Buying Business Travel looks at the debate over business practice currently shaking up the travel industry
THE INSTITUTE OF TRAVEL & MEETINGS (ITM) has suggested that supplier incentives to travel management companies (TMCs) could be eliminated altogether to put an end to the ongoing row over 'transparency'.
Acknowledging that the move might not be possible or even desirable, the organisation's second report on remuneration models says procurement professionals' working practices are perpetuating the calls for systemic change.
"Transparency may have come to the fore because of the shift in the nature of the typical corporate travel buyer," the ITM says.
"For years, travel managers were facilities managers (or other types of managers) who assumed responsibility for travel and, in doing so, became inured to the industry. "The gradual but unrelenting shift of the function into procurement has meant that people with different training, experiences and expectations now occupy that role." In short, 'old-style' travel managers simply accepted industry practices as the norm; new-generation procurement people are more inclined to challenge the status quo.
The Institute is careful to imply that this "may" be the case; however, it offers no alternative explanation for the continuing and increasingly-heated debate. In his introduction to the study, current ITM chairman Jamie Hindhaugh - one of the new procurement generation - says: "Good relationships are built on trust and understanding and it is my view that the ITM should help foster that trust and understanding by being as open as possible, acting as an independent broker and providing challenging insights into the way our industry works."
Laudable though that ambition may be, it is clearly going to be hard to realise.
On the opening day of the Association of Corporate Travel Executives' (ACTE) annual conference in Berlin at the beginning of October, the organisation's executive director, Ron DiLeo, nailed his colours firmly to the mast. "Transparency means 'I want to control how much money you are making from your business'," he said. "I think that's invasive. I think that's wrong."
Buyers argue that they have no such intentions. They fully accept that transaction fees have to include the TMCs' costs and a profit mark-up. However, that means that the basic price of the travel product or service is disguised; they have no way of knowing whether a £20 fee includes TMC charges of £5 or £15.
Their protestations of innocence begin to look less convincing when they demand to know the scale of the supplier inducements paid to TMCs.
The least trusting suspect that TMCs may be persuaded to promote the wares of more generous suppliers, while the most avaricious want at least a slice of the action, if not all of it, on the basis that the TMCs wouldn't be receiving that money if the buyer wasn't putting the business their way.
The intermediaries argue that their job is to provide a two-way conduit for commerce, and that if they do that well, there is no reason why they should not be remunerated by both ends of the chain.
The client-end reward is a transaction fee; the supplier-end reward is marketing support, an override, or a sales and marketing agreement - if the trust is there, neither side should need or want to know what the other is paying. ACTE president Chris Crowley - who also happens to be senior vice-president of BCD Travel's global client team - takes a conciliatory line. "I really welcome the ITM initiative," he says. "I think there is a lot of latitude in the understanding of the true meaning of 'transparency'. However, there is also a lot of latitude in the understanding of the true cost of service."
Using the analogy of unbundled air fares, he warns buyers: "Be careful what you wish for." Buyers and TMCs alike demanded clarity on ticket cost components, and got it - with the result that airlines are now charging separately for anything from seat selection to extra legroom.
"All TMCs want to work more closely with their corporate partners," Crowley concludes, "but that conversation has to be about transparency, plus cost, plus relationship - not transparency alone."