ASSESSING THE STATUS QUO
Leaders of four business travel organisations – GEBTA, GlobalStar, Advantage and the BTA – deliver their respective assessments of the TMC market
Published 27 February 2023
Marcel Forns, general manager, GEBTA
Spanish business travel association GEBTA represents the interests of around 20 TMCs headquartered or operating in the country
James Stevenson, CEO, GlobalStar Travel Management
Headquartered in London, GlobalStar is a commercial network of 55 TMCs operating in more than 2,500 locations around the world
Guy Snelgar, global business travel director, Advantage Travel Partnership
The Advantage Travel Partnership is Europe’s second-largest business travel consortium
Clive Wratten, CEO, Business Travel Association
The BTA comprises around 30 TMC members which, it says, account for more than 90 per cent of managed business travel spend in the UK
How would you characterise your members’ sales in the second half of 2022?
Marcel Forns, GEBTA Business travel experienced a strong recovery during the second half of 2022. In terms of number of trips, the figures from September to December 2022 recorded a significant increase and closed at 82 per cent compared with the figures of 2019 – or 75 per cent for the whole year. In terms of sales, the figures equalled those of 2019 due to the average price increase of products and services, mainly accommodation and air tickets.
James Stevenson, GlobalStar Positive. That’s how I’d characterise our members sales in the second half of 2022. Business has either returned to 2019 levels or in some cases has extended beyond to create a new, higher level for the latter half of 2022. There are of course some exceptions, notably in Asia due to the late lifting of travel and quarantine restrictions. Other areas of interest that have marked anomalies include the type of business. Where members have a mix of leisure and corporate travel, sales figures show greater bounce back. As does domestic versus international travel, which is especially true in North America. Also, SME travel came back far quicker than that of the large, multinational corporations. Outside of transient travel we experienced significant uplift in meetings and events volume.
Guy Snelgar, Advantage The speed and scale of the return to travel has varied across different sectors of the industry. But on average, members have reported that while the number of transactions may still have been 10 to 20 per cent below 2019 levels [in the second half of 2022], revenue levels had returned, or in some cases, exceeded 2019. This has come from a combination of higher fares and rates, but also from TMCs being asked to book more elements of the trip, especially around accommodation and ground transport or transfers.
Clive Wratten, BTA: We are seeing a strong recovery of business travel. Most of our members gained around 80 to 90 per cent of 2019 revenue levels by the close of 2022.
What’s your assessment of TMCs’ staffing levels right now?
Marcel Forns, GEBTA In Spain, the situation concerning staffing problems experienced some improvement by the end of last year. The current situation is much better than it was six months ago. According to our TMCs, the situation differs depending on the company. In most of the cases the staffing problems seem to affect predominantly frontline consultants.
James Stevenson, GlobalStar The biggest challenge right now is resourcing. Staffing levels are woefully low. We saw so many brilliant people laid off during the pandemic, predominantly by the mega TMCs, and re-hiring and new hire is slow to pick up. Some of our partners kept their staff on during the pandemic, sometimes outsourcing them to provide resource to Covid-related call centres, pivoting their businesses to survive. As a result they have highly trained, experienced and knowledgeable teams in play. Something some of the larger businesses aren’t able to do, consistently for all clients, because they simply don’t have the staff. It comes as no surprise to see the competition for staff right now. There are signing bonuses being offered as normal and candidates are receiving multiple offers and taking their time to make a decision.
Guy Snelgar, Advantage Our members tell us that this is certainly remains an ongoing challenge, but not at the critical level it was in the second half of 2022. We are seeing some old colleagues deciding to return to the industry, having left during the pandemic, and some TMCs are starting to benefit from trainee and apprenticeship schemes that have brought in new, young talent. However, competition for good, experienced staff remains high, as does the cost of recruiting them.
Clive Wratten, BTA The majority of the BTA’s members are at approximately 90 per cent of pre-pandemic staffing levels although recruiting continues. The general feedback we’ve received tells us that service levels are now back within acceptable levels as the industry returns to normality.
