< PrevNext > 2020 Business Travel Buyer's Handbook Selecting a Travel Management Company Covid-19 Update: TMCs Emerge with Enhanced Value Proposition By Adam Perrotta / July 27, 2020 / Contact Reporter Share Download ChapterCovid-19 decimated the financial health of the TMC community and resulted in a tidal wave of layoffs and furloughs that swept through agents and executives alike. Ironically, after the crisis of repatriating employees and canceling trips died down, the ongoing challenges to business travel presented by Covid-19 have delivered a strong argument for the vital role of the TMC partner as the center of the managed travel ecosystem. Heading the list of TMCs' modern value propositions is ensuring traveler safety. As travel re-emerges, tracking the spread of Covid-19 and evaluating viral risk for given markets—whether through their own in-house services or via third-party risk specialists—will be a core competency expected of TMCs, with Covid monitoring now as important as tracking political unrest, terrorism and natural disasters. Beyond traditional duty-of-care functions, TMCs also will need to serve as a source of essential information about the cleanliness and hygiene protocols implemented by airlines, hotels and ground transport providers to help protect travelers from infection. Information on such measures will be essential and must be incorporated into the workflows of TMCs' booking tools. Sourcing this crucial data and providing it to travelers in a clear, accurate and accessible way will take considerable heavy lifting behind the scenes, including implementing new tech connections and training agents to provide support. Much of that cost will be passed along to corporate travel buyers in the form of higher fees and/or increased handle time for bookings, and buyers requiring high-touch service could be especially impacted by those costs. As TMCs get a handle on their new value proposition, buyers going to market for a new TMC should prepare themselves for structural changes when it comes to service and fee models. Even if a buyer isn't going out for bid, existing contracts could be opened for new negotiations. The pandemic brought several long-simmering issues with corporate travel management contracting and service models to the forefront. For TMCs, booking fees went suddenly dry, revealing the inherent vulnerability of transaction-based pricing structures to a demand shock. Under terms of existing contracts between TMCs and buyers, booking voids and cancellations were not counted as transactions, leaving the TMC to shoulder the risk for cancellations. When the pandemic ground travel to a standstill, that risk came crashing down on TMCs, which simultaneously faced a surge in demand for cancellations and a choking off of revenue from new bookings—not exactly a recipe for success. After that hard lesson on the perils of transaction-dependent income streams, travel management companies may begin pushing for cost-plus pricing, where a client pays its TMC's direct expenses plus a fee that comprises the TMC's overhead costs and profit. Some major TMCs that had such arrangements in place before the onset of the Covid pandemic said the model worked quite well through the crisis, aligning both parties' interests to provide incentive to work together in sorting through the chaos. But while cost-plus pricing might work well for large corporate and enterprise clients, it likely is too complex for smaller or midsize clients, who may be better served with some form of subscription model, in which the client pays a set fee—typically monthly—based on its number of employees, in return for unlimited bookings, support and other TMC services. To maintain close support while ensuring agents aren't overwhelmed with service requests, some TMCs have begun exploring a tiered subscription model, in which a corporate client selects from among a variety of service levels. Under that model, each tier would have a monthly cap on the number of free support calls and bookings, with higher-priced tiers offering higher limits, before marginal costs would kick in. Beyond exposing pricing issues, the Covid-19 outbreak presented a pressing problem for corporate buyers—the risk that their dedicated agents and account managers would be furloughed or even laid off as TMCs struggled with their own bottom lines. The prospect of losing a key agent was so dire for some corporates that they opted to pony up to fund agent costs rather than risk having that crucial link in their travel management chain severed by layoff or furlough. Moving forward, ensuring TMC resource continuity will be a key goal—and a price many corporates are willing to pay. Despite the challenges inherent in the "new normal" of corporate travel management, TMCs are eager to win new accounts by proving their ability to serve the demands of the post-Covid industry. And with the pandemic sparking renewed interest in corporate travel programs from organizational executives, travel buyers may enjoy unprecedented backing from corporate leadership as they reimagine their relationship with their TMCs.