At this week's Business Travel Show HRG Worldwide launched a new business to tap into the unmanaged travel market.
The Software as a Service (SaaS) business will be known as Fraedom and brings together HRG's Technology division as well as its Spendvision expense management business. Fraedom will offer HRG fares and negotiated rates to those choosing to book on a portal, known as Fraedom Travel and Expense. A simple online booking will not incur charges but fees will be levied for additional services such as, say, if the client wishes to have any negotiated fares loaded (to an upper limit of seven). Travellers receive confirmation and itineraries by email and simple approval can be added where required. After the trip the traveller can quickly and easily reconcile all their booked, non-booked and incidental expenses in the same system.
Chief executive officer David Radcliffe said, "One of the first new innovations from Fraedom is a simple, easy-to-use and inexpensive service which offers a one-stop process from initial online booking, through to the reclaiming and payment of expenses.
"Fraedom will be aimed primarily at the non-managed and individual sector within the overall travel market, whilst HRG global travel management will continue to focus on the managed sector within the corporate travel space."
Radcliffe concedes that some clients might migrate to this no-frills option but believes that this will be minimal as existing customers have already identified their corporate travel needs and the benefits which only a managed travel programme could deliver.
So what is behind the TMC's strategy?
HRG estimates that there are 1,000 large managed global travel accounts of which the Big Four (American Express Business Travel, Carlson Wagonlit Travel, BCD Travel and HRG) each have about 200, the remaining 200 being distributed among other TMCs.
HRG is now gunning for the mass of business travel that is unmanaged, ie purchased in a fragmented and ad hoc manner rather than according to the tenets of a travel programme.
The business reasoning is spot on. At present, the large TMCs merely challenge each other as a managed account comes up for bid so the market is not being expanded. Instead there is a lose some, gain some environment in which global travel accounts move between agencies.
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Radcliffe has rightly identified that not all business travel is managed and that this is volume that is worth capturing. Booking on Fraedom may be ostensibly free to the customer as indeed it appears to leisure travellers using OTAs but more volume with suppliers can indeed mean lower unit costs and more revenue delivered via an automated process (ie no or minimal cost) would certainly increase revenues and margins.
The diagnosis is correct but is this the right prescription? HRG say that unmanaged customers will choose Fraedom rather than another channel because of its competitive fares and the potential for add-ons that small businesses might want such as the expense management.
Other large TMCs and OTAs — not to mention the suppliers themselves — are likely to be able to match the fares so the ability for HRG to make Fraedom a unique offering which will attract business volumes looks, on initial analysis, potentially challenging.
HRG is absolutely right that the industry needs organic growth and this is an obvious source. But in a world where mobile technologies are allowing this market a choice of channels, is this proposition the compelling solution?