Executives from some of the largest travel management companies recently told Business Travel News that they have seen a spike in competitive corporate account activity, whether it be to extend, expand or re-bid contracts.
Corporate Travel 100 competitive bid activity is up 25 percent compared with previous years and is accelerating, according to BCD Travel executive vice president of global business solutions, sales and marketing Louise Miller. In recent years, about one-quarter of CT100 corporations normally are out to tender, she said.
Similar travel program activity is happening in other large U.S. multinational accounts.
HRG CEO David Radcliffe said he watches with "abject fascination," as the level of activity is far more frenetic in the United States than in Europe. "We consider ourselves quite lucky because we in the States tend to focus on the very large managed multinational accounts and they're the ones that are reviewing, but not necessarily out to bid," he said. "They're just looking for the best deal, but the amount of domestic stuff that is going on in the States is awesome. It's quite interesting because we're being increasingly asked now by large domestic U.S. clients to start bidding. That's kind of been against our philosophy so far."
Carlson Wagonlit Travel North America president Jack O'Neill attributed some of the heightened account activity to the first and fourth quarters being the typical busy season for TMC contracts, and increases in TMC consolidation efforts outside of the United States. "It's more of the evolution of clients," he said. "They are reconciling a new world with fares going up and financial markets affecting business, and underneath all that is a more consistent pattern of companies looking to understand if they can muster the policy and reconcile internal culture to embrace a more global program."
Egencia senior vice president of North America Rob Greyber said that in the past 90 days he has not seen changes in his clients' renewal pace and contract lengths of three to five years remain the status quo, but more accounts from elsewhere are in play.
Several travel buyers also noted the recent commotion of TMC account activity among their peers, especially in the form of regional and global consolidation efforts.
Philips Electronics last year reconsolidated globally with Carlson Wagonlit Travel after a period of regional consolidation with different agencies. Philips director of strategic sourcing for airlines and corporate card Peter Sijbers said that as savings go down and costs go up, so does evaluation of supplier contracts and internal responsibilities, including a reassessment of what's core to the travel program and what can be outsourced. "I know there is a lot of activity and a lot of RFPs going on at the moment," Sijbers said. "The optimal solution depends on the maturity of the program, and it's related to your strategic direction." Regardless of their personal recent account activity characterizations, travel management companies are gearing up for what they anticipate will be a feverish 2009. "In the Corporate Travel 100, we don't decide to do a bid usually with a week's notice," said BCD's Miller. "We are already in pre-bid dialogues with companies. People are evaluating far before contract expiration."
BCD's sales staff is conducting such dialogue with new prospects and current clients. "Most of sales activity we have is building on a current client," Miller said. "In most of our bid activity, we are the suppler in some form or fashion to a degree already."
Meanwhile, HRG is taking a more tepid approach. "We've got to put our foot down in the States not to go after the domestics," said Radcliffe. "One reason for it is that our model is built for added value, whereas a lot of our competitors in the States are built for fulfillment."
He added: "They are still relying on supplier income for their profitability. Our profitability isn't built on that model. We still get a good chunk of supplier income, but it's for the work that we do for the suppliers, where in the States, it's still volume-related. I don't mind telling you that some of our people in the States are saying, 'Come on, David, we could clean up here.' You can clean up for two years and then the supplier starts to put the squeeze on you. I think I would rather stand back at the moment and see what pans out."