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Mark Frary offers a guide to choosing the right TMC for your travel booking needs
Choosing the right travel management company (TMC) is rather like choosing a second-hand car. At the showroom, the motors all look wonderful. They have all been polished, all seem to offer an impressive range of features, have had one careful owner and the price on the windscreen seems very affordable.
As a buyer, there are four outcomes.
The most likely is that the car runs well for a few years, despite the odd servicing issue, and the price ends up being a fair one. Others end up with a real bargain - they pick a car that runs for years on end without a single problem. A few more realise they have made a big mistake in buying a Lamborghini when they really wanted a Lada - or vice versa.
And what of the remainder? They are the unfortunate souls who pick a jalopy that is constantly being looked at by chin-scratching mechanics muttering: "Hmm - that's gonna cost ..."
This should probably sound familiar to many buyers who have gone through the process of choosing a TMC. So how do you make sure you are in one of the first two groups rather than the latter?
A good starting point is to match the TMC to your own company. TMCs can be put into three broad categories, although the boundaries of these categories are a little blurred:
Global TMCs: Travel management companies with large networks of owned TMCs in a broad range of countries around the globe, such as American Express, Carlson Wagonlit Travel and HRG (Hogg Robinson Group).
Mid-market TMCs: These are TMCs that have a predominantly national focus, usually with a number of offices around the country, and with no specific industry focus. They are typically members of global networks of partner TMCs. Examples include Reed & Mackay, Hillgate Travel and Portman.
Specialist TMCs: These tend to be smaller TMCs that have differentiated themselves through working with a specific industry or industries, have a focus on VIP business or specialise in a particular geographical area.
Examples include The Appointment Group, Statesman Travel, Munro's and Horncastle Executive Travel. As a corporate, if you are a global multinational then a global TMC or a network of mid-market TMCs in each major country may be the best approach. If you are a UK plc with no multinational reach, a mid-market or specialist TMC may well be more appropriate.
At the heart of choosing a TMC is the tender process, where the buyer sets out their requirements in a written document and a select group of TMCs respond with how they intend to 2009meet those requirements and at what cost. The depth of information given and required by this document defines its type:
Request for information (RFI): A high-level document which outlines the broad requirements of a travel buyer. It is principally used to find out what is available in the market and is often the first stage in the tender process, used to whittle a large number of potential TMCs down to a more manageable number for the more detailed later stages of a tender.
Request for quotations (RFQ): This document tends to be used for very commoditised procurement requests and is, therefore, less frequently used for choosing a TMC. It could potentially be used for finding a TMC to handle online bookings that require few or no 'touches' and all that is required is a low transaction fee.
Request for proposals (RFP): This is the most common form of document used in the tender process. It is usually very detailed and requests a large amount of information from the TMC. It may run to tens, or even hundreds of pages.
A tender document might include the following:
Recently, the questions included in an RFP have shifted slightly, according to Carlson Wagonlit Travel UK's director of business development, Alison Smith. She has seen an increase in questions on the following areas:
At the same time, Philip Carlisle, chief executive of the Guild of Travel Management Companies (GTMC), says that the focus is on how to get the best air and hotel deals, while green issues have fallen out of favour.
However, the Institute of Travel & Meetings (ITM) Press Panel, a panel of buyers including companies such as Airbus, E.on, John Lewis Partnership, JP Morgan, Omnicom, UBS and the Wellcome Trust, says that the types of question included in RFPs has not really changed as a result of the current slowdown.
Forecasting future volumes in the current environment may require some careful thought. The travel buyer needs to consider the impact of any changes in travel policy - an outright travel ban or a reduction in internal meetings, for example - on forward volumes. The successful TMC may well ask the buyer to sign off against any assumptions on future volumes before implementation, and monitor activity over the first weeks of the new contract to make sure things are running as planned.
Hillgate's business development manager Andrew Burch says that most forecasts are works of fantasy. "I have never worked on an RFP where there have been accurate figures issued for the previous 12 months unless we were the incumbent. Any TMC that builds an implementation process on the RFP volumes - particularly where you are asked to put a booking tool in - is crazy."
