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NEGOTIATED AGREEMENTS Is it time for some new thinking around corporate route deals? Paul Wait of Virgin Atlantic argues that they are no longer the right tool to do the job
Paul Wait GENERAL MANAGER SALES UK AND GLOBAL/ MULTINATIONAL ACCOUNTS, VIRGIN ATLANTIC Paul spent the early seventies through to 1999 at American Express Travel Service. He started out with them in Liverpool then opened offices in Manchester and Aberdeen before moving to London. His most recent position was vice president sales and account management UK/IRE. Since 2000 Paul has been at Virgin Atlantic as general manager sales UK & global/multinational accounts. In his spare time his interests are football, golf, reading and financing five children and a grandson. He describes himself as a young 54.
CORPORATE route deals, or negotiated agreements, have become questionable as an effective tool by which to obtain a fair price in return for volume. There is a high possibility that either one or both of the parties in the agreement end the year not having achieved what they set out to do. If we accept that the marketplace is dynamic and forever changing due to new products and services, additional or less capacity, economic uncertainty, flexible travel policies and unpredictable travel patterns, then the corporate route deal at best is only partially effective and therefore at risk of leading to disappointment and, at worst, conflict. Understandably travel and procure-
“Why aren’t route deals based on projected as opposed to historical trends? Why don't they have seasonal rates?”
ment managers are tasked with obtaining the best value while trying to work within a set of guidelines or rigid budgets. The constant flex in supply and demand makes this a tricky task and with airlines under constant pressure to maximise the value of every seat and drive higher levels of profitability, travel management at the very least will remain 'interesting' for some time to come. But is it time for some fresh and radical thinking even if there are risks attached? The corporate route deal has historically been the method by which both parties in the agreement are guaranteed something – a discounted price for the buyer and volume sectors and revenue for the airline, for example. In the last 18 months, however, predictability and guarantees received a severe shock. Whether it's pensions, savings or mortgage rates, there are many and varied opinions of what the future holds and behaviour has changed to incorporate more shorter and medium-term views. The market not only saw
the usual tactics of reducing the amount of
travel or downgrading it, but also saw the maturity of 'lowest fare on the day' policies whether that was with an airline inside or outside of travel policy. This ultimately sounded the death bell
for the integrity of the route deal which has been under threat on more than one occasion in the past. Suddenly 'commitment' was no longer a valid term because nobody could predict what the future would hold. And then the TMC community had an increased threat to the task of managing a policy based on a long- term contract, becoming more like a consumer agent handling small companies’ business travel where every transaction had to be fought for. While in recent months business travel has certainly been on the rise again, it is wrong to think that this problem (or opportunity) has gone away. The majority of negotiations are based on historical volumes although I doubt many have been done based on the levels of 2009! Many in the industry are calling for transparency and this is certainly an area that would benefit from this. Why aren’t route deals based on projected as opposed to historical trends? Why don’t route deals have seasonal rates (like hotels)? Why aren’t route deals only for five high-demand months in the year instead of a full 12? I’m sure they exist, don’t they? There has never been a more appropriate time for companies, TMCs and airlines to re-assess their
objectives and any concerns they may have about the structure of these agreements. They should be discussed openly before negotiations are embarked upon in order that a fully integrated travel programme has high chances of success for all concerned. Some travel companies in the leisure sector have significantly grown their business travel revenues with companies that don’t have travel policies because they are sold whatever is deemed the most appropriate arrangement for the trip in question. While there may not be a preferred supplier programme in place there is usually a budget per trip that must not be exceeded. While not for one moment am I suggesting that the baby should be thrown out with the bath water, it is clear that some very valuable lessons were learnt last year. It is essential that those lessons are not ignored and we don't just pretend that everything will return to normal. It's time to re-invent and re-imagine
with the large chains and have a much more level playing field. At the same time, this provides a many-to-many distribution platform and the corporate accounts are able to take advantage of better choice and more competitive prices. That would therefore present a win-win scenario for all the players.
12 I THE BUSINESS TRAVEL MAGAZINE
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