Suppliers have doubled down on pursuing small and midsize enterprises. Here's the perception on the ground from three midmarket travel buyers from diverse firms and backgrounds. BTN editor-in-chief Elizabeth West talked to Hogan Lovells International's David McDonald, formerly with large market names like Bank of America and PwC; Medidata's Daniel Honig, the company's first dedicated travel manager; and Evercore's Jason Ring who manages travel as only part of his larger corporate services role.
BTN: How are suppliers approaching the midmarket these days?
David McDonald: I am actually seeing a few changes: small and midmarket activity in the travel management company space and some in the hotel space, which is good. Recently, United brought out [a new program] in the midmarket. Historically, suppliers have not touched this space very well. They focused their time and energy on big names and big brands. I'm really encouraged to see the progression of activity in the midmarket space. Certainly, some of the smaller tech companies and entrepreneurial firms are beta-testing ideas and are approaching the midmarket segment more aggressively. We are probably easier to approach than going to a Fortune 100 with a brand-new idea and we tend to be a bit more comfortable with risk and trying something new than are the mega firms.
BTN: Evercore is a midmarket company with a mega travel management company. Have you seen changes in how they or other suppliers approach your business?
Jason Ring: I have an interesting dialogue along these lines with my TMC. They attempt to cater to me, but I have to coach them out of the phrase, "This is how the other banks do it." That's not catering to me. The midmarket has to be more customizable. The vendors seem to be better about it. The larger box hotels are open to the dialogue for flexible dynamic pricing [and car rental companies are] flexible on minimums for cars. They are more open to saying, "Let's see where this goes." And no one knows [at the start] exactly what will happen, but let's take shot. I agree with David that some of the [new entrants are coming] to a smaller midsize buyer to try something new. But there's a double-edged sword there: Everyone thinks, "Let's just try it out," both on the supplier side and from my internal clients. The expectation that a midmarket can just try everything can be overwhelming.
BTN: Getting discounts with suppliers is a source of frustration for smaller buyers. What advice do you have for smaller companies or those just starting out, maybe without a bunch of data, that want to approach suppliers in this more open environment?
Ring: If you are going to a supplier for the first time, it's a myth in the industry [that] you have to go in ready to negotiate and be tough. You can't do that. You have no backup to prove why you deserve that. When we built our hotel program, I went to the hotels my travelers were already staying at. I was honest with [the hotels] about that but also explained that I wanted to pick up the trail and get more travelers at their property. I wanted to partner. Because we don't have a mandated program, however, I couldn't promise 300 room nights a year even if I had 500 room nights in that city. What I could promise was a report that shows where all my room nights are going and at what rates. And, for me, that has gotten great partnerships. As you start to build that relationship and you see a lower rate at another property or construction comes in, then you can use the leverage [you've built].
Daniel Honig: So many people want a quick win and say [to a hotel] that they will give 1,000 room nights or 500 room nights in the hopes they will get a great rate. They'll go back and tell their stakeholders and it's great. In the contract, however, the supplier has the right to terminate the relationship if the buyer doesn't deliver. Hotels are in the service industry, and they generally take the travel manager at their word. First-time partnerships are a trial period between the supplier to deliver great products and service and the buyer to deliver volume. Do not overstep the expectations of what you can realistically deliver. … It could really blow up in your face. Airlines are much harder, especially the legacy carriers. Because of consolidation, they really own the space, but there's still value—leveraging ancillary benefits that can be costly in the market: bag fees, upgrades, flex dollars and status matches can really enhance the experience for travelers and they don't cost the airlines much at all. It's a great partnership when you can provide those to your travelers.
BTN: David, what's your perspective as a historically large market buyer? Do any of your former strategies translate into the midmarket?
McDonald: You are either leveraging with scale or with managing demand. Devoid of the scale side, you have to negotiate or leverage the value. I'll echo Daniel's point. There is a lot more value to be had with suppliers than a 10 percent discount or $20 off my room rate. Once you have defined what value is [to] your organization, you have to leverage your ability to connect directly with your people and leverage your interactions with C-level execs to actually get things done. That is a significant difference between a small or midmarket company and a large global behemoth. It's your ability to realistically get things done, influence behavior, advise and delight your travelers and win them over to your program. If you can put those things together in the conversation of negotiating rates, terms and value additions to your program, you'll have a lot more success than standing in front of someone and just saying, "Give me a deal."