take a step back and take another look at it.” He said the association is looking at doing at least three industry forums before the end of the year in Hong Kong, Sydney and Singapore. Dates for these have not yet been fixed.

The Future of the Research/Intelligence Unit

The supply of tourism statistics, forecasts and data is considered by the PATA members as one of the primary benefits of PATA. The Office of Strategy Management and the Strategic Intelligence Centre have been a part of PATA for decades, supplying the research and insights that have helped support policy moves around the region. Hence, the decision to outsource this critical function has raised questions about why it is being outsourced and how it will be organised and operate.

The process has worked in a simple and straightforward manner. The raw data is supplied by the various NTOs and other sources to PATA, put through the “refinery” process at the head office, then supplied to the members, some of it free, some of it for sale. Now, the system is set to become a little different and perhaps complicated. The raw data will still be supplied to the PATA HQ and then passed on to the outsourced company, run by Mr Koldowski. There, Mr Koldowski will analyse and make sense out of it, and then send it out, either himself or through PATA.

The Strategic Intelligence Centre will be dismantled and its responsibilities shifted to the new marketing and membership services unit with two staff taking charge. According to Mr Calderwood and Mr Koldowski, PATA members will see no change in the flow of services and the output of reports and forecasts. Mr Koldowski says the raw data will remain in PATA’s hands and its ownership will remain proprietary to PATA. Although he will have the freedom to find other clients to help him remain financially solvent, he will be restricted contractually from selling the information to non-PATA members or PATA competitors.

He says that in fact as an outside contractor, he would have more time on hand and should be able to supply the analysis “in three hours, instead of three days” and improve its quality in terms of interpretation. However, his biggest challenge will be the dual responsibility of running a business in addition to supplying intelligence and insights. As an outside contractor, Mr Koldowski will be operating under a different set of parameters. He claims to know the complications of setting up a company in Thailand, finding qualified staff to manage the back-office and support functions, and all the other time- and cost-consuming minutiae involved.

Moreover, Mr Koldowski, a diabetic, has health problems and is often away from the office. Asked how he planned to deal with that, he said the lower stress levels and better time-management as a result of working from home should help him cope with the pressure.

PATA’s statistical database is a treasure trove of information. When Mr Koldowski’s contract is up for renewal, other companies may want to get their hands on it. Asked if he was aware that any hiccup in his supply of services to PATA, for whatever reason, would give other outside consultancies a chance to edge him out, Mr Koldowski acknowledged that possibility. He said, “Competition is always good and healthy. It makes you faster, cleaner, more efficient. Of course other companies will be able to pitch for the business. But I have been doing this for 15 years, and if they can find someone to match my experience, they are welcome to try.”

One of the major questions is over the future of the Travel Intelligence Graphic Architecture (TIGA), described by PATA as “a business decision-making tool for the travel and tourism sector providing a one stop shop with dynamic, on demand information relevant to the Asia Pacific region.” This hugely time- and money-consuming project has been in the pipeline for two years but proved to be a far more mammoth undertaking than expected. So far, it has delivered nothing. Mr Calderwood said the first of four stages will be up and running this month, giving PATA members access to on-line visitor arrivals on demand. Different levels membership will have different levels of access. Once running at full throttle, the benefits will far exceed the costs, he says.

One question that has gone largely unanswered is why, if nothing was essentially wrong with the way things were working, is the entire unit being outsourced, especially if nothing much is supposedly going to change in terms of output. The reason is to a great degree financial. The unit incurs huge costs but does not make much money, compared to PATA’s financially far more productive events division. Outsourcing the research/intelligence will allow PATA to take a considerable chunk of costs out of the books, as Mr Calderwood pointed out earlier. Mr Koldowski has also been with PATA for 15 years. Should he leave on his own, he would have to be paid huge amount in severance pay. The precise details of Mr Koldowski’s departure conditions have not been divulged, but it would be a fair bet that they have figured prominently in the outsourcing decision.

For all the rosy spin being put on it, this change is fraught with risk in terms of how it will impact on the output. At the moment, however, it’s wait and see.