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Business Travel Trends and Forecasts Toronto
Westin Copley Place - September 10, 2019
New York Marriott Marquis - September 13, 2019
The midmarket is booming: Year-over-year revenue growth among middle-market companies has grown consistently since mid-2017, and year-over-year growth for the first quarter of 2018 reached 8.4 percent, besting the average annual growth rate of 6.7 percent during the past six years, according to the National Center for the Middle Market.
Middle-market firms are outpacing small and larger firms not just in revenue growth but also in number of firms and employment growth, according to the 2017 Middle Market Power Index from American Express and Dun & Bradstreet. Between 2011 and 2017, as the overall number of commercially active firms fell, the number of middle-market firms almost doubled and employment in the midmarket more than doubled, according to the MMPI.
But does growth among midmarket companies translate to growth in middle-market travel management? A number of suppliers say yes.
Best Western Hotels & Resorts launched its Best Western Business Advantage program aimed at small and midsize enterprise travel programs in 2012. Best Western VP of worldwide sales Wendy Ferrill said since the program’s inception, the percent of room nights from Business Advantage travelers has grown by double digits and BW has added members to its sales team to accommodate that growth.
Mike Cameron, CEO of travel management company Christopherson Business Travel, said there seems to be a renaissance of sorts occurring among small and middle-market companies looking to manage travel. One reason, he said, is that service has come back into style. “Many companies went down the DIY path and have decided they now want a partner to help them and provide their travelers with good service,” Cameron said. “That’s just becoming a little bit more important today than maybe it was before.” Other drivers, he noted, include a shift to a procurement or supply-chain management mind-set that has companies consolidating spend across every category of an organization, as well as a new emphasis on travel management in service of duty of care and risk management.
Suppliers Taking Strategic Aim
Suppliers, projecting continued strength in the midmarket, are looking to build relationships with companies in this space as a way to support their own growth. “We are always looking at how we tap into the engine that is driving the economy and [how we] play a role,” said Intercontinental Hotels Group director for groups & meetings Nathan Park. As companies emerge and understand what they want to achieve, Park said, his team is focused on helping them grow.
Ferrill said the geographic spread of middle-market companies also makes them a vital part of Best Western’s network of more than 4,200 hotels globally. “It’s just such a critical segment in terms of how our hotels align,” she said, “because we truly are where they need hotels.”
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While working with corporates in the growing middle market may seem like a no-brainer for suppliers, it’s not necessarily that straightforward, Cameron said. Even as Christopherson engages with small and middle-market firms, about 80 percent of its revenue comes from just 20 percent of its customers, those larger accounts where economies of scale are built in. Working with many smaller firms, though easier and more efficient now, is still more costly than dealing with fewer large firms.
But Cameron said it’s important to think about the potential benefits of working with smaller firms, which could be bigger clients down the road. A few years ago, Christopherson began to manage travel for a small business intelligence firm named Domo. It’s grown rapidly since then. Christopherson not only introduced Domo to the travel vertical but also partnered with it to launch a set of BI travel apps. “It’s a classic example of us starting out with a small company that became a midsized company that’s becoming a very large company,” Cameron said. “That led into all kinds of other opportunities for us.”
Engaging the Midmarket
For suppliers, working with firms in the midmarket often means something very different than working with large enterprise firms. Midmarket programs typically have fewer resources, and the task of managing travel frequently falls to an administrator or finance or procurement manager wearing multiple hats. “You have some companies emerging and they are understanding that they need a dedicated resource around travel but they are not quite there yet,” Park said. “They might be in a state of reactiveness as it relates to travel. On the other hand, you have some sophisticated accounts that are growing and they want to get ahead of trends and markets and cities and brands in a way that aligns with objectives.”
Cameron said midmarket firms typically don’t demand the custom services and solutions that large market firms do. Yet, that doesn’t mean they are content with an out-of-the box, one-size-fits-all solution.
“They have all kinds of different needs,” Park said. “They want a true business partner, not just someone slinging RFPs across the country for them. They want someone to sit down and take the time to say, ‘These are the industry trends, tools that are there, the plethora of options.’ [They need someone to] key into their strategic objectives and … [understand] traveler satisfaction, brands they go to, experiences they are having.”
Ferrill said adopting a supplier cum consultant role has been key to engaging with small and midmarket firms. “When we look at it from a sales perspective, it’s really about working with the individual who’s responsible, although not necessarily a travel professional, to identify and help them understand what their needs really are,” she said, “making it easy for them to make accommodations and what have you at Best Western, as well as to really help them understand what they need to know.”
Is Travel Spend Just a Number?
A common concern among middle-market companies is whether they’ll even be able to begin conversations with large suppliers that are more interested in high-volume accounts. “I’m not surprised to hear a sentiment like that,” said Park, “but I also wouldn’t be surprised to hear someone who said that they had that perspective until they linked up with a national sales organization that really worked with them.” Park advises middle-market companies to have an open, data-driven discussion with suppliers. “Come to the table with a transparent conversation, I am confident that we will come up with right solution.”
And what about innovation? Some middle-market companies feel they are poorly positioned to adopt novel strategies or work with emerging technology providers. Festive Road managing partner Caroline Strachan countered that, indeed, these organizations may be in an even better position to innovate: “In a large company, you have so many hoops you have to jump through to get compliance OK and [information security] OK, and you might be trying to drive change but you have to get a lot of ducks in a row before you can enable that change. Whereas some of our midmarket clients and some of the buyers I’ve spent time with in advisory groups—they have a really wonderful working culture around them.” Likewise, she said, some newer tech firms would prefer to work with smaller corporates initially rather than rolling out with a large company.
“Even if you look at yourself in your $20 million program and go, ‘I don’t think I’ve got big enough spend to make the big boys sit up and listen,’” she said, “well then, go talk to the big boys. Go talk to some of the small ones who do want a wonderful client who’s going to run fast with them and try new things.”
Strachan likes to say that companies need three things to innovate their travel program: the will, the skill and the money. If companies have the will and really want to make something happen, she said, they’ll make it happen.
Strachan recommends that her consulting company’s clients ask themselves whether they have the ability to drive change or think they can work with colleagues within the organization or bring others in with the skill sets needed.
“And then of course—like anything, right?—if you need to spend money,” she said, “make sure you’ve got the senior leader ready to support you with the budget of whatever it is you’re trying to implement.”