Christine Nikiel: Flying high with corporate travellers

Bob Shaw and Darrin Grafton say Serko saves its clients money on travel. Photo / Richard Robinson

Former farm boy Darrin Grafton might still be mucking out milking sheds had his dad not convinced him that computers, not cows, would pave the way to his success.

It was good advice. Grafton's company, Serko, has been clocking up awards and muscling out much bigger competition with its time- and cost-saving travel management software.

The Auckland company specialises in saving corporate travellers money, and chief executive Grafton believes Serko has the edge in these recessionary times when companies are cutting back on spending.

Serko sells its software to travel management companies (TMCs) and clips the ticket from each booking. The software allows TMCs to better manage bookings for their corporate travellers: it connects to low-cost carriers, as well as hotels and rental cars and allows the user to make a full online booking based on the corporate's travel policy.

It also compares air prices and allows authorisers to see how much clients save on each booking, and to reject bookings if they want to.

Companies using Serko's online system can save on average 27 to 30 per cent a year on travel costs, says Grafton. And there are savings within the company too. Grafton claims the cost of organising a trip totals on average $150, but using the online tool that cost drops to around $30.

And it's clear customers like saving money: Grafton says a new client signs up to a Serko-affiliated TMC every week and a new TMC signs up to Serko every month.

Last year the company signed an alliance with a competitor, the Nasdaq-listed United States software company TRX. Serko will distribute online travel content to companies across the Asia-Pacific region and TRX's RESX online booking system will cater for the US and Europe. It's a significant deal because it's the first time two competing booking tools have joined forces, and means TRX is no longer a competitor in the Asia-Pacific.

The deal also allows Serko to link in to TRX's global accounts and be part of a global tender process - a lucrative business considering some Asia-Pacific tenders have been worth up to $300 million.

Serko first made international waves when, just a year after releasing its software, it won the Microsoft US E-Commerce Solution award for the Asia-Pacific region, and came second in the world finals. Grafton went on to win the NZX Hi-Tech Entrepreneur of the Year Award in 2007, and he and business partner and Serko co-founder Bob Shaw were also finalists in last year's Ernst & Young Entrepreneur of the Year award.

Yet the company flies under the radar in New Zealand. That's mainly because its focus has been on bigger markets, such as Australia and Singapore, says Grafton. The biggest local corporate users spend about $20 million a year on travel, but in Australia that's an average-sized account.

Shaw and Grafton met in the early 1990s while working at Imacs, an Auckland accounting software specialist. After a few years Grafton saw potential for software to streamline travel bookings and persuaded Shaw back from England where he'd been working for Lloyds Reinsurance. The pair spent several years developing their first product, Travelogue.

Imacs agreed to sell the software in New Zealand, and Australian company Travelogue, whose platforms the software used, sold it in Australia. The software sold like the proverbial hotcakes.

"People called [the software] the biggest virus to go through the travel industry because it spread by word of mouth so fast that we sold to 900 agencies in six months," laughs Grafton.

"That gave us a pretty solid base from day one."

Local tourism entrepreneur and founder of Gullivers Travel Group, Andrew Bagnall, heard about Grafton and Shaw's product, and adopted it in his travel brands United Travel and Holiday Shoppe. The cash injection allowed the pair to develop a corporate travel market version of the software in 1997, followed by an online version. Bagnall's backing, which continued until he floated Gullivers in 2004, lent credibility to the company.

Grafton says Serko has always kept ahead of market trends. Its online software package was the first to implement carbon-related information about flights, a tool that highlighted which flights had the lowest emissions.

Serko spends $3 million to $4 million a year on R&D, yet is one of the top five travel booking software companies in the world, says Grafton, and able to compete against others with multimillion dollar budgets. Government grants have helped; the company used one to develop a recently released tool to alert users to any unused tickets the corporate has stocked up. Unused tickets, which are valid for one year, typically make up about 6-8 per cent of a company's travel spending, and only about 60 per cent of it is ever used, says Grafton. With the new alerts, unused ticket wastage drops to about 4-5 per cent, he says. For a company that spends millions a year on travel, the savings on unused tickets soon add up.

Almost two years after Bagnall went public, Australian travel company S8 bought Gullivers and Serko found it tough under the Australian company's control.

"It was hard being involved in a company that was focused on travel, not technology, and internally when most of our customers are external," Grafton says.

"We lost the New Zealandness of [Serko]. It was obvious they didn't understand [what Serko did]." Shaw and Grafton bought Serko back in 2007 and say their client base has increased threefold from what it was in 2004.

The public float hasn't detracted from their own plans to list, although Grafton emphasises it will be another three to five years before they're happy with their size.

Now the company has 40 staff, 12 of whom are developers, and six are quality testers. Turnover has been increasing by 25-30 per cent each year since 2007, he says, and most of it is pumped back into the company.

When the pair bought back the company, they offered staff shares in 40 per cent of it, aiming to rebuild the Kiwi spirit they felt it had lost under its adopted Australian parent. Each new staff member paints a small tile representing how they see the business and what they want from it. The tiles are displayed in the main meeting room, and are a "reminder that their contribution is important and makes up the big picture", says Grafton.