Next month, Ambassadors Group Inc. will move into its new, 132,000-square-foot headquarters building on the West Plains, more than doubling the amount of space it occupies now in East Spokane.
Doubling is a word the Spokane-based educational travel company knows well.
Since 2002, when it was spun off to become a company of its own, Ambassadors Groups annual gross receipts have more than doubled, to nearly $220 million, as has its net income. The number of customers it serves, called delegates because they travel the world as American ambassadors, totaled more than 43,000 last year, also more than double the number it served in 2002.
Add to those measurements the companys employment, stock price, and shareholder return. All have more than doubled in the past five years.
Company President and CEO Jeff Thomas calmly describes all of that as just pretty consistent growth, and credits most of it to the demographically growing youth segment Ambassadors serves and to an increased desire by parents to expose their children to a global perspective.
Were in a huge market, Thomas says.
Ambassadors, best known as the contract provider of the nonprofit People to People programs launched by President Dwight D. Eisenhower in 1956, now employs about 310 people. The bulk of those employees currently work at Ambassadors aging campus at 110 S. Ferrall, near Sprague Avenue and Freya Street, although it also has a small office near Washington, D.C., and some employees scattered around the world.
The new headquarters building the company is developing is located at 2001 S. Flint Road, near Spokane International Airport, and when completed, will have cost between $15 million and $20 million, Thomas says. Ambassadors currently leases about 64,000 feet of office space in four buildings in East Spokane.
The companys full-time staff, though growing, pales in comparison with the roughly 1,000 or so contract tour guides and facilitators Ambassadors hires annually, and the some 5,000 teachers who volunteer to accompany People to People participants to destinations around the world each year.
Ambassadors sells packaged trips, mostly to school-aged youths, that are designed to expose Americans to other cultures. The trips include sightseeing, but also educational components, overnight stays in private homes, and visits with dignitaries or other local notables. Some specialized programs are targeted at sports, in which delegations compete in international tournaments. Others target youth leadership and career-specific themes, and mostly include domestic travel. A relatively minor segment involves trips for adult professionals, who visit their counterparts in other countries to learn about how things in their industry are done differently abroad.
Last year, Ambassadors sent delegates to 40 countries on seven continents. In recent years, the company also has begun marketing U.S.-bound trips to people in other countries, though that remains a tiny part of its overall business.
Thomas says Ambassadors programs, which often run 20 days or more, average $5,000 in price, and that the company is known for charging a premium compared with its competitors. He defends that, though, by asserting that some other educational travel programs dont include in their package price all the costs that travelers will incur, and dont provide the depth of activities that People to People programs do.
Ambassadors has exclusive rights to provide educational travel packages under the People to People name to youths in elementary school, middle school, and high school. It also has nonexclusive rights to use the name for programs aimed at sports, college students, and adult professional travel, though Thomas says no other provider currently uses the People to People name.
To use the name, Ambassadors pays an undisclosed royalty to Kansas City, Mo.-based nonprofit People to People International. Its agreement with People to People expires in 2010, but Ambassadors has the right to renew it until 2020.
Ambassadors Groups gross receipts, its version of overall sales, have jumped 22 percent in each of the past two years, following a 35 percent gain in 2004. It crested the $200 million mark last year for the first time, ending at $219.5 million, up from $180.0 million in 2005. Gross receipts include amounts it passes through to airlines, hotels, and others.
Delegate growth last year totaled 14 percent, to 43,075 people. Back in 2002, it served just 21,000 delegates, following a tough year in the travel industry due to the terrorist attacks of Sept. 11, 2001.
The company posted 2006 net income of $26.7 million, or $1.25 a share, compared with $22.4 million, or $1.05 a share, in 2005.
So far this year, that growth appears to be continuing. On Monday, it posted second-quarter net income of $20.9 million, or $1.05 a share, compared with earnings of $18.5 million, or 86 cents a share, in the year-earlier period. Gross receipts jumped 24 percent in the first six months of the year, to $129.2 million, compared with $104.1 million in the first half of 2006.
