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Tension mounted between travel purchasers and travel management companies here at the first Business Travel Market conference as attendees debated whether TMCs place client interests above those of suppliers and whether TMC revenue streamsshould be more transparent. A panel discussion examined the implication that TMCs influence corporate bookings to increase business for certain suppliers as part of private agreements that may be at odds with a corporate client's supplier preferences.
"There are known rebates, commissions, kick-backs, but clients don't have a clear view of these and, therefore, don't have a clear view of the drivers," said WS Atkins category manager Monica Dingwall. "We don't mind that there are commissions at play, but let's not deny that they do have an influence. And that's where clients get annoyed, if they think the TMCs are being unduly influenced."
But JPMorgan Chase head of international travel Bernadette Basterfield pointed out that "there is no point in my travel management company making no money on my business because then they are not going to invest in it." Regarding transparency, Basterfield said, "It is a money-go-round that includes hotels, hotel booking agencies, airlines, etc. We know that the sales and marketing agreements exist, and that it is a revenue stream; we know that the global distribution system revenues exist. It is about how those revenue streams are transparently given in negotiations with your corporates. There is a bit of smoke and mirrors, and from the get-go there is a lack of trust between the TMC and the corporate buyer."
Discussion at the Business Travel Market followed a report issued by the Institute of Travel and Meetings, which examined pricing and cost structures, and suggested trust and transparency could be built by structuring fees around "time-based charges or by touches per booking."
Tracy Randall, director of sales and account management for Ian Allan Travel, and Nigel Bourke, director of strategic pricing for Hogg Robinson Group, favored such a model. They argued that since TMC services are time consuming, corporations should be charged service fees per minute or based on services provided, instead of current charges contingent on a completed booking. Travel buyers were not convinced.
InterContinental Hotels Group sourcing director for global travel Jo Lloyd said the TMC issue revolves around trust. "I have absolutely no problem with you charging like my lawyer, but I know my lawyer has my back and I am the only income stream for my lawyer and my lawyer will go out and fight for my interests," Lloyd said. "When you have different revenue streams coming into the TMCs other than mine, you no longer just have my back."
Referring to her experience as a supplier, Lloyd said that "if my checkbook was big enough, [TMCs] would put me in front of their clients." Now as a buyer, she asked TMCs "are you just looking to make your targets from a sales and marketing view? Once you have that fundamental lack of trust, you are never going to be able to charge like my lawyer or my accountant."
The discussion also focused on another bone of contention: balancing price. TMC representatives said they are frequently asked to reduce their fees or to develop a more appealing pricing matrix, but they insisted that by reducing price, the value is lost. HRG's Bourke said that although there has been talk of pricing structure alternatives, pricing ultimately reverts back to a transaction model whereby customers are charged based on the number of completed transactions.
"There are lots of things that we face as TMCs, and we have to ensure that we get a proper wage for the work that we do," added Allan Travel's Randall. "I can only be judged on the price of my transaction fee. [Travel buyers] get the value of the TMC, but there are TMCs out there that do it for more or less the same amount of money, so differentiating ourselves is one of the challenges."
Arguing that the TMCs can deliver double-digit percentage savings for corporations while the fees amount to a single-digit percentage of corporate travel spend, Carlson Wagonlit Travel vice president of sales and global management for Europe, Middle East and Africa Floyd Widenersaid, "The disconnect that we have today is that people are focusing on the short-term immediate savings, and they focus on the cost of the travel management company. The real savings or the value comes from managing the total cost.
"Everyone wants the Christian Dior dress, but they are only willing to pay an H&M price," Widener added. "It's a debate that goes on every day with our partners. I can give you both, but I can't give you both at the same price. We are being treated as a commodity, when, in reality, we are not a commodity. Your corporation's travel program can have more of an impact on the corporation than just buying paper or pencils."
JPMorgan's Basterfield said TMCs are challenged to reassure clients that there is an inherent value in the fees levied. "The TMCs can be their own worst enemy," she said, suggesting that they "don't believe the value that they deliver. You should absolutely negotiate around the value propositions but always bring that back to the management level or the transactional level. The TMCs are too afraid to push that edge and say, 'Actually, I don't want your business if you don't recognize the value that I am bringing.' From the get-go, there is a lack of understanding of what we are buying; there needs to be more of a robust sales campaign that actually talks up the value proposition."
But HRG's Bourke said that "what it comes down to is the transaction and the activity-based customer; our whole cost structure is based around that. Believe it or not, management fees and transaction fees exist in most industries effectively."
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