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Destination: Growth Featured

5:48am EDT July 1, 2005
Travel is a slippery industry. Companies selling airline tickets, hotel reservations and even travel insurance have to deal not only with the issues that plague all businesses, they’re also at the mercy of ever-changing trends and uncontrollable external forces, from politics to Mother Nature. Given all that, simply staying afloat in the travel industry is an accomplishment. But STA Travel Inc., the North American branch of an international network of niche travel planners serving students and young adults, has done more than just survive — it has thrived. Between 2001 and 2003, STA’s revenue increased 58 percent and the number of its employees shot up by 25 percent. Smart Business spoke with STA Travel Inc. President Nick Thomas about what it takes to build a business that thrives under challenging conditions.

Q: STA Travel has gained more than $100 million in revenue since 2000. To what do you attribute this growth?
We were growing sort of incrementally at about, I would say, 15 percent a year. Then, in 2002, we made a very substantial acquisition [Council Travel Inc.]. So it was a combination of organic growth and acquisitions.

Q: How do you recognize great acquisition opportunities?
We’re always on the lookout for acquisitions, and we’re in quite a niche, so we know who all the players are. We keep very close eyes on them, and when the time is right, if there’s an opportunity, we grab it.

We’re always also thinking in broader terms, [looking for] a broader opportunity. They come in all shapes and sizes, right from the small ones at a local level, which our managers normally bring to the table, to large ones, where we have to make a sort of strategic decision: Is that for us or is that not?

There’s really no shortage of opportunities. The big question is whether an opportunity is a strategic fit. That’s where we need to be, obviously, aggressive — going out and finding them — but then be brutally honest about whether they’re going to be a positive or negative.

There’ve been lots of mergers and acquisitions which have done absolutely nothing for the shareholder or owner value. You have to be a little bit careful you’re not riding an ego trip.

Q: How do you merge two diverse cultures into a single, unified culture after an acquisition?
There’s two ways of doing it, and you do them at the same time. One is that you force the issue. We were not interested in some sort of joint culture, and we felt confident in the culture of our own business, and therefore the new folk had to join that.

The other key is to be very genuine about it and encourage [new employees] to join you, rather than keeping people on the outs. So making very genuine moves to include the new people into the culture of your business is important.

Q: How do you get your employees to buy into STA’s vision?
We have a very strong philosophical bent to our business — that it’s of paramount importance to young people to travel and expand their horizons. I think that rings a chord with a lot of people, and a lot of our staff are ex-customers themselves.

So I think it’s just embracing the people into our company who’ve already accepted the philosophical proposition, and then teaching them the business side of life.

Obviously, you have to be profitable in business in order to maintain it, so there’s kind of those two sides to it. And I think just being very open with people helps it go relatively smoothly.

Q: How do you keep employees focused on core competencies?
That’s relatively simple. The way to do it is to keep people very focused on the bottom line. In our business, we’re in service and our core competencies are pretty straightforward. The question is not letting people just drift away. Have some very clear financial benchmarks that you’re trying to attain, right down to the per-person level, and keep people very focused on that.

We publish figures on a daily, weekly, monthly, annual basis on everything and anything. And we make very clear the individual expectations, and I think that’s the key to it — keep everything pinned down to the individual performance so it doesn’t allow people to sort of hide behind team performance.

Q: What are the keys to thriving in a fast-changing environment?
The travel industry has gone through a lot of upset and heartache, but people in any business with a strong customer-value proposition will always survive. When that gets lost, and it can in a hundred different places, that’s when anybody’s going to fail. We put a lot of energy into trying to figure out what customers are looking for, and as long you can continue to do that, and you’re building flexibility into your business so you can shift, you’ll be fine.

When you get really locked into something and you can’t move, and equally, you can’t spot the trend or you’re not honest with yourself to acknowledge the trend, then [you’ll have problems]. Being flexible is a big key to it.

How to reach: STA Travel, (323) 964-1900 or www.statravel.com