Part of the process of choosing a TMC is establishing a team to handle the tender process. The size of the team will depend on your organisation and its hierarchy but may include representatives from travel, procurement, human resources, finance and IT. There may also be a place for travel buyers from individual business units, regions or countries if the tender is global or regional in scope. However, it is worth bearing in mind that the larger the team, the harder it will be to achieve consensus.
In putting together an RFP, a template outlining standard questions you might want to ask can prove invaluable and organisations such as the Association of Corporate Travel Executives (ACTE) and the National Business Travel Association (NBTA) can provide these for members.
ITM, meanwhile, has moved away from the template concept. The organisation's Paul Tilstone says: "We are about to launch something called ITM Exchange within our website which will make it much easier for ITM members to search for TMCs who are also members of the organisation. This should mean that smaller TMCs have a chance to get involved in RFPs."
Meanwhile, the Advantage consortium of independent TMCs has set up a working party, including representatives from Ian Allan Travel and Giles Travel, to draw up an RFP template. It plans to introduce it on a new customer-facing website that is on the verge of launch.
Advantage's director of business travel Norman Gage says: "A corporate could select a number of Advantage members and email it directly to them and then we step back."
Using an electronic RFP tool rather than a template is another possibility and there are a number in the market, including LanyonBid.
However, Hillgate's Andrew Burch is not a fan. "If you are going to have an electronic auction, why not save us all time by simply going straight to the auction and missing out the 10,000 word essays. Every top 20 TMC can issue an air ticket, does currency and can get a passport and visa so if you are buying on best cost, is it really necessary to go through the whole rigmarole?"
Now that we have looked at the documentation involved, how do you draw up the initial shortlist of TMCs to include in the tender process? GTMC chief executive Philip Carlisle says that in the past many corporates would instinctively include a local TMC in their initial shortlist but, he says, "locality is not that important any more."
Meanwhile, Advantage's Gage, adds: "To a certain extent, corporates include the tried and trusted [in their initial shortlist]. Nobody ever got fired for hiring American Express, after all. They then throw in a few extras to show they have gone for a wide spectrum."
Another way is to ask an expert. Many buyers new to the process can tap into an immense pool of knowledge by networking with peers through organisations such as ACTE and ITM.
ITM also runs a series of introduction to travel management workshops. One of the modules looks at TMC selection and contract management, as well as relationships with other suppliers. The organisation also runs relevant sessions at its annual conferences. At ITM's Liverpool event this year, in the stream for so-called 'new-entrant Normas', there was a session on TMC sourcing, for instance.
ITM's chief executive Paul Tilstone says: "I think there is a lot of discussion between members about the types of relationship and service levels they have with TMCs, particularly across the large five where it can be difficult to judge how different they are from one another; getting an inside track from someone who is an existing client can be quite useful."
Others choose to ask consultants, many of them former travel buyers themselves, for help with the process. However, HRG's director of client management Stewart Harvey says there has been some move away from that route. "This market does not lend itself to bringing in high-powered consultants," he says.
The deadline has passed and the bids are in - what next? Now comes the tough work of evaluating every bid. It is almost certain that despite your best efforts to receive standardised answers to your RFP questions, the bidders will have done their best to answer in as many different ways as there are bidders. After all, they want to avoid being commoditised.
This is where your tender team will prove invaluable, as will proper quantitative and qualitative reasoning. The responses for each question should be compared side-by-side and scored according to predetermined criteria by a given member of the team.
The results of this scoring process will lead to a ranking of the bidding TMCs and you will want the top two or three to come and give a face-to-face presentation, allowing you to ask specific questions about your needs and for the TMC to ask more searching questions about your requirements.
This presentation process should then reveal a clear winner and all that remains is to inform the bidders whether they were successful. If the TMC were a car, you would now be the proud owner of a shiny vehicle that will be able to drive for tens of thousands of miles with few problems. You have taken a good look under the bonnet, had a prod around and even asked your mate from down the pub for their expert guidance. Here are your keys. Happy driving.
