BLOG COMMENT - TMCs (Agents)

The vast majority of TMCs (even the larger ones) still rely heavily on supplier income despite what they may say. Could you survive and thrive on what you pay them? I don't think so. There are ways and means now to get the definition of these 'incentives' changed so they are not included in any corporate deal. Agents have needed to do this in order to fund central and associated costs plus earn sufficient ROI.

BLOG COMMENT - Government Buying

I wonder why it is that Governments buy so very badly? Is it that they want to be so straightforward and politically correct? Or is it that they know no other way to buy? I played a major part in winning an enormous UK government contract and I still persuade myself that I do not want the answer. I am as near as you can get into being in denial as you can without being blatant about it and it makes me feel bad. The process is difficult. In fact, when you get the invitation, the first thing you feel urged to do is throw it in the bin. Why? Because it is so frighteningly 'open' that it discourages one from bidding in case you expose all your benefits to competitor scrutiny. So bad that you fear that following such a track will lead to ultimate demise! You see you have to bite the bullet and bid. Yes, they have processes and yes, they do have disclosure laws but YES, there are ways around this. Governments are complex and very political. they need to be seen to be following processes despite their fear of ridicule, which is why you need to feed them what they need rather than what they want. So bid with impunity. Just provide with integrity. Then you will be OK.

BLOG COMMENT - Buyers and airlines

The Bald airline facts about business travel. 1/ In the main companies will not mandate travel i.e. they will not say ‘you must use this airline’. They will ask you to but very rarely will they mandate it. It is not in global company nature to do so. 2/ It is practically unheard of for corporations to insist (and follow through) on their travellers using their loyalty miles for business purposes. This has a bearing on fact no 1. 3/ If a corporation is told by a national airline that they no longer have a deal then at least half of their travellers will still fly on that airline. 4/ Buyers may bluster and dictate to airlines but they seem unable to do so in their own business. Procurement is very low in the political pecking chain of any corporation. Internally people may endorse procurement tacitly but not authoratively. 5/ Whilst this situation remains it will be very difficult and perhaps foolhardy to direct connect with just one major airline. I wonder how long it will take before somebody calls the buyers bluff.

A Travel Policy’s Biggest Barrier

What is the biggest issue that stands between a policy and its successful delivery? Is it a lack of knowledge or ability in order to create one? Is it uncooperative or unable suppliers or intermediaries? Is it poor uptake or availability of appropriate technology systems? Or is it simply that end users either cannot or will not comply with edicts and have ways of getting around them?

Depending on your own experiences you could say one, some or all of the above but I think you might be missing something even more important. What is this something? It is what I call the three ‘P’s of internal Politics, Procedures and Processes and these have nothing to do with suppliers, intermediaries or individual travellers.

I have seen so many companies invest huge resources and money to create detailed and potentially rewarding travel programmes only to waste much benefit due to the three ‘P’s. Many of them choose not to identify this as the cause as it would not be considered ‘Politically’ correct to do so especially as the issues usually start at board level. A shame really as board level is where any rectifying needs to start.

So what am I actually saying? I believe that internal politics, inflexible procedures and lack of communication processes are the biggest road blocks when it comes to the delivery of a negotiated and delivered travel programme. I am also saying that non compliant travellers are not the biggest villains, it is more likely the messages they are receiving (or in some cases not) from much higher up the business chain of command.

Taking a closer look at any company’s board you can see why problems could occur. Rather like a herd of elephants you have the strong patriarch and around him a chain of command with different interests and abilities. Again, like any herd there is a fair amount of head butting and scheming going on. They all represent different interests from finance to sales, operations to procurement and some hold more sway than others.

Eventually these ‘band of brothers’ agree a policy. But do they really? You can be certain that there will be winners and losers but when it comes to something as emotive as travel they seem less inclined to feed their solidarity down the line. In some areas there can be a visible lack of zeal and that is all it takes to undermine a policy. Particularly when there are so many practical ways of getting around it.

