The roles of travel managers and travel management companies are changing in seemingly endless ways. At this week's Association of Corporate Travel Executives conference, the closing session was a moot court in which participants debated whether travel would ultimately be managed internally by specialists or sourced to other departments or external vendors. The court's decision favored internal travel specialists, but evidence presented in the case showed the real answer is "all of the above and probably more."
If an organization travels, someone should manage it. Of interest is how they do it, and who gets paid.
American Express Business Travel would like to be paid more than a transaction fee for applying its full capabilities, according to an announcement this week that underscores a concerted effort by TMCs of all sizes to bolster their consulting services. They have had no choice, as average transaction fees shrink under the weight of pervasive growth in online booking and other revenue pressures.
If transaction processing services are a commodity, consulting services are "exactly what the business is about," said American Express Business Travel senior vice president and general manager for North America Andrew McGraw, during a press conference at the ACTE event. Amex's newly formalized global advisory services are made up of about 200 professionals who help clients optimize travel spending through three practice lines: policy consulting, strategic sourcing and process management.
Like those also underway at many competing TMCs, the move shows American Express has recognized that its offerings should not be packed into a transaction fee. Individually customized for multinational clients and scaled by size for mid-market customers, pricing for consulting services is separate from transaction processing. Amex is folding into the group (and dropping the name of) its Eclipse Advisors unit, which Amex acquired when it bought Rosenbluth International in 2003.
"Ever since Rosenbluth started its consulting arm [in 1998], we have had a diminished level of business," said Management & Marketing Consultancy president Rolfe Shellenberger, when asked about the impact on the industry's independent consultants.
Recently expanded consulting services by BCD Travel, Carlson Wagonlit Travel and other, smaller TMCs--as well as last month's acquisition by Hogg Robinson Group of Partnership Travel Consulting--also reflect the trend. HRG North America Consulting president Andrew Menkes told The Beatthat he felt TMC selection was the last major service that independent consultants could best provide, whereas other sourcing and ongoing travel program optimization increasingly are better handled by TMCs.
According to Shellenberger, the "complete transition" is related to the switch by TMCs, after airlines cut their base commissions, to truly becoming the agents of buyers rather than suppliers. Whereas clients historically did not pay TMCs a penny, the effects of numerous cuts in supplier revenue, beginning in 1995, continue to change that. According to Navigant International's Securities and Exchange Commission filings, the percentage of its revenues derived from clients continued rising even in the past four years--by 11 points to 71 percent as of this year's first quarter.
This means that TMCs can be more objective in helping clients sort out their air policies and sourcing--assuming they put their client's interests before their own. Meanwhile, it does not preclude TMCs from securing their own negotiated rates for smaller clients that do not have them. That's actually part of an argument that says TMCs should not only be consultants--they should be the organization's travel manager.
Plenty of TMCs already have that role, and the back and forth on outsourcing versus internal management is perpetual. For heavily managed corporate programs, the debate on whether it's a best practice to in-source or outsource has been getting more interesting of late with the moves by IBM and others to offer travel management services to external clients.
ACTE's moot court attendees heard Hewlett-Packard travel and meeting services director Lea McLeod defend the position of internal travel managers by noting that just as companies the size of H-P would never manage a $3 billion advertising budget without marketing specialists, the same is true for its $900 million travel budget.
"My and my team's roles ... are absolutely critical to H-P," McLeod said. "It's a huge amount of spend that we can manage effectively."
On the other hand, Proctor & Gamble, also a titan account, outsourced the management of its program in 2003 to IBM.
"We outsource procurement, we outsource integrated supply chain management and we also engage in business transformation outsourcing," said IBM/P&G global travel services manager Harriet Washburn, formerly an internal travel manager with Aon Corp.
Asked about the benefits of outsourcing, Washburn said, "You become very myopic when you work for one corporation, and you see it only from one perspective, whereas the opportunity to integrate with peers who are doing similar work and have a range of experience ... enriches your ability to deliver on behalf of the corporation."
Still, said Washburn, outsourcing is "absolutely not" optimal for all organizations.
"I think he challenge for most of the folks who manage travel programs is to stay vital, important and relevant within their corporate environments," noted McLeod.