RFP tenders are undeniably increasing in frequency. Tony McGetrick, director of sales at BCD Travel UK and Ireland, says: "For the period October through to June this year, I don't think I have ever witnessed a period of such intense [tender] activity; it has been non-stop."
The reason is almost certainly the desire to cut costs. "corporates have simply put as many spend categories as possible out to bid to assess whether they have good deals in place or not. is a primary category. buyers have been looking to reduce their travel spend but, particularly, to reduce their fees."
Norman Gage, director of business travel at the Advantage consortium, says: "there is a lot more churn going on. companies are looking to make sure they are getting the best commercial terms."
Paul Hargreaves, vice president and general manager, business travel UK & Ireland at American Express agrees. "We have seen a rise in the number of RFPs coming through which is a reflection of companies wanting to make sure they have the best deal out there."
Stewart Harvey, HRG client management director, says there has been a "definite increase" in tenders but that a more significant trend is clients revisiting their existing deals to get either better pricing or improved terms and conditions.
However, Andrew burch, business development manager at Hillgate travel, says that despite a dramatic increase in the number of RFPs, there is no noticeable difference in the amount of corporates changing their TMC
He adds: "sales teams have never been busier but their job is not easier - try talking to anyone selling to the corporate market in the 12 months after 9/11 and they will tell you it is completely different this time around. What is happening and happening very quickly is that SMEs are changing without RFP and are moving around for lower fees."
The GTMC's Philip Carlisle says: "Many corporates see this as an ideal time to get a better deal from their incumbent and may threaten the process to get them to get their costs down - but this is misguided. costs are not more than three to five per cent of total travel costs and it is worth paying your more if they can reduce the remaining 95 per cent. the end result of an is often not a change of companies."
Amex's Paul Hargreaves agrees. "If you focus on fees, you never get to the real savings. We get customers to focus on the total cost of travel and we can demonstrate where the big savings are, then focus on that rather than transaction fees," he says.
However, the sudden focus on cost may result in an increase in the number of TMCs responding with no-bids - that is, pulling out of the tender process.
CWT's Alison smith says: "We look at every RFP carefully and follow a vigorous bid-no bid process. If price is the only driver we would be unlikely to bid. our expertise lies in our ability to reduce the total cost of travel."
BCD travel's mcGetrick says that his company no-bids on tenders where there is no existing relationship with the corporate or there are ridiculous bid timelines.
This is echoed by HRG's stewart Harvey. "We recently received a tender for 18 countries and had two weeks to turn it around. these people are not serious."
Other TMCs say the same about existing relationships. Advantage's Norman Gage says: "members are hearing from corporate clients they have never heard from before; that sends a chill up their spines."
Part of the unwillingness to bid is the cost to the tmc. GTMC's Philip Carlisle says that just responding to a tender can cost up to £15,000, particularly for the more global RFPs.
The ITM recommends corporates do benchmarking exercises rather than full tenders if lower fees are the only requirement, because the TMC community are getting fed up with doing a full when they feel there is a benchmark exercise behind it.
HRG's Harvey agrees. "For some, an is an elaborate form of benchmarking and a lot are truly a waste of energy," he says. "some corporates are using the process as a stick. I haven't known us to actively no-bid as many as we are doing. It is energy sapping and we can't afford to take our eye off the ball with futile bids."
What is interesting is that many corporates seem unwilling to admit in their RFPs that they are desperate to save money or that their business is down by, say, 30 per cent. Any bad news that escapes into the press seems to have a catastrophic effect on share price or confidence. Instead, buyers will leave those discussions to the face-to-face presentation stage.
Still, corporates know that, at present, have a very strong desire to retain their existing business and are more than keen to offer an attractive deal to keep them.
CWT's Alison says: "Incumbents are fighting hard to retain business and are aggressively reducing price to do so. this, combined with the cost of change, is persuading more companies to delay change in the current climate."
Tenders can be very time consuming, and then there is the cost of change - a tender takes people, resources and communications to change as well. If you do carry out a tender process, bear in mind a tender could take six months and the implementation between three and six months, and the benefits could be a year or more in coming.