Many companies end up with a policy that has been presented by procurement who are by no means top dog (or elephant!) at the board table, which is not satisfactory to all and then they have to communicate it to a sometimes incredulous work force. This is where we come to the second closely linked ‘P’ of procedures. Who is allowed to say what to whom and what are the ‘P’ for processes for doing it. How much can you or can’t you say about your decisions? How much should you justify them? How much should you mandate them?

Let us say those wise old elephants have at least given tacit support to the policy. Who is going to sponsor it and keep on the agenda as the process develops? Who is going to go to senior directors and ask them to pull their folk into line? How are those messages going to transmit through a company that, possibly, apart from payroll has no appropriate method for these types of communication?

My message to corporations is a simple one. Sort yourself out at the top. Put into place procedures and processes and only then consider the creation of a policy that is going to be committed to and enforced across the whole employee base. This will save you more than any supplier or intermediary will.

CONTENTS

(To locate entries scroll down this page or through appropriate month shown under 'Blog Archive' on right hand column)


COMMENT

FEB A Travel Policy’s Biggest Barrier
JAN Low Cost Airlines - honeymoon Over?
JAN Travel Supply Chain Intelligence
JAN ASK me a QUESTION
DEC A Christmas Message
NOV A London Airport Solution?
SEP So Will Airlines go Direct Connect or Not?
SEP A Distribution Prediction
AUG Do we need another Industry Association?
JUL What the Customer Really Wants? – Part 1
JUL Who is the customer around here anyway?
APR Can TMC Brain Power Still Save Money?
MAR Combined Airline Deals – Good or Bad?
MAR Travel Evolution is not just about Technology – Right?
FEB Travel Services – Buying is just the beginning.
FEB Anybody Understand the Corporate Hotel Market?
FEB Getting back to basics with business travellers
JAN What happens when TMCs become GDS
JAN Better to never have something than see it taken away?
JAN The Evolution of Air Distribution – The Story so Far
JAN What does a hotel brand really mean?
JAN Direct Connect – The first significant skirmish in a long campaign.
DEC Loyalty Cards – What value?
DEC Christmas Distribution Story - 2
DEC A Christmas Distribution Story
DEC You don’t get ‘owt for nowt’ in travel distribution.
NOV BA dispute – Pride and promises
NOV GDS/Airline issue. Coming to a head?
OCT A Take on AA Distribution Issues
SEP Data Provision - Sounds Easy?
SEP Just how much would you Disclose?
AUG Can TMCs Really Influence Business?-Switch selling...
AUG Travel Compliance – So very easy.
AUG Can TMCs Really Influence Business? – Deals
AUG Can TMCs really influence business?
JUL Why small is becoming big in Business Travel.
JUN A different approach to TMC negotiations
JUN Global Travel Programmes – Delivering?
MAY Airlines and Travel Management Companies (TMC)
APR Airline marriages? Call for Jerry Springer.
APR Travel and the Environment
MAR Do academics understand the real world
MAR Is Government Buying Wisely?
MAR Who should buy travel? (Part two)
FEB Who should buy travel? (Part one)

Low Cost Airlines - Honeymoon Over?

The other day I spoke to a friend who had always been a massive supporter of European low cost/no frills airlines. He looked pretty annoyed and moaned about the fact that many of the deals that used to be around no longer exist. He also could not understand why he now has to do a lot of the work for them such as online check-in etc yet pay for almost every extra you can think of. Why, he said should I do all the work yet more often than not have to pay an administration fee.

It seems to me that more people than just my friend are falling out of love with these airlines. One person put it quite emotionally by saying he felt ‘betrayed by these so called ‘people's champions’. Having been in the business for many years I was surprised that folk could believe that these airlines were working in anything else but self interest but I guess if one looks at some of their past marketing and newspaper publicity one might understand.

