While TMCs and travel managers acknowledge that only about 60% of hotel bookings go through the travel management process and that the surface transport sector is even less strictly controlled, the one area both parties were confident they had got to grips with was air travel.
Not so, according to Mike Platt, managing director of BTI UK and a highly respected figure in the industry.
Up to 20% of corporate air bookings are now bypassing company travel management and going direct to airlines, he said. Companies were losing financial control, MI and subsequent leverage on suppliers on these bookings and the root cause was “a basic and fundamental misunderstanding of business travel, what it is, how it works, what it does and how it is paid for,” he said.
The situation is sufficiently serious for Mr Platt to see it as “corporate travel's biggest challenge of 2005.”
He said the reason travellers were going outside the corporate travel management process was that they did not like paying a say £40 transaction fee when booking direct was much cheaper.
“They ask themselves ‘Why should I pay a £40 transaction fee on top of a £79 no frills domestic air booking when I can phone the airline direct?' Many find this apparently logical argument compelling and do just that,” he said.
“Between 5% and 7% of corporate air bookings are now bypassing company travel management and going direct to suppliers. In the case of companies with mainly short distance journeys this figure can increase to 20% and higher still.”
What travellers did not appreciate was that the transaction fee covered the whole TMC service to the corporate. Booking was only a small part of the service but it was, vitally, only what most travellers saw along with some back-up like handling itinerary changes or 24-hour help. The service the transaction fee covered also included: technology, MI, billing, policy compliance, ancillary services like special deliveries, management support, security, credit and supplier deals. The company knew about these services and what it paid for them but those with this knowledge were not usually the travellers.
“Mainly travellers have seen nothing of these negotiations. They see nothing of the vast hidden mass of the travel management triangle (or should it be iceberg) and simply fail to understand why they are being told to pay £40 for a booking and perhaps some support which they might only value at say £10.
“On top of that the service they want may not be being delivered, as it is against policy, too specialised or simply negotiated out of the contract,” Mr Platt said.
Going outside policy did not save the companies money, in fact it was costing them dear as they still had to pay the transaction fee as well as losing the benefits it had negotiated for and contracted with the TMC to provide, like MI, supplier influence, security, compliance and financial controls.
He said the problem was not just TMC trying to protect their booking fees but of “many corporations beginning to lose control of a significant portion of their spend.”
He said travel management was something that had to be “communicated, explained, justified and properly priced.” But each corporate would have to find its own best solution.
* Mr Platt made a presentation on this subject at the annual meeting of the UK Guild of Travel Management Companies in Oman. Any corporate which would like a copy of the presentation should e-mail [email protected]