AT THE BUSINESS TRAVEL SHOW BACK IN 2008, the managing director of a hotel booking agency made a keynote speech. He predicted travel management com¬panies (TMCs) risked oblivion if they failed to adapt their business models. At the time, technology advancements were starting to influence procurement and booking. Change was afoot, and there was an air of exciting uncertainty.
However, the executive was widely criticised. His rhetoric was considered gratuitously provocative, designed only to promote specialist agencies such as his own. But Grant Appleton did, to a certain extent, have a point; it’s just that it was relevant to any business in the corporate travel supply chain, not just TMCs. Adapt or die, was regularly the cry. What he ne¬glected to mention was that sustainable evolution had always been a core strength of the travel management community.
As is often recalled in the pages of this magazine, TMCs (when they were more commonly known as business travel agents) had the carpet pulled from under their feet nearly 20 years ago when British Airways (and eventually others) announced it would stop paying agency commission in the UK. They’ve been in a state of constant development ever since.
The present era is no different: cor¬porate procurement departments, travel buyers and travel managers still encounter challenges around control, compliance, technology and pressure to drive down costs. But how is the relationship between corporates and TMCs changing in the modern age?
PERIOD OF CHANGE
TMCs, according to one industry veteran, support their customers in three main areas: security; compliance to policy; and savings. Nigel Turner, a senior director at Carlson Wagonlit Travel (CWT), says: “More than ever before, the TMC’s ability to be an outsourced point-of-control, reporting and support function in addition to a booking service is highly valued.” And no fair-minded buyer would disagree.
Buyers and programme managers also find themselves in a period of change. Claire Marsden is senior supply chain manager for Sodexo, and manages travel for one of its large external clients. Her contention is that travel programmes are now under intense scrutiny from internal stakeholders, such as chief financial of¬ficers. There is, she believes, more emphasis on the total cost of a trip rather than the price of an individual booking.
“The total cost and scope of travel has increased,” she says. “It used to be about pounds and pence, but now we have a much wider cost perspective: duty-of-care, corporate governance, employee well-being and other legal implications.”
She adds: “The costs covering all these areas can be incredibly high to a business, not just in pure terms, but in terms of risk and adverse publicity. The TMC relation¬ship plays a significant role assisting clients with duty-of-care and traveller tracking, as their systems are far more robust than any internal systems or processes.”
MOVE WITH THE TIMES
It is these extra responsibilities that allow TMCs to retain a central role. That’s not to say every one comes equipped to help. Mervyn Williamson, joint managing director of Statesman Travel, says only those investing in future models will prevail. “TMCs have long occupied the middle ground between OTAs [online travel agents], independent procurement consultants and financial analysts,” he says. “Those moving with the times are building as seamless a booking process as possible, while using data and insight to provide actionable advice to help buyers make the important decisions.”
But even that’s not enough, says the London-based entrepreneur. The TMC, he insists, needs to make those changes happen, whether through communication, education or “a dash of ingenuity”.
“This is reflected in RFP [request for pro¬posal] questions that extend beyond service delivery to include support for emissions tracking, strategic procurement, traveller tracking and savings delivery. TMCs can’t expect buyers to have their finger on the pulse of all the industry issues,” he says.
So it’s vital that TMCs share inside knowledge on current trends, says William¬son. “When buyers are well informed, they make better decisions. It’s our responsibility to be the savvy independent broker, a role that’s proving, more and more, to be the key to client success when taking on sup¬plier negotiations on behalf of corporates.”
There are more TMC products and services available to the buyer community than ever before. However, most in procure¬ment – across industry sectors – are under pressure to cut costs. Adam Knights, man¬aging director for ATPI in the UK, says this trend has been particularly acute in the energy sector. The recent fall in oil price has put many companies under severe financial strain.
He says: “There is huge focus on price. All TMCs are being challenged to provide a core service for less money. There has, therefore, been a move towards menu pricing. Contracts are often re-bid to drive prices down. The question is: did clients know what they were using before?”
Knights recounts the story of one company that renegotiated a deal to cut cost, but hadn’t realised what was included in the original deal. The new contract didn’t cover certain things that had been taken for granted. “Procurement has to be clear on what they use, whether it is account management, MI [management informa¬tion] or handing data to a third-party travel security firm,” he says.
RISK AND SECURITY
TMCs have positioned themselves as central to travel risk and security strategy since the Corporate Manslaughter and Corporate Homicide Act became law in 2007. At the time, most efforts were focused on traveller tracking. The world is, in some ways, a more unpredictable place than it was nearly a decade ago. Wildcat terror attacks have scared many organisa¬tions into taking action – travel security is no longer just an extra string to the TMC bow; it is at the foundation of service.
Stuart Birkin is director of account management at Chambers-CTM. He says his company has recently received an unprecedented number of security-related requests from clients. The TMC has increased collaboration with a number of third-party specialists, such as International SOS, iJet and Anvil, to provide an extra layer of security. “The subject now finally has the attention of most executives, no matter the size of their business,” he says.
“However, there still needs to be greater awareness. There are a number of different levels of information and protection out there that can be matched to a customer’s requirements and budget, either provided by the TMC or an external provider. There aren’t really any excuses for a corporate not to have at least basic traveller tracking in place.”
Most of the large global TMCs, including CWT, American Express Global Busi¬ness Travel and BCD Travel, have their own consultancy divisions. These are, to a large extent, responsible for collating data and identifying areas of policy or programme improvement. It is a space in to which many smaller independent TMCs are also moving. Ryan Taylor is global travel buyer for the Sparrows Group – he heads up the winners of Travel Team of the Year at this year’s Business Travel Awards. Taylor says data management and analytics remain an area for improvement, and calls on TMCs to up their games.