I have my own views on this sector of the market and, as he asked my opinion I gave it. This is what I said:

OK, this is how I think the low cost airline model works:
They start a route on the stack them high and sell them cheap basis. They cut their costs to the bone and undercut the prices of any competition from the big boys. This works for a year or two until they have got hold of as many passengers they can on that route. Then their problems start.

You see, like all business they need to generate increased year on year profits but where is that increase going to come from? After all, their costs have already been stripped to the basics. They struggle to increase passenger numbers because they have already cornered their share of the market. Also this share is being attacked by the major carriers who have adjusted their prices to compete on the same ‘net plus extras’ model.

So the only way to please their investors is to enter new markets (they are already established in the best ones) and get more money from existing passengers. How do you get more money from them? Well you check your stats, booking patterns, peak flights and increase fares on those services that are popular (good timings etc) up to the highest level they think they can get away with. Then they look elsewhere amongst ancillary costs such as credit card fees, airport service 'frills' and start charging for them. When the authorities catch up with those they feel unacceptable they move these charges to a grey area described as 'admin fees'. On top of this they try to sell their customers non airline services like car hire and hotels and then go to these suppliers and negotiate special commissions for giving them business.

So the issue is that they have to keep growing in order to keep their share price up. Great in the old days but hard now they are established. The only good thing about this is that, as a result prices are finally becoming much more transparent so you can choose what you are going to get i.e. you can pick poor timings on less popular routes and still pay a low fare. As mentioned earlier these companies sell through big time marketing campaigns which mean they will still offer the occasional mega headline grabbing deals here and there.
The thing to remember is these airlines work on the basis that they do not want you to pay less than the maximum you are prepared to spend and they are finding out what that sum is in all sorts of clever ways. One could argue they are more pirates than charities!

Travel Supply Chain Intelligence

It has never ceased to surprise me how little time the chain studies its partners, clients and perceived competitors. They are all intertwined in activities right the way from the traveller to the front end supplier yet history demonstrates that they do not understand the people they depend on or those they want to replace.

A good example would be say an airline that wants to replace a TMC or GDS which is quite topical at the moment. Now the black and white capability is there in the shape of enabling technology but the real world is in colour and of different shades and complexity. Technology systems are the beginning of the road not the end of it, an enabler not the solution. But some folks just plough on anyway and seem genuinely shocked at the push back

I am convinced this happens because the players have not set the right priorities into understanding all of the things the other components do. Instead they blindly follow their ‘ideal scenario’ strategy and attempt to bludgeon it into the marketplace. Sometimes this just might work in parts but the risk of fall-out is great with the potential of lasting commercial or competitive damage. They should also realise by now that the other members in the chain are anticipating their moves and building detours and opportunities around them.

These thoughts are not here to try and dissuade the chain from evolving and diversifying, after all that is progress. What I am saying instead is that this industry needs to understand itself and its component parts a lot clearer. For example, has any airline ever taken the time (and at the right level) to examine what it’s ‘partners’ do in detail? To sit down and better evaluate the chain reaction of planned strategy and thereby have answers to the issues that will surely arise? They might even find ways that benefit, or at least soften the blow to the rest of the industry.

The way some current players go about change is simply not savvy. They know what they want and charge at it, usually with disappointing results. A bit more thought, understanding, broader knowledge and early dialogue just might form a better basis for progress. And for heavens sake remember that the world has multi markets, technologies languages and cultures. Head offices in their ‘ivory towers’ in the USA, UK, Germany and The Far East can pontificate and plan as much as they like but to little avail if their decisions simply are unworkable elsewhere. Instead they can do major damage.

So my plea is to stop, think, research a great deal, understand the players/competitors better and look way beyond the first hurdle and towards the end-game. I still maintain that the major industry bodies should be driving this understanding. Perhaps if they had less back slapping, money making, selling type conferences and more distribution, supply chain summits they would make a bigger contribution.