Cendant Focuses On Pace Of InnovationCendant Focuses On Pace Of Innovation

The U.S. travel and hospitality industry has been suffering for more than a year because of the weak economy and people's reluctance to travel after Sept. 11. Yet Cendant Corp. has managed to keep increasing sales. Making its growth strategy pay off will depend in no small part on whether technology can provide greater efficiency.

Cendant has been growing largely by acquisition. The New York company owns travel-and financial-services companies, including several hotel chains, Avis, Century 21, and Galileo International, the second-largest travel-reservation system, which it bought in October. These acquisitions have helped the company almost double its revenue to $8.94 billion last year, compared with the year before. But the benefits haven't yet moved to the bottom line; Cendant's operating profit margin slipped to 11% last year from 17% in 2000. This year, the company predicts much better bottom-line results at the same time it continues to buy more companies in the lodging, time-share, and car-rental industries. To do all that, Cendant is streamlining its IT processes, cutting unnecessary costs, and building up business efficiency through the use of technology.

The IT budget for all of Cendant's businesses probably will drop this year, CIO Larry Kinder says. That's mostly because of a 10-year, $1.4 billion outsourcing deal it signed in December for IBM Global Services to manage its data operations. The deal includes Cendant's Avis, Days Inn, Galileo, Ramada Hotels, and Resort Condominiums International operations, and it lets Cendant consolidate its two data centers into one and offload help-desk and desktop support services. But can Cendant outsource and still provide the kind of innovative IT the company needs to keep growing?

It's a critical call, given the challenge Kinder and his IT team face to consolidate the back-office functions of Cendant's multiple acquisitions. By consolidating, Cendant can move the acquired companies' personnel and financial data to its existing systems and jettison the acquired companies' back-office systems, thereby cutting the cost of IT support, maintenance, and software upgrades. For example, when the company bought Holiday Cottages International in January 2001, it consolidated its payroll and human-resources systems.

But that's standard merger procedure. More difficult is Cendant's plan this year to integrate its many reservation systems. If an Avis call center could also book reservations for Cendant's hotels and its Cheaptickets.com airline system, there would be huge potential cost savings. "We're looking at everything that we have and asking, how many reservation systems do we have, and how many do we need?" Kinder says. He hopes that during the next year the company can integrate some of those systems, using open standards such as XML to make that kind of cross-functionality possible.

That will require customer data being shared among businesses, which Kinder recognizes will take careful monitoring to avoid raising customer-privacy concerns. "We don't want a customer who rented a car from Avis to start receiving sales offers from 35 other business units," he says. To prevent that, Cendant will use customer-relationship management and analysis software to understand which offers best suit individual consumers.

The company is trying a number of IT-intensive improvements in its travel business. It's rolling out a program called Mega Loyalty to integrate membership programs across its brands and major airlines. It's revamping the Galileo reservation system to make it easier for travel agents to search and upgrading its consumer-oriented Trip.com site to offer a broader menu of travel services, including airline tickets, car rentals, hotel accommodations, and vacation rentals. Improvements to the site allow for faster booking because users don't have to initiate a new search if they want to change their travel criteria.

Kinder says the key to the success of Cendant's technology strategies is teamwork. CIOs for each Cendant-owned property work together to find ways to maximize profits and leverage each other's strengths. In addition, Kinder is methodical about which IT projects his company pursues. "You've got to have a business case, and you've got to be able to stand behind it and deliver what you say," he says. This will certainly be the year to prove that IT can deliver what's been promised.