Negotiating is not something to be feared or avoided. It's part of the job for suppliers and buyers and that means that both sides are aiming to get the best result for their company.
Travel buyers traditionally use transactional data in their supplier negotiations. But there is more data than that to use if you want to do even better when fixing next year's price.
Good purchasing strategy is about more than a keen price tomorrow for what you are purchasing today. It's also about identifying the best source and quantities for the travel you are likely to purchase in the future.
As with any negotiation the more you can convince the other side of the table of your value and the better you can identify your future needs, the better positioned you will be.
Don't neglect information about what is likely to happen next year — both in your company and in the wider economy.
Data: the past
In the past the perceived wisdom was to use data which demonstrated past behaviour as the best predictor of future usage. Transactional data were used as evidence to support the expectation of next year's travel profile and volumes on which any corporate fares or room rates would be determined.
The 2008 global economic downturn did a lot to remind us that like the stock market and wages, business travel does not just increase steadily year on year. The volume of travel fell dramatically in 2009 as many companies imposed cost cuts or, in some cases, travel bans. Conversely, when companies began to travel again the volumes achieved in the previous year appeared as unrealistically low numbers to take to a bargaining table.
But then big data emerged as a concept and we all began to recognise that there might be other numbers that could usefully be applied to the exercise.
There is no reason not to include forecast data in your information kit to take to supplier negotiations.
Data: the present
We live in a world of big data. According to Google chairman Eric Schmidt, we create as much information now in two days as we did from the beginning of time through 2003. The issue isn't having data — it's which data and how we use it. And data is not only about what has already happened. Used properly it can be a very good indicator of what is likely to happen.
There are two main kinds of data which will affect suppliers' prices and the price that you should be paying, the macro and the micro.
Macro
Think of "macro" as the market at large. What is likely to happen in the wider economy will affect not only published fares and room rates but market demand. These forecasts are part of what suppliers will use to create their own budget forecasts.
Use external sources such as the TMC, official industry bodies such as IATA and other broader economic indicators to put together a picture of what's likely to happen in the market. If bodies such as the IMF and World Bank are forecasting strong GDP growth in a region, there's likely also to be strong demand for tickets and rooms. If a region looks as if it's slowing down, the converse could be true. Other economic indicators which might affect demand in a region include inflation rates, exchange rates and debt.
Economic activity will also vary by sector. Energy, retail, banking and construction all will recover — and slow down — at different points in the business cycle.
Of course, non-economic factors such as big events like the Olympics and World Cups can also affect demand for flights and accommodation. Political instability or natural disasters will also influence the volume of travel to a region.
External 'macro' factors will affect suppliers' expectations of rate or yield in particular destinations or on specific routes.
Micro
'Micro' refers to what's happening within your own company and, more specifically, the likely profile and volume of travel that your company will be undertaking in the next year.
All travel departments and managers should aim to have a senior level sponsor who can help gather data from other parts of the business which will affect policy and the travel programme in the coming year. This could be anything from the sales team targeting an area for growth to plans to open a new factory (which will need staff visits) to planned expansion. Some of this could have commercial sensitivity so managers must take care with what they share.
This does not apply only to transient travel. As more and more companies are integrating their strategic meetings and management programme into their travel departments, this is especially important. Knowing the volume and likely size of meetings as far in advance as possible is likely to yield keen prices.
For a travel manager to have more accurate information about which destinations are likely to have more — or less — travel in the coming year is invaluable. If it is a route without much competition and full loads, it is unlikely to yield big benefits as carriers would be hesitant about diluting a potentially strong yield. However, on a route where there is competition a good discount can be achieved either with an existing partner or a new one keen to gain new business and therefore market share.
Sourcing and negotiating; the future
We're all seeing good growth to the emerging economies of Africa, Asia and South America — all of these markets growing more quickly than the traditional markets of continental Europe.
But each individual corporate should know which destinations they should be focusing on in their supplier sourcing and price negotiations.
It's a powerful thing to know your future needs when sourcing. For example, when choosing vendors for meetings make sure that the properties in the portfolio match your future needs. If you're doing bigger events and planning on more people for your internal training days, you may need suppliers with different kinds of venues.
Clients who can see where their company's future growth and expansion is likely to be are in a powerful position. Hotels and airlines both want to increase their market share. They will always be interested in attracting business that they don't have today.
Identifying the destinations which can deliver segments to a supplier in the future can be the key to a successful round of supplier negotiations.
Travel management: the future
Including new data is necessary but it's not sufficient. To deliver real value corporate travel managers should think about using new data sources in new models. Travel managers must consider the possibility of new structures and scenarios in their forward planning.
This is what shrewd modern management is about.
The Bank of England now employs what it calls stress testing to assess the ability of our banks to cope with different scenarios. This is an example of scenario planning which is fast becoming a standard strategy in mature travel management tool kits.
More than simply looking at the past or trying to predict one future all corporates and travel management companies should review the wider industry to consider the impact upon their programmes — including their needs, sourcing and costs - across a range of scenarios.
For example, one question for corporates must be "Is your sourcing strategy robust enough? Does it work in every future scenario (eg what if demand in on a key route or in a key city goes up 50%)?"
Forecasting isn't about predicting the future but predicting it across a range of futures and then ensuring that you are best placed now for whichever scenario comes to pass.