Like wallflowers at the prom, many small and midsize
companies can feel overlooked by travel suppliers. IBM, with its massive travel
budget, makes airlines swoon, General Electric finds little difficulty getting
hoteliers to dance, and Bank of America gets its pick of rental car suitors.
But for companies whose travel volumes lie further down the scale, turning the
heads of suppliers for a dance, let alone a long-term relationship, poses more
of a challenge.
Despite their position in the corporate travel pecking
order, most firms with less than $12 million in annual U.S.-booked air spend
have achieved some success in directly cultivating preferred pricing
relationships with at least some suppliers, according to a Business Travel News survey of more than 200 travel buyers. Of
respondents with less than $2 million in annual air volume, 60 percent by
year-end will have negotiated at least one contract with a travel supplier.
That goes up to 82 percent for firms with between $2 million and $12 million in
air volume.
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"The old
adage that the larger you are the better deal you get, I think you can bust
that myth," said Acquis Consulting Group director Greeley Koch. "Suppliers
have realized that after they go after the big fish, there are opportunities
with small and midsize companies if they target it correctly. That's what we've
seen with our small and midsize clients. There are deals to be had if you
present it to the suppliers in the right way and get their attention. In the
past, they might have said, 'You're too small for us.' "
Travel program factors beyond size that can woo suppliers
include travel patterns, program structures, class-of-service preferences,
policies and the ability to direct share, Koch noted.
Supplier willingness to structure deals also varies by
segment, and small and midsize respondents viewed hotels and rental car firms
as becoming more receptive to direct deals than airlines. Of all respondents,
41 percent indicated hotels were more receptive to discounting than they were
six months prior, and 33 percent shared that view of rental car firms. For airlines,
only 18 percent of respondents saw increased receptivity.
For travel suppliers, particularly airlines, decisions to
chase direct relationships with small and midmarket companies often come down
to available resources.
"The focus has always been on big corporate managed
travel because of the resources at the carriers," said United Airlines
senior vice president of sales Dave Hilfman. "We have over 850 salespeople
in the world, but you can only get to so many. The Holy Grail is always that
unmanaged piece. You'd love to be able to get them if you could do it
cost-effectively. Today you get to it with consumer advertising or some basic,
low-cost programs with a little bit of a benefit. But I do think all carriers
are trying to find ways to capture a greater share of that market."
For respondents with less than $2 million in U.S. booked air
volume, only 33 percent had directly negotiated fares with a preferred carrier.
However, 60 percent of respondents who have crossed that $2 million threshold
indicated that directly negotiating was the primary approach to securing the
best airline services and discounts.
Infinite Campus travel and events manager Christa Neau said
her company has tried "to set up a relationship with Delta," but "we
constantly fall just a few hundred thousand dollars short of the half-million
mark to start talking contracts with them." As the company works to shift
travelers to Delta in anticipation of eventual direct contracting, small
business programs with air carriers have had to suffice.
Like Infinite Campus, many small and midsize companies often
must take the initiative to get an air deal. "Airline sales reps aren't
just knocking on the door, asking, 'What's your air spend?' " Koch said. "It's
a matter of having the right data and being able to tell the story in the right
way."
Buyers are more likely to attract suppliers if they use a
travel management company and a booking tool, deploy enforceable travel
policies and demonstrate an ability to steer travelers to preferred suppliers,
Koch suggested. It also helps if companies gravitate toward higher-margin
classes of service, particularly international business class.
While airlines in particular pose a challenge, smaller firms
reported greater success in dealing directly with rental car firms and
hoteliers. Of those respondents with less than $2 million in air spend, 43
percent negotiated rates directly with rental car firms and 58 percent had done
so with hoteliers.
While chainwide hotel deals and relationships with national
account managers can be more difficult to attain, many small and midsize
companies at the very least can "get the attention of a local hotel close
to headquarters or a main office location," said Koch. The business that
smaller firms are able to generate at the property level can be just as
significant as that of a massive corporation.
"I'll give hotels their props," said StarCite vice
president of enterprise strategy Kevin Iwamoto. "They don't discriminate
as much as airlines do based on volume. Hotels I think are very fair in the
sense of honoring the delivery of market share with a sizable discount. The
airlines? If you're less than $1 million, you're persona non grata. It's
another world."
Meanwhile, rental car firms also have dedicated more
resources to capturing small and midsize business. For example, Avis Budget CEO
Ron Nelson during a recent earnings call pointed to an initiative to enhance
sales efforts that "focus on small business customers." Alone, such
companies may not deliver the level of business of a blue-chip corporate
enterprise, but in aggregate, the segment is expected to "generate over $1
billion of car rental revenue annually in the U.S. alone," Nelson said.
For companies that don't directly negotiate with travel
suppliers, other options exist for securing better-than-published pricing as
well as heightened service, including supplier small business programs.
Additionally, many small and midsize firms defer the task of securing the best
travel rates and services to their travel management company.
"We have for all categories some negotiated savings
that we pass on because of the influence we have with suppliers. We have the
ear of all of them," said Orbitz for Business president Frank Petito. Most
other TMCs that cater to small and midsize clients offer similar preferred rate
and fare programs.
After negotiating rates directly, such TMC programs are the
most popular way for small and midsize firms to secure preferred pricing,
according to the survey. Thirty percent of respondents from companies with less
than $2 million in U.S. booked air volume relied on their travel agency's rate
program to secure airline discounts, while 15 percent of those companies took
that approach with hotels, as did 15 percent with rental car companies. For
respondents with more than $2 million in air volume, 21 percent leveraged
agency relationships for airfares, and 21 percent did so for hotel rates, while
13 percent used such programs for rental car rates.
However, it's not an all-or-nothing proposition, and many small
and midsize firms take a hybrid approach. "It's a combo of their own deals
and ours," said Ovation Corporate Travel chairman and CEO Paul Metselaar. "One
reason they hire us is our ability to aggregate the high-end business
travelers. We're able to offer them some generic deals based on purchasing
power, the preferred hotel partners program, etc. Generally, when we take them
on they have very few deals. We'll add those generic deals and negotiate what
we can."
Meanwhile, only a relatively small percentage of survey
respondents claimed they secured the best pricing and services through
membership in supplier small business programs, which often are modeled after
frequent flyer or other consumer loyalty programs. Of respondents with more
than $2 million in annual air spend, only 6 percent found they could secure the
best air pricing through such programs. For respondents with less than $2
million, meanwhile, usage of such programs was only slightly higher.
Several TMC executives noted that clients see value in such
programs through soft-dollar benefits, such as upgrades and lounge access, if
not significant rate discounts.
"I wouldn't say they're popular," Casto Travel
president and COO Marc Casto said of such programs. "They are frequently
deployed. The vast majority of our clients are on those programs. Do they have
value? It's better than nothing."
Casto and other agencies often manage such accounts for
clients. "More often than not, the chore falls on us to actively manage
the points programs because they may not be willing to do so. When the company
is spending $500,000 a year, which is generally the default where that applies,
they won't necessarily know when is a good time to use that one free ticket,"
Casto said.
"Most carriers offer these soft-dollar programs,"
added Peter Klebanow, Ultramar Travel Management chairman and CEO. "We see
it as our responsibility to ensure our customers are getting the appropriate
level based on their spend. If it can't come in the form of a direct airline
deal, we sign them up for the small business programs and then we manage those
programs. We're the ones who will know when to use the points versus the
dollars."
This report
originally appeared in the April 16, 2012, edition of Business Travel News.