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Travel buyers have asked for more “transparency” over the pricing models being used by travel management companies (TMCs).
Buyers said they wanted TMCs to offer more clarity on exactly how they earn money from suppliers, during a panel session on TMC fees at the Business Travel Show in London.
Sandra Dvorak, category manager, travel and MICE, at the British Council, said: “It concerns me about transparency. Both buyers and suppliers need to work together.
“There’s an understanding that TMCs have to generate a profit. But it’s about understanding where the profit is coming from.
“How do they provide value to my organisation? How do the ways they generate income affect the ways we purchase and how we get access to fares and access to inventory. Will we have the visibility of choice?”
Merel van der Pijl, category procurement specialist at Dutch diary firm Friesland Campina, agreed: “I don’t mind that we have to pay a fee to the TMC. We want to make sure there is transparency. So at least we know that the travel programme we have in place is built and steered in the correct way.”
John Melchior, managing director of Travel Group Consulting, said there was currently too much focus on reducing TMC fees (typically around 3-5 per cent of total travel budgets) and not enough on cutting the other “95 to 97 per cent paid to suppliers”.
Click Travel’s CEO Jill Palmer added that the reason for the focus on TMC fees was because they were “very transparent” whereas the “total amount of spending on travel is potentially unknown”.
“A good managed programme can save 20 to 30 per cent on a travel programme, particularly if you have not used a TMC before,” she said.
“We don’t restrict content on the basis of the amount of commission we earn. “We don’t have travel consultants pushing certain brands to earn commission overrides.”
Click currently offers the use of its online booking tool without any fees – and makes money from this service through earning commission from suppliers, mostly hotel companies.
But van der Pijl said that a “zero fee” pricing model would “raise questions” for her as she would want to understand “in a transparent way” how the TMC was making money.
Matthew Pancaldi, global sales and client relations director at HRG, said that the TMC made 80 per cent of its revenue from client fees with the other 20 per cent from suppliers.
“You have to deliver value otherwise the customer won’t pay us,” he added. “You have to work in partnership with the TMC and focus on reducing the total costs of the programme. You should be incentivised to do that.”