In which areas do you think TMCs are investing the most currently?
Marcel Forns, GEBTA We do not see a general pattern applicable to the whole TMC community as their profile is quite diverse and so is their market approach. Sustainability reporting, however, seems to be at an embryonic stage for part of the market, while content integration is a major topic for most of the players.
James Stevenson, GlobalStar There are four key areas enjoying TMC investment right now. Firstly, technology, and specifically single booking platforms that provide a consistent source of content for both agents and travellers whilst maintaining reliable policy management. TMCs have to invest in this to ensure access and full servicing capabilities for both GDS and non-GDS content, including NDC. Secondly, people, from wellbeing and development initiatives through to signing bonuses. Every tactic to attract and retain people is enjoying TMC investment. Thirdly, ESG unsurprisingly remains a focusinvestment as clients demand more support for their company initiatives. Lastly, meetings and events and live availability venue finders. In today’s world of remote and hybrid working, canny TMCs are investing to speed up client requests for meeting space that enables teams to be brought together.
Guy Snelgar, Advantage Many TMCs continued investing through the pandemic, particularly in technology, and we are now seeing the fruits of that investment being launched for customers. Tools delivering sustainability information and calculation to the corporate traveller have been the most prominent. There has also been a lot of work behind the scenes by TMCs refining the operational processes – a combination of technology, recruitment and organisational change to support new booking patterns and service expectations that have emerged post-pandemic.
Clive Wratten, BTA This will vary depending on the TMC’s business model and the market segment they operate in. On the whole, all TMCs continue to invest in technology, but I actually believe the biggest investment is in their staff. Recruiting, retaining and re-training employees is critical, especially as the industry is making a promising return to pre-pandemic levels. It is clear that people are at the heart of the business travel industry.
What do you think is the TMC community’s biggest challenge at the moment?
Marcel Forns, GEBTA Sustainability and content. Both issues are without doubt major concerns for the TMC community. As we have seen a certain decrease in staffing problems in the last months, we believe that access to content will now become the main challenge for the vast majority of TMCs.
James Stevenson, GlobalStar As I’ve said before, staffing has to come high on this list because as we have seen, it is detrimental to meetings service level agreements. Probably followed by – and these are in no particular order – content fragmentation, supplier capacity and inflation, with the last of these affecting the cost of fuel and in some regions the eye-watering costs of air fares, which both prevents travel or uses up budget quickly.
Guy Snelgar, Advantage Managing the different processes and workflows that come from the content fragmentation has driven new challenges on resource and staffing. For example, a process that might have been a largely automated through traditional GDS content could now be a more manual one via NDC. Delivering a smooth, consistent booking experience, change management and payment across so many distribution channels can mean TMCs having to do a lot of manual work in the background. This has an increased resource cost which is not always reflected in existing client fees or supplier revenues.
Clive Wratten, BTA As the last three years have shown, predicting the future is tough. Nevertheless, I believe that content fragmentation is a key issue that TMCs face in the future. There has never been a more important time for the industry supply chain to collaborate and respect each other. TMCs are the integral conduit, and they need to be recognised and appreciated. Collaboration across the industry is vital to tackling big and small challenges. We need to take a proactive stance on sustainability and reducing our carbon footprint. As a contributor to greenhouse gas emissions, sectors across the industry must work together to develop innovative long-term solutions that are financially viable.
There was much talk of subscription fees during the pandemic as a model that better protects TMCs but, for all the hype, has there been much change in the way corporates remunerate their TMC partners?
Marcel Forns, GEBTA In general terms the Spanish market is based on a transactional model. However, we do see some shift to complementary and more balanced business models that seem to be more adequate in remunerating the added value offered by TMCs, namely when it comes to consultancy, for example.
James Stevenson, GlobalStar There’s no evidence of that change. I’ve seen the subscription model on a domestic level, pushed for by the TMC, but nothing more than that. It can be an expensive option for clients when their travellers' volumes vary so much.