Also during the first half of the year, the company had about 25,400 delegates travel under its programs, up 20 percent from the year-earlier period. It currently has about 56,400 delegates enrolled for 2007 trips, compared with the about 45,300 it had enrolled at this time last year. Most of Ambassadors trips take place in the summer months.
The company has added about 25 employees so far this year, and expects to hire more, Thomas says.
Though Thomas credits much of Ambassadors growth to the growing segment of the U.S. population under age 25, he says the company has become more aggressive about tapping that estimated youth market of about 30 million people.
Virtually all of its marketing is done via direct mail, primarily letters sent to school-age children and their parents. It spent nearly $32 million last year on sales and marketing efforts, more than double the amount it spent five years ago. Thomas says the company now has 4,000 different versions of the form letter it sends out.
Ambassadors also has been concentrating on broadening its product mix. It launched its first leadership travel programs in 2002. The company has added more adventure components, including rappelling off of castles, to create more excitement.
Safety a key concern
Perhaps the biggest challenge Ambassadors faces is the fear parents have of sending their children abroad in an increasingly dangerous world, Thomas says.
Parents want to look you in the eye and ask you if youre going to protect their child, he says. Thats understandable. Clearly, the world is a more dangerous place.
He says Ambassadors has responded to those fears by hiring an international safety consultant, running through countless crisis simulations, and conducting safety training for all of its tour guides and teacher chaperones. It also has met with safety experts at companies such as Disney Co. to learn from them, and does background checks on all its guides and volunteers.
Thomas says that when the July 2005 subway bombings took place in London, Ambassadors had delegates in that city. The bombs went off at 1 a.m. Spokane time, and by 3 a.m., Ambassadors had convened a crisis team at its offices here, then contacted the tour leaders in London and began calling the families of all 2,500 delegates who were in Britain or on their way there, to keep them informed of the developments.
It also now has begun providing its own cell phonestested to work in specific countriesto guides and volunteers who accompany delegates on trips, so that the company has confidence that it can reach them when needed.
Another challenge the company faces regularly is the fluctuation in the U.S. dollars value against international currencies. Ambassadors regularly deals with eight primary currencies, and as the U.S. dollar has weakened against major international currencies, its costs have risen. The company hedges against such fluctuations by buying some currencies well in advance of trips, since it must put a price on trips and begin taking delegate deposits months before the departure.
Ambassadors history dates back here to 1967, when Keith Tatham, a leader in the nonprofit People to People program, launched a for-profit venture to offer People to People trips. That company operated until 1995, when brothers John and Peter Ueberroth, who had founded their own travel company in California, called International Ambassador Program Inc., acquired the Spokane operation and began running it as an educational-travel subsidiary.
With the acquisition, the Ueberroths Newport Beach, Calif., company changed its name to Ambassadors International Inc., and went public later that year. John Ueberroth had extensive experience in the travel industry, including as president of Carlson Travel Group and CEO of Hawaiian Airlines. Peter had been commissioner of Major League Baseball and organized the 1984 Summer Olympics in Los Angeles.
In 2002, following the big dip in travel as a result of the 9/11 terrorist attacks, Ambassadors International spun off its educational-travel subsidiary to concentrate on business-related incentive travel programs.
The spun-off entity became Ambassadors Group Inc., which also is publicly traded through the Nasdaq trading system under the symbol EPAX.
John Ueberroth remains chairman of the Spokane-based company, and Peter Ueberroth is still a major shareholder.
Thomas, 40, joined Ambassadors in 1995, and was named president the following year and CEO in 2000. He heads a relatively young group of executives, including his wife, Margaret Thomas, also 40, who is the companys executive vice president; and Chadwick Byrd, its chief financial officer, whom the company lists as being 35 years old.
Thomas says theres a synergy from the youthful management and the market Ambassadors targets in its programs, and says the Ueberroths made a big bet on youth.
Contact Paul Read at (509) 344-1262 or via e-mail at firstname.lastname@example.org.
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