“Data feeds are coming from every¬where,” he says. “There have never been so many sources of data: corporate cards, expense tools, in-house systems and TMC data itself. For many companies there is a huge need to outsource data management to a specialist company. TMCs have an important role to play in this, too. But this comes back to getting people around a table, and working together to perform analysis and make recommendations.”
Juliet Reffold, head of account manage¬ment for Statesman Travel, says until now data has been used to squeeze airlines and hotels in the hunt for value. But she believes focus on different data sets could have an even bigger impact on the bottom line of travel budgets. “For instance, increasing the client’s average time between booking and travel by a few days can often produce greater savings than weeks of negotiation on an airline deal,” she says.
The hysteria surrounding so-called ‘big data’ appears to have simmered in the last 12 months. Graham Ross, UK head of sales at FCM Travel, says while big data has focused minds, the biggest challenge for corporates remains finding effective ways to deal with basic data first of all. “Big data will become very powerful as it matures; but using ordinary data with impact will be central to the evolving TMC-client relationship going forward,” he says.
CONTENT OR DISCONTENT?
Another much debated industry issue of recent years is that of content. Whether it is air, accommodation or ground transporta¬tion, there is an abundance of choice in an escalating number of channels. This creates issues for both corporates and TMCs.
Companies need travellers to book through approved channels, so they know where they are. Programme managers need compliance in order to maximise preferred supplier agreements. But travellers don’t like to be restricted by policies that are not fit for purpose.
Warren Dix, Hillgate Travel’s director of sales and marketing, says: “If you cannot offer full GDS [global distribution system] and non-GDS at the same point of search, you are out of the game. It is fundamental and expected by today’s travellers.”
Chambers’ Birkin agrees, saying tech¬nology is key. “The TMC must have the technology to scrape and search availability. It needs to be available in the marketplace, and understand the pros and cons to help clients make informed decisions.”
But a London-based travel manager from a global professional services company, speaking to BBT, says TMCs are struggling to keep up with the new content, such as Airbnb accommodation and Uber taxis, entering the marketplace. He says: “The TMC used to rely on everything going through the GDS. As this source is fragmenting, they must adapt mid- and back-offices to handle different data sources. This threatens two of their revenue streams: the GDSs and supplier income.
“In addition, new players are coming into the market who claim to handle all sources. We’ve yet to see if this is true, but their presentation of data and timeli-ness appear to put TMCs in the shade.” He warned that one day TMCs might only manage compliance and provide consultancy to organisations that choose to outsource.
Clive Wratten, chief executive of CTI, admits that many of the best travel deals are found online. But he warns that employees can waste too much time browsing the internet. This is where he believes TMCs, using specialised industry booking tools, can find the best deal both on and offline. “Consumers and business travellers have more options than ever when planning a trip,” he says. “They expect offers to be tailored. For this, it’s important for any TMC to get under the skin of the client, really understanding that they need and, therefore, installing more trust in the TMC resulting in better business all-round.”
WORK vs LEISURE
Travellers’ expectations in terms of how of one shops and books travel are radically different from, say, five years ago. Away from work, most people have sophisticated smartphones and use a variety off intuitive, user-friendly apps to shop and book a range of products and services.
Sodexo’s Marsden says: “Travellers are forever criticising the corporate self-booking tool [SBT] in comparison to leisure travel channels. Some of this is due to the policy restrictions, but much is due to the lack of content and flexibility [offered by TMCs and technology companies].”
Josh Gunn, head of digital communica¬tions for Statesman Travel, says the variety of booking tools available in the public market make it difficult for OTA-type agencies to deliver value to the corporates. “They look at partners that can deliver the whole package,” he says. “If all the benefit a TMC provides is wrapped up in a booking tool, then it’s harder for travel managers to convince rogue travellers of the benefits of using the TMC, when they’ve got dozens of free apps that do the same on their iPhone.”
FCM’s Ross says the mobile channel, despite its supposed popularity, has not, until now, achieved a significant amount of market penetration. That could, he admits, be about to change. “Mobile is certainly increasing, but not at the rate we expected and anticipated a few years ago,” he says.
But predictions made at a forum organ¬ised by Amadeus and ITT (the Institute of Travel and Tourism) centred on that trend gathering momentum this year: traveller booking habits and demands around open booking and sharing economy items will, in their view, have a bigger immediate impact.
BSP AND CONSOLIDATION
Later this year, TMCs will have to pay their airline bills through IATA’s BSP (billing and settlement plan) fortnightly. For many years, payments were made monthly, and TMCs’ cash flows were based upon four-weekly cycles. The big question is: will more frequent remittance impact the TMC-client relationship?
Probably not, is the opinion of most. CTI’s Wratten says: “As long as the TMC can demonstrate value in the services they provide then there should be little impact. However, if the TMC acts primarily as a credit facility for their clients’ travel spend, they could be in for a shock.”
However, some smaller TMCs could find the new financial arrangements tough to cope with. This could see more consolida-tion in the marketplace. Statesman’s Wil¬liams says: “The BSP changes, coupled with a need for serious investment in technology to keep pace with the industry, will cause some owners to view this as a fight they’re unlikely to win.
“We expect more than a few at the under-£50 million mark to be looking for an exit. Conversely, the impact of BSP changes will hit the biggest TMCs very hard and make them even more financially risk-sensitive, reducing spend on innovation and progress in their offering.”
The TMC-client relationship has gone through its ups and down over the last two decades. But like any solid marriage, both sides take time to sit down and discuss their problems when the time is right. That’s not to say they couldn’t survive without each other; it’s just that they’re probably better off together.