Guy Snelgar, Advantage With so much uncertainty around travel volumes over the last couple of years, it is not surprising that there hasn’t been a big move to some of the new fee models like subscription fees – it was hard for a corporate travel manager to make any commercial comparison while people weren’t travelling. However, they have not gone away and we have seen more TMCs announcing alternative models recently. There is still a disconnect between the value that a TMC delivers from the total management of a company’s travel programme and a fee structure which is based heavily around the booking of each individual transaction. As business travel establishes its ‘new normal’, I do expect see a move towards some more inclusive models that recognise the whole service a TMC provides.
Clive Wratten, BTA The BTA’s role is to ensure the industry and its customers are educated on the mechanics of the sector of which commercial models are just one part. During the pandemic, we worked closely with all elements of the supply chain to look at different transactional models. It is now up to each TMC to take this information and apply it as they best see fit.
Do you think there is a discernible shift in the way TMCs make money?
James Stevenson, GlobalStar I think many TMCs would like there to be a shift in how they make money! The management fee model is usually always the preferred option, but in reality, clients are asking for a transaction fee model. It’s interesting as the mix between supplier revenue and client fee revenues will vary depending on the TMC – and those who weight towards earning from supplier revenue are always providing less choice for their clients. But the landscape has changed. Suppliers simply don’t have the same amount of cash in their model today that they had pre-pandemic. Costs and margins are irrevocably altered. TMCs can no longer rely as heavily on a blend of listing fees, marketing revenue and performance-driven incentives. Suppliers are more willing to give clients negotiated deals at lower volumes today. For example, the volume threshold for route deals from airlines is significantly lower. Similarly, hotels are keen to drive volume and are giving corporates better performance-driven rates.
Guy Snelgar, Advantage There’s not so much a sea-change here, as a gradual evolution that has been happening for some time. Certainly, some suppliers, post-pandemic, are reviewing how they incentivise and remunerate agents, but as always that varies across the industry. While many supplier partners are offering new commercial incentives, others are reducing or limiting access to these. The impact of these changes varies from TMC to TMC, depending on their model, which is leading many to review the profitability of some products and whether existing client fee levels are sustainable in some cases.
Clive Wratten, BTA: This very much depends on the model the TMC uses as the industry continuously adapts to market conditions. TMCs are adept at adjusting their business models to reflect the commercial landscape which explains the shifting emphasis on where the profit is derived from.
Are TMCs’ increasingly long and complex fee menus and surcharges damaging customer relations, or is it a case of ‘needs must’ for TMCs’ welfare?
James Stevenson, GlobalStar It is definitely not a ‘needs must’. It’s a choice. We choose to not entertain it, preferring to place emphasis on great customer relations. Our model is pretty simple. Our fee menus are neither long nor complex, and we don’t have surcharges, unless it is a third party surcharge, such as NDC, which we pass through at cost, obviously. Our makeup adds to the simplicity of our model. We are able to provide clients with a fee structure that is adapted, where it needs to be, on a market by market basis. We put our clients’ needs front and centre. Complexity is created because the industry doesn’t have a standard way to book. That means that larger TMCs and especially the mega TMCs can and will charge extra for anything and everything that is outside standard service. They have to try to cover all bases as far as client needs – today and in the future – are concerned. A ‘pay as you go’ menu that is long and complex is their solution.
Guy Snelgar, Advantage There is a necessity for TMCs to cover the changing – and often increasing – costs associated with processing different booking types and content sources. In a model where corporate buyers are looking to achieve the absolute minimum cost for each different transaction type, that is inevitably going to lead to a complex fee structure to match. For example, if a booking fee has been sliced so thinly on a product that might not deliver any commission back to the TMC, then the removal of a GDS incentive, or additional costs incurred from having to manually process changes to the booking, can make that fee unsustainable without a surcharge or increase. I would say that is part of the rationale behind a move towards more rounded and inclusive management or subscription fees that look at the total service that TMCs provide.