BTN Europe presents an overview of business travel and MICE predictions for this year
How continuous and dynamic sourcing is shaking up the traditional procurement process
The way in which corporates compile their travel programmes is changing. Sourcing air, hotel and car rental content, traditionally undertaken through an annual RFP, can take three months and cost thousands in lost productivity. No wonder corporates are looking at alternatives.
Contemporary sourcing is dynamic, using real-time and predictive data for decision-making in partnerships between buyers and sellers, based on mutual trust and understanding.
Business travellers’ needs have changed, too. Programmes must satisfy babyboomers, millennials and multi-screening Generation Z. Travel buyers are also taking notice of “social peer sourcing”.
With global hotel rates predicted to rise by up to 3 per cent this year and air fares by up to 2 per cent, corporate thirst for value – and ways to realise that value – has never been greater. So, it’s time to find out what industry buyers, suppliers and intermediaries are saying – and thinking.
In motionGemma King, director of corporate Travel, EMEAAPAC, at Omnicom Group, believes travel sourcing is becoming less proscriptive and more flexible. “The whole ethos on our programmes is changing,” she says. “We no longer use the unwieldy RFP process in our mature programmes because the carriers aren’t changing.”
In their recent joint research, A New Horizon in Hotel Sourcing, ACTE and HRS found that 51 per cent of travel managers who have changed their approach to hotel procurement in the last three years have saved money as a result. Meanwhile, 10 per cent of programmes have scrapped traditional hotel RFPs in favour of continuous sourcing and are benefiting from improved traveller compliance and satisfaction, financial savings of up to 14 per cent and increased flexibility.
The mystery is why 42 per cent of travel managers remain unfamiliar with continuous sourcing.
Chris Crowley, vice-president of EMEA at HRS, says: “API access, travel 3.0, more informed buyers and a new generation of travellers is changing the way people are thinking. Technology stakeholders are disruptive, creative-thinking people untainted by traditional mindsets. There’s more data out there and more ways to aggregate and interpret that data to enable informed choices to be made.”
Investment bank and financial services company UBS has recently changed its approach to sourcing, as Kevin Carr, group corporate services, global travel management, explains: “UBS sourcing has been relatively traditional, in-sourcing an annual RFP for our hotel programme. We realised that’s no longer relevant and decided to introduce more two-year agreements and to make our programme more flexible, so it can be changed or renegotiated at any time.”
What about aviation?Daniel Cadeau, who is responsible for UBS’s air programme, says he does not accept that continuous sourcing works only in hotels – but believes wholesale corporate adoption of continuous or dynamic sourcing in his segment may be a while off.
Cadeau predicts that NDC will bring multiple levels of change to sourcing, “so we need to balance the benefits to the supplier with benefits to the buyer. As a buyer I am looking to NDC to bring additional benefits in terms of ancillaries. We will still go into annual renewals, but there will be greater emphasis on dynamic pricing.”
Crowley, meanwhile, believes continuous sourcing is “very applicable to air. The market is already moving towards this approach with less corporate discounting and more multi-deal making. There are lots of new dashboard tools that allow travel managers to continually assess the value of their deals across class or route, so they can flex and interpret their programmes.”
Julie Murphy, country sales manager, UK and Ireland at ANA, agrees. “Pricing structures and processes are evolving. There are more joint venture deals with carriers collaborating as they strive to create a seamless travel experience. In terms of philosophy, it depends on how the buyer buys.”
Building relationshipsThese days, effective supplier engagement is also critical. Far too many companies simply just send an RFP and are surprised when suppliers don’t respond or choose to no-bid.
“Best-in-class procurement sees constant supplier engagement so there are no surprises, and suppliers know the company, is familiar with the requirements and is hungry to meet them” says Chris Pouney, director, Severnside Consulting.
This approach is also championed in car rental, as David McNeill, AVP global corporate sales EMEA at Enterprise/ National, notes: “Some of the most successful RFPs begin long before the RFP is issued by suppliers, and buyers talking about the goals of the review, which helps to inform the process, irrespective of whether the requirement is global, regional or local.
“The result is a better understanding of what the RFP needs to achieve, how suppliers can provide solutions, and any emerging, often unseen, opportunities and risks. Car rental is embracing a much wider range of mobility services. Organisations that have not put out an RFP for four or more years might not be aware of what rental car businesses can now deliver, and how they can integrate with other providers to deliver a far better end-to-end experience for business travellers.”
ANA’s Murphy says she would be disappointed if one of her team could not understand what is happening in a client’s programme. “What is important is understanding how the buyer is buying,” she notes. “Professional integrity is also key to relationship. If a buyer is pro-active in selling their programme, that helps our understanding and ability to put forward best proposals.”
Meanwhile, Leigh Cowlishaw, director of proposition, Capita Travel and Events, believes the balance of power between buyer and supplier has shifted. “In the past, corporates could dictate their pricing. It is now more challenging in key locations on certain days of the week, so we aim to support our customers’ objective in terms of savings and availability. Brexit uncertainty is also making it harder for corporates to commit to certain volumes.
“We are seeing less of a single focus on cost and more around productivity, traveller satisfaction and common-sense factors,” she says. “It is no longer good enough to simply focus on room night volume in specific locations. Instead we help our clients make their proposition more attractive in terms of length of stay, shoulder nights, F&B spend and overall value.”
“Our company is not as brand-dependent as it used to be,” says Omnicom’s King. “Suppliers’ creativity and experience are essential. We work with hotel representation companies so that we get consistency in style and delivery to travellers.”
For UBS’s Carr, commitment to the relationship is essential. “We have to make sure there is a good fit and that the two parties are mutually compatible. There’s lots of choice out there so we must be careful. Two-way success requires both parties to deliver.”
Role of the intermediarySo what role will the TMC play in this new world of business travel sourcing? King believes larger corporates need more from their TMCs. “I expect my TMC to know more about the hotels on our programme,” she says. “The role of TMCs in sourcing decisions will increase over the next few years because their ability to plug into critical content is very important. The key thing is knowing what’s coming and what we need to do about that now.”
Looking ahead, continuous sourcing will provide travel managers with the opportunity to interact with a wider crosssection of the business travel supply chain but leaves them facing a bewildering array of technology services and products.
The opportunities for TMCs around new thinking in sourcing are exciting, too, provided TMCs have a clear technology strategy, know what their core business is and avoid trying to be too many things to too many people.
Social peer sourcing: Brand loyalty ain’t what it used to beSocial peer sourcing is an emerging procurement method that recognises how a traveller’s loyalty can shift from hotel brands preferred by their employers to brands preferred by their social networks.
“Social peer sourcing means finding the right experience through your social media networks,” says Gemma King, director of corporate Travel, EMEA APAC, at Omnicom Group.
“We are in a one hub location, with 5,000 people, so it’s easier to share information. As well as getting lots of feedback from our agencies about the programme, we are also kept up to date with upcoming product launches and so on, so we can make sure our accommodation is the right fit.”
The importance of smarter communication with travellers is echoed by Leigh Cowlishaw, director of proposition, Capita Travel and Events. “Social peer reviews are driven by a younger mindset, so TMCs need to know their supply chains inside out.
“Loyalty points will become outweighed by the brand experience, while buyers, suppliers and intermediaries will need to look at the level of personalisation in their programmes rather than freebies.”