GUEST COLUMN Warren Dix
WE ALL WANT THE SAME THING FROM TMCs: A BETTER, FASTER AND CHEAPER SERVICE. BUT AT WHAT COST?
his year marks the 10th anniversary of the culmination of BA’s ‘Fresh
Approach’ initiative – a time airline commissions in the UK market were effectively removed by all carriers. This changed the
relationship between TMCs and their clients. Historically, travel management was treated as a profit centre. Commission income was typically around 9 per cent, with the cost of service from the TMC accounting for 7 per cent and the remaining 2 per cent returned to the customer as a rebate. When commission was removed, travel management effectively became a cost centre. TMCs initially set their fees to try and replace lost airline commissions, but due to market forces, these levels were unsustainable. Since 2005, the
dynamics of the managed travel landscape and the respective fees charged have now changed beyond all recognition. This set me thinking: 10 years on, what is a fair price to pay for your TMC and what now represents true value? When I visit prospective customers, the same items are always on the agenda. They all want to see an
BUYINGBUSINESSTRAVEL.COM
The dynamics of the managed travel landscape have now changed beyond all recognition
A FAIR PRICE TO PAY T
improvement in the service they receive and the online travel tools they have access to; they want greater insight into their expenditure; they want faster response times and they want to try and reduce their service fees. It is a case of better, faster, cheaper. This presents a challenge: to continue to improve service standards, TMCs have to invest in training and pay a premium for the best staff. To provide the most up-to-date technology, TMCs have to invest in innovation. To offer faster response times means having the latest, often costly, telephony and email systems. Offering the widest range of choice often means investing in the development of systems to run alongside the GDS. All these things cost money. So what is a fair price to pay? At the crudest level, the formula is very simple for any TMC: the number of
transactions multiplied by respective transaction fee equals total operating costs plus profit. Yes – profit. Many of us were taught the parable of the wise and foolish builders. When selecting a TMC, the fact that they are profitable is the rock. It is a firm foundation for a sustainable service that will continue to effectively meet your programme requirements over time. If you take the profit out of the equation you are left with a house built on sand. It’s my belief that true value essentially comes from two key areas. First, a TMC should be able to manage and reduce the actual cost of travel. Second, it should be continually looking to create new efficiencies within your travel programme.
TMC costs now typically account for somewhere between 3 per cent and 5 per cent of the total travel budget, down from the historic 7 per cent. It is, therefore, within the remaining 95 per cent of expenditure that there is a real opportunity to achieve significant reductions in cost. TMCs not only need to have access to the very best fares and rates, but also they need to have the right operational infrastructure and approach in place to truly deliver in this area.
Warren Dix is Hillgate Travel’s director of sales and marketing. Leading a 16-strong team, he manages Hillgate’s business development, marketing and account management functions. Prior to joining Hillgate Travel, Warren held senior positions at BCD and Expedia Corporate Travel.
Having the right tools in place to provide cost transparency is also essential. Business intelligence, pre- trip approval and genuine benchmarking are the order of the day. Gone are the days of benchmarking against the full, published fare to show sky-high savings. In fact, now we would rather highlight fare declines and out-of- policy activity to highlight any customer overspend. When it comes to creating efficiency, system integration and the resulting time-saving opportunities are no longer the preserve of larger companies. Increasingly, we are seeing SME customers looking at technical integration. I strongly believe that in 2015 a TMC should be able to prove their worth. There should be substance behind all engagement and a TMC should be able to demonstrate true value and ROI that they deliver. In short, customers should be able to see the value and be happy to pay a fair price.
BBT SEPTEMBER/OCTOBER 2015 121
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132