BBT asks a travel buyer, TMC and airline to give their thoughts on better relationships, bigger purchasing power and ability to negotiate rates with the aviation industry...
PITY THE POOR LEISURE TRAVELLER trying to arrange a break with family or friends: spending hours researching dates, cities, hotels – and, of course, airline fares. Then spending even longer trying to coordinate everybody’s diaries and budgets.
Finally, the plans are agreed, and he goes back online to make the bookings, but then realises every air fare has now risen dramatically, way beyond your group’s budget. Back to the drawing board. You can’t negotiate with a website, after all.
So he looks at the business world with envious eyes. Corporate travel managers have big purchasing power, direct relationships with airlines and the ability to negotiate rates years in advance... don’t they?
AMANDA TAYLOR, head of travel, Lush (handmade cosmetics)
A MAJOR CHALLENGE FOR A CORPORATE TRAVEL BUYER is predicting the potential volume of traffic on routes. Regular traffic could reduce on previously popular routes when the focus of the business changes to another region. That new region might not be served by the same airline – or alliance – with which you were flying before.
The most cost-effective corporate travel programmes involve the use of both client negotiated rates with airlines and spot buying. You have to ask: is it viable to commit all our travel through one airline to secure rates, when working across a mix of published, negotiated and consolidated rates will provide lower overall fares?
Airline fares can fluctuate as a result of the changing geopolitical landscape and major savings can, for instance, be achieved through consolidated fares through a supplier versus full published fares, without compromising on quality.
As our brand grows on a global scale, it’s become clear we are travelling certain routes more regularly than before, which puts us in a better position to secure contracted rates. I’m gathering information from across our business regions to understand the routes they undertake, which will help when negotiating with airlines.
My advice to a corporate travel buyer seeking to secure the best results in airline negotiations would be to develop a full understanding of your business, working out where the potential growth exists. Then ask yourself if there is an airline/alliance that could operate these routes with either direct flights or using a central hub as a connection point. In my experience, the airlines I’ve worked with most recently have been hugely supportive in our discussions and have worked to understand our business needs.
GIANNI LEONE, head of central and west Europe, Alitalia
I BELIEVE IT IS ESSENTIAL for corporate travel buyers to build trusting and open relationships with airlines. Buyers should be transparent on their company’s travel policy and be willing to share high-level market data to allow the partner airline to fine-tune the offer. I would also advise buyers to be forthright, approachable, available to meet regularly and open to looking at the airline’s whole service offering, not just the price paid.
Corporate travel is much more than simply price. Corporates want their executives to perform to the best of their ability, arriving at meetings refreshed and on top form. Consequently, elements such as schedules, onboard service and quality of lounges are just as important, if not more so, as the price alone.
To convince an airline that negotiation is worthwhile, corporate travel buyers should demonstrate capabilities, including the ability to enforce their travel policy. That said, most corporates now have a best logical fare policy, which means they can book outside the corporate fare programme and use normal published fares when cost-effective. Where travellers may not want the flexibility of a corporate fare, they may be willing to buy a lower fare to save on costs. On the downside, they then have to adhere to the rules of the published fare and, therefore, do not have the ability to amend bookings.
Airlines are generally willing to offer good deals if a route is facing significant competition, in either pricing or schedule, or when launching a new destination to carve market share.
PAUL DEAR, global director of supplier and industry affairs, HRG
THE FIRST POINT I WOULD MAKE is that today’s air travel marketplace is exceptionally complex and, therefore, potentially confusing. From the relative merits of direct and indirect travel, through to unbundling and the differences between each airline’s business class offering, there are many variables. Travel buyers really have to be experts – gathering and assessing the right data to understand the market – to get the best deals.
There are no strict rules but we tend to advise clients to consider negotiating rates with airlines when annual spend on a route reaches around £100,000. Nonetheless, when negotiating, the best approach is certainly to address more than one route. Try to bring your organisation’s entire global air travel spend into one RFP [request for proposal]. That approach is common practice for multinational businesses. Your bargaining position is more powerful if you are talking to airlines about hundreds of millions of pounds’ worth of travel, rather than hundreds of thousands.
As negotiations can take six months to a year, agreements tend to last around two years. Given the time spent negotiating, shorter-term agreements would clearly make little sense. But equally, airlines prefer not to tie themselves into longer-term agreements, as market situations may change.
But negotiating rates with airlines is only part of the process. Travel buyers and managers must then take control internally – make sure your travellers comply with your policy to maximise the benefits of the deal you have just struck.
Changing travel habits can be difficult. For example, indirect travel to your ultimate destination is often cheaper than direct, but can bring inconveniences to your travellers. You have to clearly direct your travellers to book the way you want them to, based on your negotiations. This leads to another vital area of a corporate travel buyer’s expertise – understanding which products your travellers want to book. Did you review your travellers’ current buying habits before entering into negotiations? Travel policy will increasingly be driven by travel behaviour. If it’s working, don’t break it.
Negotiated client rates are not the only option. Spot buying can be an effective approach, particularly when requirements are straightforward – if you just want to get there and back – and unbundling comes into play. For example, a traveller taking a short-haul day trip, with no need for hold baggage or any ancillary services, may well be able to source the best fare through spot buying. Travel buyers therefore face a dilemma – is it worthwhile to negotiate full-fare short-haul services with an airline knowing many travellers will effectively unbundle and use few of the negotiated elements? Again, the travel buyer must be an expert, using business intelligence to know when contracted fares make more sense than spot buying.
Airlines will continue to work in partnership with TMCs [travel management companies] and travel buyers to offer attractive negotiated rates. For the well-informed travel buyer, there are definitely opportunities out there.
Airlines may be less willing to negotiate on routes with low capacity or monopoly/near-monopoly status, but on routes with high capacity, such as the transatlantic services on which the joint ventures are competing, there are great opportunities.
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