TMCs BY MARTIN FERGUSON
BATTLE OF WITS
TRAVEL MANAGEMENT COMPANIES HAVE LONG BEEN INDUSTRY HEAVYWEIGHTS – BUT DO THEY HAVE A FIGHT ON THEIR HANDS TO STAY RELEVANT?
“IF I CAN CHANGE, AND YOU CAN CHANGE, everybody can change,” bellowed an ex- hausted Rocky Balboa in Rocky IV, after prevailing against his brutal Russian opponent. The champ overcame all the odds, and the partisan crowd in Cold War Moscow, to defeat the suppos- edly indomitable Ivan Drago. Pre-fight, Sylvester Stallone’s character was seen as a spent force. Fans believed his best days were behind him. The adversary was younger, leaner and stronger. He trained with hi-tech equipment, in- jected steroids and boasted a full-time team of doctors and coaches. The hero, on the other hand, worked out alone in the mountains, chopping trees, throwing logs, pulling sleighs and running in the snow. Detractors predicted Rocky would be beaten out of existence. The ending was, as is the case with Rocky films, inevitable. No matter how progressive and powerful Drago appeared to be, he didn’t have same experience, the same know- how, and couldn’t perform the basics as well as Balboa.
SECONDS OUT Travel management companies (TMCs) have also been threatened by the odd knockout blow over the last few decades. But their future is far from predictable. To avoid being metaphorically laid out on the canvas, bosses have had to keep change and adaptation at the forefront of their thinking. Before evolving into TMCs, they were known as business travel agencies (BTAs). Commissions earned on airfares drove the business model. At around 10 per cent of the ticket price it was a lucrative set-up. Corporate customers were happy
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because they didn’t have to pay anything. In fact, BTAs often shared commissions with customers. Everyone was happy. Well, everyone apart from the airlines, who eventually abolished the incentive. Punch-drunk, BTAs had to quickly
rethink the model. Charging for some- thing that had until then been gratis wasn’t going to be straightforward. Intermediaries had to demonstrate they were providing a valuable service. And so TMCs were born. Charging transaction fees for booking tickets was at the core, but supplemented by other services, including reporting, traveller tracking and supplier negotiation. Around the same time, the consumer
world was reaping the benefits of the in- ternet. Major new brands, including Ebay, Napster and Amazon, were disrupting the traditional retail space. Budget car- riers Easyjet and Ryanair had unearthed a direct-sell model, which eroded the market share of full-service carriers while simultaneously opening up air travel to a new marketplace of people who until then couldn’t afford to fly overseas. Meanwhile, British Airways (BA) and
flag carriers around the world were investing heavily in their websites. The doomsayers again predicted the death of the TMC, saying the role of the middleman was defunct in the age of the World Wide Web. Again, changes were taken on the chin. TMCs embraced the digital age by moving online – and eventually mobile – to the centre of their corporate strategies. Guy Snelgar, head of sales and consult- ing in the UK for travel technology firm Amadeus, and once employed by one of the UK’s biggest independent TMCs, says changes in the recent past have
made intermediaries extremely adept at change. “When the commission bubble burst agents suddenly had to justify their existence,” he says. “At the same time, anyone could book travel online for the first time. The challenges were real, and the reinvention was excellent. It was no longer just about booking [tickets]. They started developing corporate travel policies, managing programmes and facilitating supplier deals,” he says. Adam Knights, group sales director at
ATPI, adds: “When the major structural changes happened, the good [TMCs] just got better and the bad ones were sold, merged or went bust.” Meanwhile, Paul Wait, chief executive of the Guild of Travel Management Companies (GTMC) goes further, saying: “TMCs have the ability to adapt to market changes and the business needs of clients in their DNA.”
OVERLAPPING THREATS The abolition of commission and the rise of the internet were easily identifiable threats to the then status quo. Today’s challenges are more difficult to characterise because so many megatrends are overlapping to produce a multitude of potential outcomes. Consumer technology is faster, cheaper,
more accessible and more sophisticated than ever. It is being used not just by a new generation of travellers, but also by an entire society with constantly evolving shopping habits and expectations. The mobile channel, social media and consumer demand for personalised products and services, have challenged the traditional supplier distribution model on which TMCs have long been reliant, owing to the cash many receive from the global distribution
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