In this month's Travel
Procurement cover story, the value of contracting is reviewed and questions
abound from both sides. Suppliers attempt to adjust their distribution
strategies with an eye on reducing costs and increasing customer engagement,
while buyers deal with rising costs and a more vocal and self-empowered
employee base.
On the surface, this looks like the same old stuff for those
of us who live in the world of managed travel. But is it really? The old saying
"may you live in interesting times" was meant to infer a world filled
with challenges and difficulty, and I'd say it applies nicely to managed
travel—and never more so than today. You may ask what makes today different.
Allow me to explain.
The pressure on both sides to deliver is immense;
historically, their goals have been somewhat at odds. Suppliers strive to find
the right balance that maximizes revenue (think higher airfares, ancillary
fees, increased revenue per room night, etc.) while minimizing cost of sale
(think smaller corporate discounts, reduced global distribution fees, etc.).
Buyers fight to manage budgets and get the best return on their travel
investment.
Suppliers increasingly deal with rising and in many cases
uncontrollable costs, aging infrastructure that limits efficiency, government
regulations that stifle growth and a much more demanding customer, which
combine to make life very interesting indeed. At the same time, buyers must deal
with economic uncertainties that put travel expenses under a more powerful
microscope and a workforce under increased pressure to deliver results while
impacted by a younger and more entitled demographic that at times openly
challenges the value of the managed travel program.
Of note in both cases is a more demanding end user. While
managing customer demands certainly is nothing new, managing those demands in
today's environment is significantly more complex. The days of a "one-size-fits-all"
model are long gone, as people increasingly demand the freedom to choose for
just about everything.
Suppliers have adjusted their approaches to attract and
retain customers and today rely on a mix of product enhancements, pricing
schemes, marketing and loyalty programs and social media. Buyers therefore are
left to deal with more instances of direct-to-user approaches, as well as the
random "offers" that emanate from the bevy of apps targeted at their
end users—via an ever-growing group of suppliers, social networkers, device
makers and app developers—that often fly in the face of their managed program.
Beyond your known suppliers and their approach to "contract"
with your end users, how do you deal with the latest iPhone app that allows
them to search for a hotel or with Google's new airfare search tool? Entities
like Apple and Google have captured people's attention to the point of being
able to influence their behavior. They cannot be ignored. Failure to develop a
mobile strategy or to consider these new influencers can risk the relationship
you have with your travelers.
Buyers must ask themselves:
• Will the proliferation of "distractions" in the
form of loyalty programs, direct-to-traveler marketing schemes, social
networking and random offers cause more business travelers to go rogue?
• Will
corporate contracting wane as suppliers find new ways to engage customers and
customers find new ways to serve themselves?
• As
new technologies and approaches emerge and develop, will they influence end
users to the point of distracting them away from the traditional managed
program?
• Or,
can theses new concepts be embraced and harnessed in such a way as to actually
attract users to the program?
Supplier contracting and the managed travel program always
will be vital. However, who you contract with, how your contracts are
structured and how you manage your program will need to change. Going forward,
the value of the contracts you build with your end users will be every bit as
important as those you sign with your suppliers because ultimately they are
dependent on each other to succeed. Do not forget that come contracting time.
Tony D'Astolfo is
chief sales officer for ground transportation firm GroundLink. He recently
ended a seven-year run as Rearden Commerce's senior vice president of travel
services.
This report
originally appeared in the February 2012 issue of Travel Procurement.