With HBAs developing into TMCs, and TMCs evolving into software companies, veteran journalist Stanley Slaughter contemplates what it all means for the business travel industry...
Six months ago, Click Travel launched Open Rail and Takethetrain.com, its own software for rail industry. When it made this move, the company regarded itself as a travel management company (TMC). Now Click managing director Simon McClean has told ABTN that he now regards his organisation as a software company.
He is not the first – nor is he likely to be the last – to change his brand. It is a path already taken by Expotel, which has changed its branding from hotel booking agent (HBA) to TMC. It is not just obvious changes like TMCs moving increasingly into the world of meetings and events, but more subtle ones too, where TMCs have bought IT companies or moved into areas like consultancy where previously they had not strayed.
These are changes that have taken place over the years but the result is that the various functions within the business travel industry have become blurred at the edges. While there is - and no doubt always will be – a place for the niche or specialist operator, many now see themselves not as jack of all trades but certainly as able to produce most of what the client wants.
It makes McLean’s explanation of his move sound like a clarion call for more to follow his path. When asked why Click placed so much importance on having its own technology, this is what he replied: “Some 94% of our transactions are now online. In other words, our entire business is driven by technology. I find it amazing that people aren’t doing the same as us, because why wouldn’t you want to be in control of the thing that is driving the business? It’s really strange.
“We’ve actually reclassified ourselves as a software company – we’re not down as a travel agent anymore. That’s what we do now. We are a software business. We deliver software to clients.
“It’s like running a restaurant and outsourcing your kitchen. You wouldn’t do it, because you want to be in control of the thing that determines whether your customers think you are a success or not. Our customers mainly interact with us through our online sales and therefore we need to be in control of it. We’re big control freaks, in that respect. Controlling the entire user experience is very important to us.
“In short, it’s a technology driven business so we want control of that technology. All the rest follows from that.”
Jon West, managing director of HRS UK, part of the worldwide hotel portal company, admits the line between an HBA and a TMC can be unclear. For example a company can start out as an HBA working only as a hotel specialist but gradually drift into other services which make it more of a TMC. It can also be that a company needs to diversify to survive.
But interestingly HRS, which operates purely in hotels, sees its competition not as TMCs but as fellow pure HBAs – there are just one or two in this category – and the GDSs. It is not unknown for HBAs to work with TMCs. After all, the Capita Group, which owns travel management company Capita Business Travel, actually bought meetings and events specialist BSI.
West sees HRS’s strength in the number of hotels, both GDS and non-GDS, that it can offer its 25,000 corporate customers. It also does not interfere in transactions, as the customer simply uses HRS’s portal to find his accommodation. It means for fewer staff than a TMC would employ.
It has always been a gap in a TMC’s package that they could not offer a particularly high number of hotels to clients as so many properties remain off the GDSs. This has improved over the years but there is still a big enough gap to open the way for pure HBAs like HRS and Hotelzon to make a big impact. This is not something that has happened in the airline sector where GDS have a much stronger hold over the content that TMCs need. While this hold has been loosened by the Internet, it is the airlines with their websites rather than specialist agencies which are stepping in.
But to return to McLean’s point that the provision of software is key. Will all TMCs see it this way? There are many TMCs which pride themselves on producing their own. HillgateTravel is a good example.
But can a TMC successfully turn itself into a software company let alone vice versa. While the answer to the first is “possibly”, the answer to the second is almost certainly “no” even if it wanted to. It is possible to produce systems which help corporates and travellers make bookings. Evolvi, an internet based self-booking rail tool created specifically for TMCs is the best example here. But it would be a huge task for a TMC to set aside the resources needed to produce expense management systems that clients require and specialists like KDS and Concur supply.
There is likely to be more re-branding in the Click model but it is likely to be on a small scale. Meanwhile, the big areas look likely to stay in the grasp of the specialists.