Big is best, but then small is beautiful, too. Bob Papworth asks whether it's all a case of proportion in the TMC world
Some time around 1,000BC, a nine-foot Philistine braggart copped a forehead-full of pebble, courtesy of a young shepherd boy. Around 3,000 years later, give or take a day or two, FCm Travel Solutions seems to have latched on to the idea, re-organising its 5,000 staff into myriad stand-alone 'team-based businesses' in an effort to overcome the travel management industry's global Goliaths.
FCm's director of account management, Alex Cousins, explains: "By restructuring our offices into an environment of small, empowered teams, we have created a culture of high service delivery by skilled and motivated individuals.
"Passing back the ownership and day-to-day responsibility of individual clients to dedicated travel managers, who have the support of our business management team, means FCm delivers a one-to-one business relationship at all levels."
Or, as the economic thinker Ernst Friedrich Schumacher memorably put it: small is beautiful. It's a philosophy that's been a while coming. For the past umpteen years, the corporate travel industry has been banging on about 'globalisation' with scant regard for the fact that there are only a handful of truly 'global' accounts to be had.
As Nigel Turner, Carlson Wagonlit's director, public sector and industry affairs, happily points out, 80 per cent of CWT's clients spend less than £250,000 a year. Between them, they may require global reach, but individually they're clearly missing out on vast chunks of planet Earth.
The gulf between the UK's top five travel management companies (TMCs) - FCm and Carlson, plus American Express, Hogg Robinson Group, and BCD Travel - and the rest, has narrowed in recent years, with the mid-sized likes of Portman, ATP and Capita muscling, and Hillgate sidling, into contention. But then there's a sharp edge-of-reef drop to the sunless netherworld where turnover is measured in mere tens of millions.
The irony is that the big boys, some of whom spent the early part of the 21st century buying everything in sight - think Navigant, Rosenbluth, TQ3 and The Travel Company - on the basis that size mattered, are now re-inventing their up-close-and-personal credentials.
David Thomas, FCm's UK director of sales, has seen the 33 business travel centres on his patch transformed into 86 "team-based businesses", none consisting of more than seven consultants, and all fully empowered, with their own profit-and-loss responsibilities. It's a reaction to market trends, he says - "we have recognised that the model is changing". Interestingly, he adds that "we have always pitched against the multiples", suggesting that FCm doesn't see itself as one of the breed.
Far from being "costly" and "cumbersome", Thomas reckons his FCm teams are now dab hands at managing accounts in the £100,000-£200,000 bracket. "That's a very important market for us, and I think that has been reflected in our re-structure," he says.
Carlson Wagonlit's Nigel Turner is equally adamant that his company doesn't fit into the pricey, pedestrian pigeonhole. Re-emphasising CWT's 80:20 credentials, he says: "We are very much in that [small and medium enterprise - SME] marketplace. It's not so much about whether you are big or small - obviously there is a perception there - it's more about how you operate.
"We don't have call centres as such, for example. We have regional cover throughout the UK, but even with the larger offices you won't be met by an array of buttons and end up speaking to any one of 60 people.
"The most you will deal with is a section of eight but, even then, if you want a named individual, we will give you that. Customers want to know who they are dealing with, and they want us to know about them and their business. You can put just so much information into a computer about a customer, but all of that will never beat the knowledge stored in someone's head."
Simone Buckley, Capita Business Travel's managing director, maintains it has the best of both worlds. "We are a medium-sized travel management company owned by a large FTSE 100 company. Our parentage gives us stability both financially and technically, which, in today's volatile market is an important asset to have. We are an acquirer rather than being at risk of being acquired." She adds: "Being a smaller TMC enables us to be nimble and dynamic, which is an absolute edge when it comes to delivering promises to our customers."
On the other hand, there are advantages to being a bigger TMC - for example, there is so much more money and resources in general to research and develop new products and services.
Peter Kite, Hogg Robinson's recently appointed director of supplier partnerships and industry affairs, is keen to attest to the benefits of size. He stresses his company's round-the-clock service, arguing that with major clients working in multiple time zones, the old 'out-of-hours' service - an emergency phone number designed to drag some hapless travel consultant stumbling and mumbling from the land of Nod - has had to give way to a full-blown 24/7 travel management operation.
And Kite has major clients a-plenty. Citing HRG UK, he says: "Eighty per cent of our business is very much with the large corporate market. We do have a proportion of smaller customers who have been with us a long, long time because they like the service they get, but we are very much in the big league." But that doesn't mean that HRG is monolithic, though.
"Because of the customer base we have, flexibility is absolutely key these days - I don't think you can survive without it," Kite insists. "You have to be flexible in business to meet the needs of the marketplace, and if I had to pick the single most important thing on the service side that illustrates that, I would have to say it is our out-of-hours operation."
In the UK, HRG has 50-plus staff, many of them home-based, working in shifts 24 hours a day, 365 days a year, with similar set-ups operating in other HRG locations around the world. That, he says, is something the smaller TMCs just can't offer.
Ah, but they can, says Ian Epps, director of partnership relations with International Travel Partnership (ITP). A consortium of 30-plus TMCs around the world - Ian Allan Travel is the UK partner - ITP provides its mid-sized members with the economies of multi-national scale they probably could not achieve on their own. "If you are a relatively small TMC and you want to be cutting edge in terms of development, that can be quite expensive, so by pooling the resources of our 30-odd members, we can make cost-effective headway," says Epps.
