Travel management companies need to adapt. Online adoption is impacting the revenue of TMCs, as shown in HRG's latest financial results. The revenues cannot easily cover the costs of the many management levels and overheads that TMCs have to sustain. Also given that the knowledge within TMCs is not always enough, it could spell trouble for some companies.
The rules of the game have changed in the last decades of market development. Decreasing commission for TMCs has made dealing with intermediaries more expensive. At the same time the arrival of low cost carriers (LCC) has decreased overall air fares so much that it has made the TMC fee look much too high. However, the opaque pricing structure from the suppliers gave the TMC a window of survival which means TMCs now offer quite simple services.
- Giving access to book trips, issue relevant documents and deliver payment structure
- Providing more or less valuable data information to customers
- Account management, including advice and data analytics
Globalisation in general has emphasised the value of international TMCs because customers needed consolidated data from all over the world. The global distribution systems (GDS) helped by providing a uniform and international booking structure and the relationship between the GDS and TMC is key in today's world.
The existing process for both corporate and leisure travel intermediaries is basically the same as it has been for three decades. The internet and software has helped to some extent, especially in documenting and accounting, but some agents still use the same cryptic mainframe language used in the GDS. Online booking and metasearch engines have created a lot of transparency in the market for the booker and traveller, but once the booking is done there are still several manual processes. This makes the work
- Labour intensive and expensive
- Continuing to support the opaque world created by the suppliers
- Expensive for suppliers, forcing them to approach the end-customer direct
- Limited in adding value to the end-customer, but more expensive than going direct to supplier
The development of apps and arrival of the millennial generation to the travel market will force changes from all intermediaries in the coming years. TMCs are going to have to think out of the box; it is a battle for survival.
Globalisation coupled with the growth of handheld devices has meant people can work anywhere, anytime ©dolphfyn/iStock
Future workplace habits
Predicting the future is virtually impossible and information is not as private now as it once was; companies are increasing security far beyond today's levels to protect their knowledge and secrets. There will be regional differences and the maturity of developing countries could change the landscape. But there are some trends that help us to look into the crystal ball.
- The number of corporate trips globally will stay the same or decrease
- Technology will substantially decrease the number of physical meetings
- The cloud will globally replace company networks. This may limit access to the internet
- Local networks with no internet access will become the norm for many departments
- Having more than one screen, split screen or dual access availability will become the norm
- The smartphone will become the primary travel and communication tool
Globalisation continues and in order to succeed any company anywhere needs to think and act globally. Communicating and acting globally will be the norm and the impact of many different cultures and traditions will influence decision-making. New ideas will come from all over the world and any implementation will influence many cultures.
Companies everywhere are forced to constantly review and renew their customer offering whether they are consumer or business facing. Combined with globalisation and the possibility to produce anything anywhere, travel managers will be forced to constantly produce and deliver better while being more innovative or cheaper.
This will force all suppliers, from core material to soft service, to act and help increase their competitive advantage by doing the same. One of the newer sciences is strategic supply chain management, where all items entering the company is reviewed and aligned to the end product. This is also done with the non-core services including travel.
The previously mentioned trends are accelerating. Technology such as the cloud and new software tools are adding wood to the fire, such as the International Air Transport Association (IATA) inventing new distribution and payment structures. In the coming years I would predict
- Increased strong demand from customers for more transparent and simpler pricing structures
- Customers expecting more value creation, correct and valid information and professional advice, helping them achieve their targets
- Suppliers using technology, loyalty programmes and personalisation to 'own' the traveller and travellers and bookers becoming even more proficient in surfing the internet
- Multisource and multi payment structures from credit/debit cards to wallets and mobile pay
Customers will expect this to happen globally with strong local differences. This makes the work for intermediaries extremely complex and will force many players out of the market. However, while the technological development makes it difficult, it also provides opportunities for the clever players to create tools at affordable costs. Companies today get their products from all over the world because they have aligned platforms, templates and structures. Any TMC can do the same.
What to do
TMCs need to review the world from where they are located, as the travel industry is still a home market industry with travellers returning to base where there are local infrastructures, cultures and values. Tax and VAT structures have to be taken into account with labour and legal rules. International companies should be collecting local information and finding the similarities.
Below are some questions that TMCs, and perhaps other suppliers, should be answering about themselves, but travel managers might also want to think about TMC contracts in a similar vein.
- What value does the company add to a trip?
- How are these values perceived by corporate clients?
- How do those values compare to competitors?
- What is the direct and indirect cost of producing a trip generated online and offline?
- How are these values compared to trading direct with the supplier?
- How will a TMC deliver in a multisource environment?
- Does the TMC have systems in place to improve quality and productivity?
- Does the TMC have a product development plan in place?
- How will the TMC approach the smartphone world and apps?
Travel managers are looking for more efficiency, value and differential advantages.TMCs will have to address these areas if they are going to retain business.