Profiting From Visas And Passports
When Bill Gates applied for a visa for a recent trip to Nigeria, his paperwork hit a snag. The Nigerian government required proof that the billionaire chairman of Microsoft would not stay in the country and become a drain on Nigeria's social services. The company helping him with his application, travel document expediter CIBT, obtained a letter from Gates' bank that reassured the Nigerian authorities, and the visa was approved.
More than 200 U.S. companies profit from helping travelers navigate the maze of documents they need to obtain visas and passports, according to Robert Smith, executive director of the National Association of Passport & Visa Services, the industry's trade group. While there isn't research available on the size of the passport and visa expediting services industry, Smith estimates it's a $150 million business in the U.S. alone. And as countries tighten their borders because of concerns about security and immigration, he expects that the market for such services will only expand.
CIBT has grown quickly. Originally founded in 1989, it had 60 employees and $15 million in revenue by 2003. That's when Jeffrey Fine, CIBT's chief executive officer, partnered with a private equity group to buy the business and lead an aggressive buyout strategy. CIBT has made 14 acquisitions in the last five years, and now has 560 employees and offices across the U.S. and Europe. Fine says CIBT processes about 800,000 visa and passport applications annually worldwide and expects 2007 sales to hit $135 million.
Fine's background in leveraged buyouts spans sectors from real estate to home health care. He describes the passport and visa expediting business as a highly fragmented industry where most of the players are mom-and-pop shops, making it ripe for consolidation. "Our ultimate goal is to create a global brand in visa and passport expediting," Fine says. What FedEx is to the U.S. Postal Service, Fine wants CIBT to be to passport services.
The changes in passport and visa rules have been a boon to the industry. Starting this year, U.S. citizens traveling by air are now required to have a passport to re-enter the U.S. from Canada, Mexico, or the Caribbean. And the Homeland Security Dept. plans to start enforcing the same requirement for U.S. citizens traveling by land and sea as early as January, 2008, as part of its "Western Hemisphere travel initiative." The new rules have increased the demand for U.S. passports from 13 million applications last year to an estimated 16 million this year, according to the State Dept.
Getting a U.S. passport through the normal channels can take 10 to 12 weeks. Even the government's expedited service takes two or three weeks. Travelers who urgently need passports in less than two weeks can make an appointment to visit one of the government's 13 Passport Agency offices in person. But for many applicants, companies like CIBT save time and headaches. The expediter can get customers' passports in one week, three days, or even 24 hours, for fees ranging from $50 to $100 on top of the government's normal processing fees.
How does it work? Passport expediters are registered with the government and allocated a limited number of slots to process urgent applications. The company makes sure all the paperwork is in order, delivers it to the agency office, and obtains the passport. Because the number of slots is limited, expediting passports is a tough business for new players to enter, Fine says. "It's kind of like a country club, because they say they're only going to expedite a million [applications], and those million are allocated right now," he says.
Many of CIBT's customers are corporate travel departments or cruise ship and tour operators—clients who need a large number of applications processed at once. Other customers are individuals traveling on short notice for funerals or family emergencies.
Even with the growing demand, passports make up only 20% of CIBT's U.S. business, Fine says. (CIBT expedites only U.S. passports, but processes visas for all nationalities.) The company's bread and butter is foreign visa applications. With roughly 200 passport-issuing countries in the world, each with different visa rules, expediters have to keep track of myriad combinations that each require particular—and often mind-boggling—documentation.
Add to that factors such as whether people are traveling for business or leisure and whether they need single-entry or multiple-entry visas. "It creates tens of thousands of combinations of visa and passport requirements," Fine says. "That's why companies outsource to us, because there's a lot of content to be aware of."
CIBT doesn't expect that to change any time soon. If anything, Fine says, he thinks terrorism concerns will make the paperwork needed for international travel more complicated. He plans to continue the company's aggressive acquisitions and open offices in more countries. "It's a highly scalable business and therefore you can achieve good operating margins the larger you become."
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