Op-Ed: Mega TMCs Wrongly Reconsidering Account-Management Model

Faced with pressures on margins from online competition and marketplace commoditization, travel management companies are restructuring and more narrowly defining their service model for core or basic services. One victim of this is account management. Account managers have always been consultants, serving as a single point of contact while providing proactive market intelligence, benchmarking, opportunity analysis and strategic assistance with suppliers. These professionals also managed global and local programs pursuant to business plans and service agreements collaboratively worked out with travel managers.

The new model reduces account management nearly to a ministerial level. Clients are being induced to move to newly invigorated consulting divisions, which are higher-cost and offer richer yields especially where "gain share" or contingency savings payment arrangements are promoted. This shift in focus and resources is supplier-enabled by a more concentrated industry—corporates have fewer choices, especially in global programs. Consulting services in some cases are being tied to attractive core pricing.

There are potentially disturbing trends in TMC restructuring and new marketing:

A. Existing TMC clients not benefiting from lower-cost transaction processing may be faced with paying more for diminished services.

B. The line between core services and fee-based consulting services can be unclear and difficult to define. The back and forth over this issue is nonproductive and adversarial.

C. Some TMCs propose mark-ups to salary and benefit costs. Undisclosed mark-ups erode trust and create the perception if not fact the corporate is paying twice.

D. Offers of no-cost consulting or credits to offset consulting fees can be illusory.

E. Process cost reduction, including increasing online adoption, along with savings assistance are all intrinsic to the TMC's core role.

F. TMC consulting offers may be accompanied by unsubstantiated marketing claims of ROI and gain-share benefits. It is problematic in gain share to establish a baseline against which to gauge travel cost savings. With a large number of variables based on industry changes, the baseline is a moving target.

i. One man's savings is another man's windfall.

ii. Down the road, a hard cash check has to be written against soft, controversial definitions of "savings" or "avoided costs." Disputes are likely even if definitions were agreed at time of contract.

G. Savings are primarily achieved through the corporate client's own direct supplier negotiations, policy enforcement, clearly established and timely traveler communication and traveler acceptance. Third parties have little influence on company culture. Travelers can be skeptical of outsiders directing or influencing choice of suppliers and rates.

H. TMCs continue to receive unauditable revenues/incentives from suppliers that present conflicts of interest. This may be less of a factor than it used to be, but needs to be considered.

I. TMCs deserve to earn competitively negotiated fees for transfer of knowledge or intellectual capital. The client should buy time and advice. Why waste time arguing over results from decisions their culture and policies influence and their travelers determine?

J. Tying minimum purchases of consulting services to pricing for core services is unfair, if not legally questionable. Clients are entitled to unrestricted options whether and where to select noncore services.

Bookings are becoming so transactional they warrant little return except through huge economies of scale. More true value needs to be added in TMC corporate relationships. However, overly ambitious marketing claims of ROI on savings warrant healthy skepticism. Contingency fees are not bolstering societal credibility for the plaintiff's bar, so why extend that distrust into the commercial travel industry?

Corporate TMC relationships that are to be long-term should be based on candor, transparency, an open book and a frank recognition that paying for time and advice is the best recipe for successful partnering. Core account management deserves to be resuscitated, not marginalized.

Caldwell & Associates President John Caldwell