1 November 2022, London Marriott Hotel County Hall
21 November 2022, Hilton London Metropole
12 December 2022, etc.venues Monument, London
The inaugural IBTAC (Independent Business Travel Agents’ Conference) event is to take place in London on February 7 2011. One if its founders is Ian Skuse, a partner at Westminster-based law firm Piper Watton Smith, and a regular columnist with ABTN’s sister publication, Buying Business Travel. Here he gives his views on some of the key issues facing the industry in 2011
Consolidation of suppliers
“Airline groupings are starting to emerge. We all know the background to this. A lot of these mergers and alliances would have been banned a few years ago under competition law, but the regulators are now keeping their hands of so it’s a great time to merge.
Also because of the strengths some of the larger groups, distribution costs are being passed onto the unlucky TMCs – particularly merchant fess. GDSs (systems used by travel agents to book airline ticket, hotels and other ancillary products) obviously are also flexing their muscles. BA announcing new fuel surcharges which means their competitors will surely follow suit, although they are not fixing prices between them, allegedly. There is increasing power being generated by suppliers that is going to result in increased administration and costs to the TMC. All this emphasises how important it is for the TMC to have a written contract in place with corporate clients. A lot of independents don’t really see the point in having a contract. There’s a lot out there. I’ve lectured to them before. They want to know if contracts are worth the paper that they’re written on. Without one they are exposed. When there are big changes taking place in terms of bookings and payments, it’s fundamental for the TMC to be able to pass on the charges to their customers without having to argue about it.. It’s extra pressure on the TMCs and they need to make sure their businesses are tight and controlled.”
"The government is bust, and it is looking to extract as much tax and extra revenue from the market place as it can. We are seeing that in a number of ways, not least APD (air passenger duty). There are a series of cases coming up about VAT on merchant fees. So, for example, if you say you are going to charge 2% for every credit card transaction, it seems that VAT is going to have to be paid on that amount. I’m not a VAT expert, but there has also been the Med Hotels case. It is a company owned by Thomas Cook that supplied content to online holiday companies. Med Hotels farmed out a whole load of contracts with hotels round the world, marked up the prices, loaded them onto a website, and tour operators or trade buyers bought the inventory. Throughout all this Med Hotels maintained it was an agent, arguing that the principal should pay VAT. HMRC decided it was acting as a principal because it was marking up rates. And Med Hotels was hit with a £14 million VAT bill. It has had a big impact on the leisure side, but has also impacted TMCs who are buying hotel rooms, marking them up and selling them on. It exposes you to a big catch up payment, which can be a real shock to the system."
"We are not quite clear where ATOL (Air Travel Organisers’ Licensing – a payment protection scheme organised by the Civil Aviation Authority) is going, but it looks like it’s going to be a ‘flight plus’ concept, which is expected to include TMCs. It’s yet another layer of regulation and administration, and potentially bonding. There’s a lot of pressure on the regulators to accelerate this, and it could arrive in 2012. All this on top of the recently introduced ATOC bonded.
PDQ machines (devices used to transact credit and debit card payments). In the leisure sector there has been a standard letter going around which is all to do with when you are paid by the card company. Once your customer has paid, the credit card companies and banks are saying they’ll let you have your money 90 days after transaction. At the moment it’s five days. I guess that’s because of the volume of failures in the travel sector and the merchant acquirers wanting to protect their exposure on failures by holding onto the money until the traveller has travelled. It is a concept that will creep into the TMC market. They won’t be treated differently. If the TMC has a lodge card like Air Plus it’s obviously a different story. But if it’s the TMC itself using it’s own PDQ with Barclays Merchant Services or Streamline, then they may face this issue of how long it will take to clear the amount."
"I think we’re going to see a year of tighter tendering for businesses, and lower margins. If you’re an independent agent, rather than a CWT, HRG or Amex, you’re going to have to come up with something special in terms of added value. It’ll be good for consortia like Advantage who can offer the tools for its members to be able to compete with the bigger boys. For all these reasons we are going to see more consolidation in the TMC sector. Some will struggle. Some will think that the way ahead, rather than organic growth, will be to merge with a company of a similar size, so that with acquisition one can increase your portfolio, reduce head count, and become more profitable.
I think there are lots of conversations going on behind the scenes, but there are lots of people finding it difficult to find the right fit. There are some owners nearing retirement looking for a safe pair of hands to take over. There are a few TMCs up for sale and there are a lot of people looking around.
Looking at the independent TMC, I don’t know what the proportions are, how many independent business travel agents also have a leisure side, or are associated with another business. The percentage is quite high in the independent sector, but when things happen in the leisure sector it impact the business side. So when the PDQ issue, for example, rears its head, it will impact TMCs that have got a combined business."
To register for the Ibtac 2011 conference visit www.ibtac.co.uk