Supplier deals
Of course, the traditional quest for a balance between supply and demand remains a major factor in negotiations, but providers have become more selective about the amount and nature of the incentives they are prepared to offer. Paul Tilstone, senior vice-president of global operations with the Global Business Travel Association (GBTA), identifies what he calls the WIIFM (“what’s in it for me?”) factor. Buyers have always sought added-value come-ons in return for their business volumes, but more effective yield management practices, coupled with increasingly sophisticated distribution methods, are enabling suppliers to become much more picky about who gets what.
TAILORED TARIFFS In particular, airline pricing has become much more closely targeted, and IATA’s New Distribution Capability (NDC) will give carriers even more power, enabling them to tailor tariffs right
those with sizeable mixed-type fleets – have become a lot smarter when it comes to aircraft utilisation. They can and do withdraw supply pretty much at will, and thus control availability and, by extension, prices. Airlines have become much more adept at matching available seat kilometres to revenue passenger kilometres, maintaining relatively healthy load factors. Just to add to the whole unholy mess, there is a big question-mark over the value of even attempting to press for volume deals with airlines today. Unless a corporate has truly colossal buying power, spot-bought tickets can represent a better bargain than negotiated fares.
VOLUME DELIVERY Rather more happily for the buying community, hoteliers have considerably less flexibility; fixed assets entail fixed costs, regardless of
occupancy levels. You can’t turn off the hot water and send the chef home just because the hotel is only half full. However, those fixed costs
have to be met somehow, and accommodation providers are increasingly reluctant to be beaten down on price, preferring to offer non-financial sweeteners such as “free” car parking or wifi (although complimentary connectivity is now becoming so ubiquitous that it may not count as an incentive for very much longer). Historically, the big sticking
point for hoteliers has been volume delivery – notoriously, some corporates have over-promised on the amount of business they can push towards a particular supplier.
down to specific individuals. The scheme is widely seen as a move away from publicly-quoted fares – ticket prices would be adjusted in much the same way that supermarkets personalise their special offers on the basis of shoppers’ regular buying habits.
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Online retailers such as Amazon are renowned for informing customers that “people who bought this, also bought that” – and the NDC would emulate that. Some TMCs fear they will lose their consultative role – searching for the best available flight deal will become impossible if ticket prices are calculated on individuals’ travel patterns. Furthermore, airlines – particularly
Ticket prices would be adjusted in much the same way that supermarkets personalise their special offers
MAY/JUNE 2013
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