OP ED: How To Measure An Agency's Value
It's been two years since the airlines announced the commission cap and, in so doing, dramatically changed the relationship between corporate travel managers, travel suppliers and travel management companies.
The shift to management fee contracts reflects this changing dynamic, aligning travel management firms' objectives directly with those of its corporate customers. Along with this new fee structure comes new ways of measuring the success of travel management partnerships.
With more experience under our collective belts, both corporate clients and their agents are now taking a more critical view of what it takes to create a win-win relationship. Simply put, a win-win relationship provides the corporation with outstanding service at a fair price for both the company and its travel management firm. It's built on open, honest communication. Rather than considering strictly the short-term cost-benefits, the focus has broadened to longer-term planning and a more strategic vendor relationship.
How has this view changed the agency selection and negotiation process? First, the process has become lengthier and more comprehensive. More than ever, companies want to "experience" the agency before they commit to a relationship. Prospective customers are coming to the agency's headquarters and client travel centers to get a better feel for the culture of an agency partner, spend time with management and agents, and see firsthand how ongoing client services are provided.
On the financial side, potential customers are asking travel management companies to share key financial information. Those corporations want to understand the underlying financial stability as well as the cost structure of their prospective travel management partners. Clearly, this amount of disclosure requires a tremendous amount of trust. Without a comfort level that the inquiring corporation is sincerely interested in a long-term relationship, however, the travel management firm may choose to decline bidding on what could likely prove a short-term--and unprofitable--transaction.
Corporate travel managers also are looking to ensure that there are no hidden costs. For example, they must determine up front whether 24-hour service or customized management reports are included in the agency's management fee.
With the travel management process focused less on transaction volume and more on service, there are new metrics for gauging what value the company receives on its investment in an outside travel management firm. Some common areas of focus include:
Response time. How many contacts does it take to complete a transaction? How long does it take, on average, to finalize a trip itinerary? If travelers are spending too much time on hold, that could prove a red flag indicating a lack of resources dedicated to the account.
Quality control. Are travelers getting the right seats at the right times for the right price? The same holds for hotels, car rentals and other services requested. Are there automated controls to continually monitor and maintain high quality levels?
Management reporting. How much will the travel management firm do to support the corporate client's information and management reporting needs? That information can be the linchpin in an effective travel management program.
Account management. Who holds responsibility for the ongoing management of the account? For larger accounts, a seasoned professional account manager is the key to ensuring smooth implementation and to see that ongoing service and quality levels are achieved. The account manager also is charged with helping the corporate customer analyze travel patterns and negotiate the best vendor rates.
Technology expertise. Nothing will have greater impact on the travel management process than technology. Companies must evaluate their prospective agency's ability to creatively apply advanced technology to improve productivity and help manage expenses.
As former British Airways CEO Sir Colin Marshall put it in a recent Harvard Business Review article, "a service business is dealing with people's impressions and feelings. They don't actually buy an object; they buy an experience." A long-term relationship is the best way to ensure that experience is a superior one.
<I>Frank Dinovo is president of Omaha-based agency Travel & Transport.