We have witnessed a continuing trend to move travel supplier decisions into strategic sourcing/corporate procurement, and there's abundant evidence that it has been the right decision for major corporations. There is a solid argument that a midsize car is the same across car rental brands, and the same can be said for a double room in similar-category hotel chains in most domestic cities.
However, the argument that airline travel procurement can sit neatly inside a traditional strategic sourcing process needs to go beyond the product to the actual experience, which is much more than an airline seat: You have to look at the airport experience at check in, the onboard working environment, deplaning, customs clearance and how well rested your executive is when he or she lands in a different country ready to "hit the ground running and do the deal."
The airline industry has seen a polarization between the large legacy network carriers and the new entrants--the low-cost carriers. It's about time we took the focus away from low operating cost and placed the emphasis on high value, which includes the overall experience and productivity--including cost--to the business traveler.
International network carriers have a huge arsenal of tools to influence--and sometimes force--carrier selection, up to and including thousands of frequent flier points in specific cities (especially when there is new competition), and enforcing domestic discount percentages based on performance in key international markets, where there is fierce competition.
If you are forced to hand over data and yield part of the selection process, is that truly strategic sourcing?
Corporate procurement specialists and travel managers are forced to give the upper hand to some airlines by providing confidential data that allows the airlines to mine this (scrubbed) database to determine how much business--and often at what price--your company is giving to their competition.
I doubt that any chief financial officer would tolerate that type of purchasing paradigm from any other vendor trying to sell goods and services.
[PULL_1]Imagine IBM refusing to quote a price for computers and mainframes unless you showed them how many Dell products you bought during the past year and asked you to specify by type of product.
The international segment of a business trip is the most costly component, which, by definition, can have the most impact on the productivity of your corporate traveler and, ultimately, on the purpose of the whole business trip.
If you allow your company to be forced into your international carrier selection as part of a quid pro quo (or the other way around), then you, sourcing/travel management, have yielded your leverage to the exact model that the airlines have created with their alliances, marketing programs and loyalty- and fare-based upgrades.
The forced/influenced selection process masks inferior service, squeezes out competition and ultimately raises prices over time. We have to look at the overall investment in a trip and also take advantage of technology that allows a business traveler to "spot buy" the best price, because it's difficult to prove that a $200 decision on one ticket could in fact impact 2 percent to the bottom line of an entire corporate airline discount program.
At the end of the day, the selection of travel suppliers must be made within each individual corporation by a collaborative group that includes the needs of the individual traveler and the dynamics of a particular trip or department.
If you let the suppliers dictate the rules of engagement and artificially stimulate demand--as well as stifle competition--then you really have yielded the decision making to the supplier, thus changing the process from a strategic decision to a forced decision that does not benefit the shareholders and stakeholders.
Andy Menkes is Eos Airlines senior vice president of sales for the Americas.