Choosing an intermediary to manage your travel programme is a complex business. Martin Ferguson asks the experts for advice on where to start
Corporate travel agencies were forced to rethink their business models in the early 2000s after airlines, led by British Airways, stopped paying commission. The result was TMCs as we know them today.
They come in all shapes and sizes: a small number of global TMCs offer wide geographic coverage and have enviable influence over suppliers, whereas independent TMCs often provide a more personal, tailored approach to customers. But over and above booking travel itineraries, all these rejuvenated intermediaries now specialise in areas such as traveller tracking, expense management, data analytics and consultancy services. Throw hotel-booking agencies (HBAs) in to the mix and buyers have a lot to consider.
In this era of global commerce and rapid economic growth in emerging markets, companies have an ever-increasing and more complex list of demands for their travel management providers.
But finding the right partners is not simply about the size of your business or the size of the intermediary. There are a number of more subtle factors to take into account. We asked three industry experts for advice on what to consider when recruiting a travel management partner…
Carol Neil is head of corporate travel in Europe, the Middle East and Africa (EMEA) for Japanese financial giant Nomura International, and was named Travel Buyer of the Year at the Business Travel Awards 2014
There is no set formulabehind choosing the right TMC or HBA. It really depends on the size of your organisation, your travel culture, ethos and key objectives. My first priority would be to identify possible partners who, on paper, appear to meet the requirements spelt out in the RFP [request for proposal].
“It could be a boutique agency, as they would be more likely to tailor their offering to meet your company’s requirements. However, if you have a global travel programme, a smaller intermediary may not be able to meet your geographical requirements. If they don’t have local representation in some of your travel programme’s key destinations, there will be difficulties with data distribution, traveller security and technology integration.
“When it comes to the use of technology, especially online booking tools (OBTs), your corporate travel spend is not a barrier to embracing the latest innovations. Large organisations will almost certainly opt to use one of the well-established OBTs. Smaller businesses are more likely to use a TMC’s proprietary OBT, or one of the newcomers, who are perceived to be more willing to incorporate their needs.
“To conclude – size matters, depending on what you are looking to achieve. Start by discussing your aims with your peers, either individually or at industry conferences and forums. This will help you to establish what is best practice for a travel programme of your size and who in the industry is considered to be best in class, and most suitable to support you.”
Tom Stone is director of travel sourcing and outsourcing management company Sirius
“Before launching an RFP, or deciding which intermediaries to invite to tender, it is crucial for an organisation to define its key objectives. The tender list will be influenced depending on, for example, whether cost is significantly more important than service, or whether there is a proven track record in implementing online booking.
“An organisation that has a high level of simple point-to-point bookings may be happy with a lower-cost TMC, without the bells and whistles of a full-service provider.
“The tender list will also be influenced if there is a larger volume or ratio of domestic travel, rail and/or hotels, as there are some TMCs that specialise in this field and an HBA may have more of a role to play.
“When it comes to what’s the best fit, an intermediary’s culture and ability to match objectives are more important than size. Some organisations may need a more flexible approach, including the ability to customise technology.
“Others may be suited to a more standardised template of service provision. Multinationals tend to use one of the multiples because they can generally meet regional or multinational objectives. But there are some very well-run consortia that can fulfil a global strategy with local independents.
“It’s a fallacy to believe the assertion that big companies like to do business with other big companies, though there is clearly a trade-off between size and relative importance to a supplier. A smaller corporation may lose some of its visibility with a large TMC or HBA, but it may well be able to access inventory that is not available to smaller suppliers.
“Newer entrants to the marketplace have commoditised the booking of straightforward point-to-point journeys and brought transactional pricing down to a price point that many of the traditional intermediaries struggle to match – again, focusing on service as a differentiator.
“Being a big fish in a small pond is appealing to some but, as a rule of thumb, you would never want to be more than 20 per cent of any intermediary’s turnover – that simply isn’t healthy.”
TRADE ASSOCIATION’S VIEW
Paul Wait is chief executive of the GTMC
“There is no one-size-fits-all approach to defining how a corporate travel buyer or procurement professional should select the most appropriate provider to manage a travel programme.
“Regardless of whether you’re the largest TMC out there or one of the smaller independents operating on a skeletal staff, at the end of the day it all depends on the client. What are their requirements? What are they looking for from a provider? Can that provider deliver against their corporate travel objectives and perhaps, most importantly, is it a good culture fit?
“These are the sorts of questions that procurement departments are asking of themselves and the answers, in turn, will define the type of TMC that best fits the bill. Segmenting prospective applicants before these requirements have even been determined is simply an exercise in frustration.
“Delivering true consultancy services and long-term strategic business advice is where travel management companies can both differentiate themselves and prove their worth among the procurement brigade – going beyond simple order-taking. Too often travel management procurement is decided on the level of transaction fee, rather than the service and value that a TMC can bring.
“Anyone can book a standard flight but the right TMC will be a true consultant to your business. To achieve success, it’s fundamental that both sides work side-by-side as partners.
“Visibility and dialogue is key – TMCs need to provide constructive information and sound recommendations for clients no matter their size or sector. For a TMC to stand a chance in a competitive RFP process, it is integral to understand the client and the issues that they face.”