Thursday, November 15, 2012
The Mechanics of Booking Business Travel - Part 1
Traveling on business is vital to UKPLC and hopefully a pleasant, or passable experience. It takes people out of their everyday lives and awakens many emotions from pride and planning to disappointment and incredulity. Sometimes all of them. A booking and its associated journey does not just happen and there are a chain of stakeholders involved in every decision. The traveller needs to go to his company and justify the journey. The company usually goes to a TMC (travel agent) to make the booking and the TMC goes to the supplier who provides the end product. Simple? No. Far from it. Each of these players has their own brief, their own methods and, importantly, their own objectives and it is these important elements that few people truly understand. For most travellers it is straightforward. They want to travel at a sensible time, at a very competitive price and they want their tight budget to stretch across the whole year. They also hold a rational view that says why pay for something I can do quickly and cheaply myself. The company wants everything the traveller wants plus a lot more. They want a proper authorisation process and detailed total travel management control of the full booking process plus on-going support for travellers on the move. The TMC wants to do all these things as they depend on the travellers and their employers to pay for their services. They are constantly producing new products and services which they offer, at a price, to their existing and prospective clients. The suppliers? This is the area that has changed the most and the source of greatest ‘misunderstandings’. In the old days they collectively decided to build into their fares a provision for payment to TMCs to cover their expenses. As competition ramped up and new no frills airlines arrived they understandably decided this was a burden they could not carry any more. They set out to change the status quo and now most of the mainstream airlines do not subsidise TMC with commissions. As a result airline fares excluded agency payments and went down and the TMCs looked to their clients to pick up the tab for their cost. This is where the misunderstanding started. Airline costs went down so they were more competitive and they took on their new foe, the no frill carriers. TMCs went to their clients and told them that instead of sharing their commission with them they would now start submitting bills. You see in those days that is what TMCs did. They won clients based on how much commission they were prepared to ‘share’ with corporations. Now they were saying that it would not be subsidising corporate cost by providing a ‘free/profitable’ service but levying fees instead. But never mind because the airlines would be charging less to cover these ‘costs’. Companies had a problem. Travel was relatively low profile as its TMC management was often seen as a profit centre rather than the cost it had become. Many asked their procurement division to make sure they got the best deal out there and meanwhile set about trying to build in this new expense within its budgets. The traveller got a shock. Not only was he being wooed by no frills airlines with big marketing budgets but also being expected to pay a ‘handling’ charge to TMCs who were perceived as being unfriendly to these newcomers. It was not very clear that mainline airline fares had lowered and the value of TMCs were questioned in a much more searching way. Remember what the thinking traveller wanted? I do not think that paying a TMC for services that might not be directly relevant or of value to that person came in to it! What happened next? In my blog next week.