When it comes to multinational travel agency configurations,
there is a spectrum of options. On one end are corporate travel buyers who hold
centralization dear and strive to use a single travel management company across
all global operations. On the other are those who value market-specific
expertise and rely on a constellation of local, national or regional agencies
to deliver it.
Yet, if there is a bias in multinational travel management,
it's toward centralization, consolidation and control. And, for agency
relationships, monogamy is in. A 56 percent majority of 139 multinational
travel buyer respondents to a BTN survey question on the matter have
deployed a single TMC worldwide. Another 20 percent contract with multiple
providers but aim to whittle them down to one.
Remaining is a 24 percent minority of corporate travel buyer
respondents committed to a multi-TMC framework, many of whom cited the local
touch associated with their setup, with some noting the increasing ease of data
consolidation to foster the model.
Will Tate, partner with travel management consulting firm
GoldSpring, agreed that the single-TMC structure remains prevalent, especially
among large multinationals running mature travel programs. "The optimal
number for this group is one. The concept is, 'I can leverage my pricing; I can
leverage my service needs; I can consolidate with one group; I only have one
supplier to manage; I have one single point of contact to manage the world,'
" said Tate.
"There is plenty of global synergy that is happening,"
he said. "The megas have done a terrific job in moving that ball forward.
You do have a lot of commonality in key areas, but you don't get it down to the
level most buyers think about when they think about managing one supplier
around the world."
Respondents to BTN's survey who are adopting a
single-TMC structure enumerated benefits that included consistent data,
consolidated reporting and centralized policy management.
Quite a few also highlighted a diminished administrative
burden, thanks to central account management, process standardization and a
single point of contact. For example, when one respondent organization wanted
to introduce a new technology or supplier agreement, "a single agency
simplified worldwide rollout." Noted another, "It also simplifies
fare filing and follow-up of suppliers."
Another respondent's singular TMC provided "one central
point of touch for duty of care, global reporting, consistent reporting, global
leverage of spend and policy compliance." Another added, "It's
impractical and inefficient to manage separate policies and suppliers for key
components of the program."
The roughly one-quarter of BTN survey respondents who
were on the path toward a single-agency structure cited many of the same
reasons as those respondents who already had centralized. Further, several
stressed cost benefits, citing lower average transaction costs and less cost to
manage.
Tate said the numbers bear this out. Years ago, he built a
financial modeling system that assesses TMC pricing as he consults on client
requests for proposals. With "about 200,000 agency price points in that
tool from 140 countries," Tate said, this analysis shows how pricing
levels change based on agency configuration. "It's generally a very slight
advantage to awarding [a single] global [TMC]," he said, noting that
hard-dollar savings like transaction or service fees were only slightly better
than the best-in-region approach. "Soft-dollar" benefits—add-ons like
consulting services—gave further pricing advantage to single TMC agreements.
What Is A 'Single' TMC?
A "single" global TMC actually is something of a
mythical creature. The global nature of even the largest TMCs can be illusory,
as various agency partners or franchisees, tech systems and service levels can
be in place, depending on the locale. As one respondent wrote: "Few TMCs
are truly global despite their protestations to the contrary."
Tate acknowledged that mega TMCs often use a hodgepodge of
technology systems and rely on partners or franchisees in some areas.
United Kingdom-based Click Travel senior business development
manager Lucie Harrison in a November 2014 blog post contested the nature of a
single TMC. "The problem with this approach is that under the skin, a
mish-mash of different technologies, processes, cultures, management teams,
reporting infrastructure, service levels and contractual agreements results in
a fragmented service delivery. In reality, the brand is the only part of the
service delivered consistently across the globe."
Quite a few of the 24 percent of respondents who have no
plans for a single-TMC structure agreed. "We have four travel management
companies globally," wrote one respondent. "There isn't one who can
provide consistent, competitive service globally." Another noted, "The
best TMC in one region may not be best in another. We allow for local input in
the process."
Indeed, there is a sense among some that the tides are
shifting in the favor of a best-in-region approach.
A Hogg Robinson Group official last year estimated that 30
percent of requests for proposals for global TMC services ended with regional
selections, not single TMCs, according to The Beat.
Some companies have consolidated their agency structure only
to later deconsolidate. Japan-based financial services firm Nomura last year
moved to a regional arrangement following the conclusion of a three-year
contract with a single global provider. Head of EMEA corporate travel Carol
Neil told The Beat she found that "especially in Asia," the
global TMC "could not meet all the service-requirement idiosyncrasies of
some countries."
A respondent to BTN's survey came to a similar
conclusion: "Local expertise doesn't always mean a single global agency.
We had that once, but there were inconsistencies. We now have best-in-class
regional agencies."
Tate contended that multiple suppliers "adds cost and
complexity and layers," as well as the need for a data aggregator to get a
view of operations and spend. Some respondents seemed OK with that.
Direct Travel, with a focus on midmarket clients in the
United States, uses partners to service clients abroad. "A lot of times
our customers want consolidated data, and … with the technology now, it's very
easy to globalize or standardize that data," CEO Ed Adams said. "The
bigger issue is working with somebody in your country and having that support."
Click Travel's Harrison likened use of a single global TMC
across the world just for data consolidation to wielding "a sledgehammer
to crack a nut."
And while adherents to a unified TMC structure touted cost
benefits, one respondent said a multi-TMC setup produced "better local
rates" in addition to better "service support." And that
respondent still was "able to get consolidated reporting through a
third-party tool."
Further, companies also can replicate some benefits of a
single-TMC structure by using an agency network like Radius or GlobalStar
Travel Management. With an annual travel spend of $185 million, Danish
healthcare company Novo Nordisk gave a nod to the network model by signing a
direct deal with Radius Travel last year. The deal was the largest yet brought
on by the agency network's central sales organization, prompting CEO Shannon
Hyland to note, "Our model is resonating more in the marketplace."
GlobalStar, an advocate of the best-in-market approach, sees
a similar shift, especially as "the technology has reached a level where
you could consolidate data yourself," said executive director of global
sales Chris Weedon. "Over the last 10 years, everything was all about
global. Everyone was saying you want to try to negotiate one online booking tool
contact, one GDS contract, one TMC contract."
Larger companies sometimes talk about the 80/20 rule, by
which they'd consolidate 80 percent of the market, "sort of the quick-win
countries," but leave the rest out, Weedon said. "They're now coming
out to start tackling that 20 percent, and when they look at that and maybe
look across Asia and Latin America, they realize that actually, everyone
operates a network across those regions. The megas—Amex, CWT—they have a
network organization across some of those regions."
Still, whether narrowing down to one or a few, the trend
toward consolidation is alive. "We are looking to consolidate but not
necessarily to one," noted one respondent. Another described the preferred
setup as "one global agency as global data consolidator" plus "some
regional deviations as necessary."
Others were in the midst of experimenting and feeling their
way through the optimal agency setup, such as the respondent who said, "We
implemented the largest agencies as a first step. If the service is poor in a
particular country, we go out for RFP and choose the best provider for that
country."
This report originally appeared in the April 20, 2015, issue of Business Travel News.