"We are effectively run by the partners, so we don't come up with a solution and then start looking around for an application for it - we are very much partner-led. For example, we have some marketing expertise here in Windsor [where ITP is headquartered], and we have a full-time IT director who makes sure that any IT projects we are working on are properly implemented."
So what are the USPs? "First there is the question of flexibility, and when a bid come through for what I would say are primarily SME accounts, we can work together in a more flexible manner," says Epps. "Then there are the areas of expertise - partners such as ours may be in or around the top 10 in their home countries, but probably not in the top three, and they are often involved in things like group travel, or the incoming business, where I would suggest some of the larger TMCs don't do very well."
In terms of worldwide coverage, Epps admits that ITP does have "some market gaps that we are trying to fill", but insists the network is sufficiently robust to meet the multinational needs of its members' clients.
"Our philosophy is not to rush in and take on a partner that does not meet our criteria, because any organisation such as ours is only as strong as its weakest partner."
Peter Reglar, founder and chief executive of Business Travel Direct, is not so sure that now is the time to be thinking in terms of global coverage. Company purchasing bosses looking for more bang per buck are starting to fine-tune their travel management operations, he believes.
"I think that whereas some of the larger accounts have constituted part of a game of pass-the-parcel between the top TMCs, a lot of the bigger corporates are now starting to look farther down the line," he says.
"From the point of view of the procurement people, it's a brave step to take, but it is beginning to happen."
As corporates begin to question whether they actually need global coverage, the argument goes, so more and more of them will wonder why they should contribute to the central running costs of partner offices in other parts of the world.
"Global coverage has become less important than it was," says Reglar. "The whole scene is changing. People are recognising that companies of our size can be much more responsive to their specific needs.
"In our case, it's not a question of 'this is what Business Travel Direct can do for you', but one of 'what would you like us to do?' You can't just hand them a bog-standard offer - it's a case of working with the client and understanding their needs, and then working towards that."
Great minds, it would appear, think alike and it seems Reglar and Andrew Burch, Hillgate Travel's business development manager, are singing from the same hymn-sheet. "We have made a living out of telling everybody that we're small," says Burch. "We finish up every presentation, every tender proposal, saying we never wanted to be the biggest, we just want to be the best. When Jeremy [Bull, Hillgate chairman and chief executive] set up the business 25 years ago, he never wanted to be a Carlson or an Amex."
Cynics might say that's just as well because, in terms of sheer size and with the best will in the world, Hillgate isn't in the same league. However, Burch sees it as a case of just being different, not better or worse. "If you are aboard a large tanker and spring a small leak, you can sail on for years without doing anything. If you are in a speedboat and you spring a small leak, you fix it there and then, otherwise you're sunk."
This self-preservationist agility is not the smaller TMCs' only selling point, however. "Our clients buy personality, promises, delivery - they buy what we call solutions," says Burch. "These are things that aren't even in the big boys' vocabulary.
"We make it personal. We recently went for a piece of business and we didn't make it to the final four - and that really hurt. A bigger company wouldn't care, because there'll be another one along in a minute."
There is a concern, too, that brand awareness sways a great many procurement decisions. American Express enjoys worldwide recognition, HRG certainly has the edge in the UK (and probably elsewhere) and, in government circles, CWT is a no-brainer, while smaller TMCs sometimes struggle for recognition.
However, Burch reckons that it pays to keep plugging away. "Smaller companies like ours keep their clients longer than the big boys - we do, certainly Reed & Mackay does, Travel Alliance has very loyal clients... It's all about client retention."
There is also scope for symbiotic relationships. Hillgate shares a client with one of the big five, handling the UK and Europe end and leaving the US to the partner TMC - big brother does the single-nation stuff and is secretly rather glad, Burch believes, while Hillgate is left with the high-touch intra-European business. Neither could do the other's job as effectively, but the client's needs are met, and both TMCs get paid.
Stephan Durand, Amadeus UK' managing director, speaking at a recent Capita Business Travel client forum, said that CBT had a "speed to market" with its products that could never be matched by CWT or Amex. "In a world where change is continuous, one cannot underestimate this ability to bespoke our service and products and develop our solutions in partnership with our customers," says Capita's Simone Buckley. "The advantage comes somewhat from having only one country and one currency to worry about.
"Being the size that we are we have to be clear about the customers we can serve and those that we would not suit which saves a lot of time and effort. This gives us the time to spend listening to our customers and prospects, and developing the solutions that they want to buy - the things that really add value to them. When you are a big global company you end up trying to be all things to all people and not really ever getting anything completely right."
So, there you have it. TMCs are split into Davids and Goliaths. The Goliaths, however, appear to be made up of multiple Davids, while multiple Davids often band together to form consortium Goliaths. As if that wasn't enough to contend with, some Davids can, and do, get along just fine with some Goliaths.
For procurement johnnies looking to seal a quick pre-Christmas deal, it's all very confusing.
However, given the time of year, it is perhaps worth remembering that the original David, having sent his enemies scuttling back to Philistia, later went on to establish a royal city, complete with lowly cattle-shed.
And, of course, we all know what happened next ...