Procuring travel as a small- or midsize enterprise even in the most stable times can be a bit of a tricky proposition. Companies of this size don't always have the scale to drive global, countrywide or chainwide deals and often must closely analyze their travel patterns and history to be able to weigh the prospect of a negotiated deal versus the utility of a supplier's standard program for SMEs.
These, of course, are not the most stable times. Companies of all sizes in the late summer of 2021 struggled with the timing and conditions of their employees' return to offices amid the stubborn Covid-19 pandemic and the blistering spread of its delta variant. Projecting workplace conditions in such an environment even a month out seems daunting, much less trying to forecast corporate travel patterns and volumes for next year.
And that's a scenario in which attempting to negotiate a volume- or share-based contract for 2022 could prove thorny, especially considering the variant could well jeopardize, for example, airlines' network expansion plans. There's enough uncertainty that some SMEs for 2022 will roll over 2021 contracts (themselves in some cases rolled over from 2020), rely on rates negotiated by their travel management companies or avail themselves of suppliers' dedicated SME rate programs in lieu of a full-on contractual negotiation.
"Everybody thinks a corporate contract is the ideal, but it's not always," Nina & Pinta managing partner Jo Lloyd said. "For every corporate contract you have, it's a corporate contract you have to manage."
Still, that doesn't mean there aren't opportunities available for buyers willing to look for them. But doing so will require an assessment not only of future travel projections but also current plans to manage the evolving effects of the pandemic.
Assessing the Situation
The backbone of any effort to formulate a 2022 travel procurement strategy is an analysis of an organization's stance on the pandemic. It's impossible to see too far into the future, especially given the effect of the variant, but travel buyers can at least assess their organizations' back-to-office plans and whether they will affect Covid-era travel restrictions and policies.
Redwood City, Calif.-based technology company Informatica, for example, beginning in July relaxed some travel restrictions, said global travel manager Rick Wakida, allowing exceptions for sales personnel to a pandemic policy that requires two levels of managerial approval for travel. Salespeople now need lower thresholds of approval to travel for on sales calls, he said. That change conceptually heralded an increase in Informatica's travel volume, but the delta variant since has caused the company to scale back its 2022 travel projections, he said.
While that policy exception was not reversed due to the variant, Wakida said, return-to-office plans at several locations were paused.
Wakida said at the beginning of 2021, he'd projected travel volume at the end of the third quarter to about 25 percent of the commensurate quarter of 2019, and about 50 percent at the end of the fourth quarter. But "what the variant has done is push everything back," he said, noting that both those projections have been delayed one quarter.
The delaying effect of the variant is a common tale, said Judith Allen, president of the global corporate and energy division of travel management company Frosch International Travel, and buyers must keep the ramifications in mind.
"You need flexibility and a simplified approach to travel procurement, with flexibility probably leading that," Allen said. "Recognizing that the crystal balls were thrown out a year ago and nobody knows what the future will hold, legacy contracts that have lines in concrete about how much volume you're going to hand a vendor just won't be a realistic approach."
Because of that uncertainty, Lloyd said, there's a case to be made for caution in procurement, given the all-but-impossible forecasting environment. "We're still in a place where we need to see where the chips are going to fall before you start to formulate a strategy," she said, "so status quo seems to be the approach until everybody is really certain about what it's going to look like, and honestly I don't think that's going to be before the middle of next year."
Air Travel
Among the unfortunate assessments some organizations must make is the state of their internal travel management team; the profession certainly wasn't spared the job losses of the pandemic. Those SME organizations that no longer employ a dedicated travel buyer quite possibly aren't as eager for a full air negotiating process. But all SME programs might want to consider extending their air deals this year, Lloyd said.
"There's a tremendous amount of speculation at the moment, and the optimal move is just to extend," Lloyd said, noting the uncertainty both airline and buyer have for even the near future. That said, she noted, while many carriers are willing to extend this year's deals into the future, some still want to negotiate.
SMEs that do not want to attempt to craft their own air deals, or do not have sufficient volume to do so, have options too. Most major U.S. carriers offer standard business programs that include discounts, upgrades and other perks, and travel management companies often have negotiated air rates that corporate clients often can use.
"I'm seeing a little bit of a 180 back to TMCs that can provide to SME clients our own air engagement," Frosch's Allen said. "We actively try to do that."
Allen added she's seen some smaller organizations that have negotiated their own deals in the past forego that process for now in favor of standard airline offerings. "Where organizations may have taken the next step to a full air contract, some may be reverting a bit to SME programs, and I think that's a wise move," she said.
Informatica already has rolled over its air contracts, Wakida said, and Lionsgate EVP and head of procurement Leon Pilosof said the media and entertainment company did likewise.
Lodging
The question of whether to extend hotel contracts, however, since the beginning of the pandemic has drawn sharply differing opinions, with some chains interested in locking in 2020 terms into 2022 and both sides struggling with visibility into future demand.
"Hotels generally are pretty happy to roll it over," Lloyd said. "A few wanted to do something different, but ultimately rolled it over."
Informatica one year ago decided to roll over its 2020 terms into 2021, Wakida said, and the company now is preparing to enter the request-for-proposals process for 2022 terms. He said he would consider rolling over some terms and rates again under the right circumstances.
"The key component in these rollover agreements is that the rates are extended, the services and amenities are included and don't fall off, and we want to ensure some level of pricing protection," considering the applicability of Informatica's negotiated discount and the state of chains' public rates in a possible future of heightened demand, he said.
Santa Monica, Calif.-based Lionsgate now is in the process of developing a hotel RFP strategy for 2022. "We know we want to have a combination of static and dynamic rates because of the uncertainty in the marketplace, with the static rates as the cap," Pilosof said. "If we just do dynamic rates, we have nothing to provide us with any risk mitigation." He added he was looking for clauses covering last-room availability in 2022 deals as well.
Most chains are offering rollover of static rates into 2022, and at least some discount of the best available rate, Pilosof said.
TMCs
The pandemic-triggered travel shutdown offered buyers an opportunity to consider their choice of TMC, Lloyd said, adding she's seen several RFPs to that extent. Christopherson Business Travel CEO Mike Cameron, however, said that his TMC has seen "literally no turnover during Covid," and attributed that lack of movement at least partially to the reams of unused airline tickets many corporations held upon the initial travel shutdown, and the difficulty managing them amid a would-be agency switch. Several clients with expiring deals extended their contracts for a full three- to five-year term without issuing an RFP, he said.
Cameron said he's also noticed clients implementing stricter travel policies amid the pandemic, and he's seen companies without travel management programs, or those with Airlines Reporting Corp.-accredited Corporate Travel Departments, switch to more traditional arrangements.