Travel professionals' diaries resemble alphabet soup in the spring — ITM, ACTE, GTMC, IATA and others all hold their annual conferences. These are always good educational events. But delegates know they could always read the presentations at home. The real reason they attend conferences is to touch base with peers to find out what's really happening in the market.
The International Air Transport Association (IATA) and the Guild of Travel Management Companies (GTMC), nominally a UK group but increasingly the voice of TMCs in Europe, both held events last week. To the uninitiated their concerns might have sounded quite different. In reality, they are grappling with the some of the same issues.
When IATA members met in Miami the two biggest topics covered were Open Skies — the running tussle between US and European carriers on the one side and what they perceive to be the subsidised Middle Eastern airlines on the other — and cabin baggage. The GTMC met in Brussels shortly after the UK general election so the fact that government and regulation was on its agenda was no surprise.
The elephant in the room for both conferences was the Lufthansa Group's recent announcement to levy a €16 surcharge on any booking made via the GDS.
Public support from fellow carriers for Lufthansa's initiative was absent in Miami but in off-the-record or casual conversations with peers many reportedly said they too might consider such a move or that they were waiting to see what happened with Lufthansa.
The wind of outrage from TMC representatives in Brussels was understandably palpable — LH's move was tantamount to a direct tax on anyone using their services, systems in which they had invested much and were dependent upon to make a living. It would make an efficient method of distribution — which was lower cost than direct distribution when all factors were taken into account — more expensive.
But it was the other conversations happening that brought some clarity and unity to the wider picture.
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Airline and TMC challenges roll off the same lines. ©luismmolina/iStock
One senior TMC CEO expressed frustration at procurement taking over the reins of travel supplier selection from those that understood the travel industry. The consequence was a focus on the size of the transaction fee rather than an understanding of the overall cost savings that good travel management could deliver. In other words, TMCs are feeling that their unique brand benefits are being forgotten in a structure that focuses on price rather than their unique service in judging RFPs. In other words, TMCs feel they are being treated as if they were interchangeable commodities. TMCs react to this kind of customer decision-making by lowering their fees and raising needed revenue by upping charges elsewhere.
Airlines too are frustrated by price-led decision-making. Buyers compare alternative carriers on the basis of price so airlines similarly lower the fares to make the sale and then similarly look unbundle their services to raise needed revenues.
They both do this because this is how people have become accustomed to buying in an internet shopping age where 'freemium' — low-cost basic package and expensive add-ons — is the norm. Airlines are aware that many consumers are buying through their websites and OTAs where it is difficult to convey any brand values.
Instead the sales differentiation happens through personalisation, a technique of targeting products and offers to individuals which can be practised by retail sites, own websites and NDC but is lacking from the GDS.
TMCs offer clients a lot of value but customers tend to make their buying decisions based on the fee they see on the RFP. Airlines offer a lot of value but customers tend to make their buying decisions based on the fare they see on a screen.
Their challenges are similar. Perhaps their solutions might be as well.