Op-Ed: Price, Service, Quality: Pick Any Two For Travel Supplier Relationship Management

The corporate travel industry has seen a significant change in travel procurement, dating back to the decline and eventual elimination of airline commissions. When airline commissions were at their peak, the focus was on the percentage of the rebate travel agencies offered, with little regard for service or the quality of the associated travel products.

As our industry made the inevitable leap to "pay for service," the travel agencies quickly rebranded themselves as travel management companies and strategic sourcing began to take more control of the travel purchasing process. Some of the challenges seen in applying standard sourcing disciplines were due to the mistaken belief that "travel is just another commodity" and savings could be achieved by selecting the lowest-cost provider. We've seen evidence of this shortsighted approach when reservations were moved to "low-cost reservations centers," which translated to offshore agents with minimal industry experience who read from scripted index cards.

No matter how you view business travel, at the end of the day it's a service industry with varying levels of services, multiple distribution channels and prices that change by the day and sometimes by the minute. Travel is a highly emotional subject for employees—after all, it's human cargo that the buyer is packing off around the world. As such, when you are making the decision on a specific vertical in business travel, you need to focus on price, service and quality, but you can only get two out of the three without sacrificing one of them.

That's not to say that price is not critical, especially in today's economic environment, but there's more to the equation than the transactional price, whether it's an agency fee, hotel rate, airfare, etc., as we've all seen during our careers.

When I was the travel manager for a major bank based in New York, I told my primary hotel sales executive that I didn't want her lowest room rates for New York City. She looked at me oddly and then finally asked me why. I told her that, like the Godfather, there would be a day where I would need a favor, as in a room for our CEO on a sold-out day or an upgrade for a vice chairman, and that she'd be more willing to do it if she remembered that I didn't beat her up on price.

Of course, that day came twice. I got our CEO a suite at the standard room rate, and to coin a phrase, it was "priceless."

Our CEO didn't care about average daily rate or average ticket price, for that matter; what mattered to him was that I took care of him when he needed a favor.

Allow me to give some examples:

• It's expected that your preferred airline partner, as opposed to a vendor or supplier, provides elite status for your top executives and your most frequent travelers. What you can measure is the percentage of times your negotiated fare inventory is available. This is especially critical during periods of high demand. It's not enough to negotiate a huge discount: The seats have to be available at the time of booking in order to achieve any significant savings. Being able to clear a seat during winter break or special events is a significant achievement that can't be measured in unit pricing alone.

• The pricing systems for hotels are looking more like airline yield-management systems, and the percentage of times your negotiated rate is available or not is an easily measurable metric that will define the quality of the business relationship. The ability for a hotel chain to update your company on special rates that could undercut your negotiated rates is a measure of the quality of the relationship.

If your preferred hotel partners can provide an automated audit trail of commissions due to your company, perhaps through your travel management company, that can amount to a significant number at year-end. More than 50 percent of all hotel bookings are not at the corporate negotiated, and usually net, rate.

• Considering that travel management company fees represent the smallest portion of a T&E budget, it's amazing how much focus business travel buyers place on them. Despite their attempts to lower fees by merely issuing a request for proposals, the real savings can be achieved by working with your travel management company and investing in account management and/or consulting time spent on reviewing the waste, lost productivity and missed savings as a result of noncompliance with airline, hotel and car rental contracts.



We now need to focus on supplier relationship management, where there is collaboration between preferred suppliers and buyers to reduce the total cost of ownership for services, while creating competitive advantages for both sides through deeper relationships instead of annual RFP rituals.

I for one would rather partner than procure. Maybe then, when it comes to price, service and quality, you can get all three.