SPOTLIGHT SERIES | TMC SUBSCRIPTION MODELS
about [re-writing] their travel policy or bringing in sustainability initiatives, for example. There’s no transactions there but you’re still working with them and providing value.” The company will adjust the fee as appropriate each year. “We’ve had it both ways, with some companies coming in with lower spend and some with higher spend than they expected. Many companies at the moment struggle to have insight on the size of their programme,” says de Boo. And that is the crux of the matter. A subscription fee has to work for both parties and setting it at the right level is fundamental to that. Moving to the model when there remains uncertainty about future travel volumes is difficult. “Subscription fees work best when a buyer can give assurance as to what their volumes are going to be. Then they can agree the appropriate set up,” says consultant Chris Pouney, who provided this article’s opening line. “Good travel managers know with reasonable assurance where their volumes are going to be because they’re connected to their sales team, their finance team… they know what’s coming up and that is when the model works well.” Travel management companies – and some buyers too – almost unanimously believe the transaction fee model needs shaking up. While they work for some, subscription fees do not appear to be the solution around which the industry will coalesce – at least not until travel volumes stabilise and become more predictable – but then again, perhaps there is no such panacea. This article was first published on businesstravelnewseurope.com in February 2023 as part of the Spotlight Series: Travel management companies report Travellers get the support they need and won’t land a $25 fee if they need to make a change
have a flat annual rate that reflects the value we provide for managing the entire programme which is much more than just allowing travellers to book.” De Boo says the offering, which is utilised by around 60 per cent of its customers, provides simplicity in terms of budgeting and understanding the cost of the travel programme. “Travellers also know they get the support they need and won’t land a $25 fee if they want to make a change,” he says. Ostensibly, it is not too far removed from a management fee, but is not based on a percentage of overall spend. Rather, the annual fee, which can be adjusted up or down, is based on a combination of the number of travellers, overall spend, online adoption and a customer’s particular service needs. “All of that determines the sweetspot,” explains de Boo. “There are subscription models based on license fees or user numbers but if you have some people who book only four times a year and others booking 100 times a year that’s not going to work so well.” The likes of reporting, analytics, reshopping, duty of care procedures and unused ticket management are all wrapped up in the fee. “No shoe fits everyone but I think it works really well for the market we’re in – the mid-market and smaller customers,” says de Boo, who adds the TMC includes the option in RFP responses where it deems it appropriate, “but often we’ve already engaged with the client well before the RFP and the model might be the reason we were invited to participate.” The TMC has been offering the set-up for more than four years and says it better protected it during the pandemic. While the company reduced fees for some customers, it was able to keep many larger clients’ teams “more or less intact”. De Boo explains: “We kept providing all our services. Just because there wasn’t any travel didn’t mean they [customers] didn’t want to talk [about] travel – how to navigate it all, providing information to travellers, looking after those still travelling. And as the pandemic progressed some thought
CWT was perhaps the highest profile TMC to formally introduce a subscription offering, doing so last summer. Customers receive a single, recurring monthly invoice for all products and services they procure from the firm, with the fee based on criteria including forecasted transaction volumes. A group of customers that took part in a pilot of the model over the preceding 12 months said the monthly fee reduced the time their finance teams spent reconciling TMC invoices and helped eliminate hidden fees. Asked for an update on the offering in February this year, CWT says it sees a “continuous uptake” and has onboarded its first client outside the US on the model. It noted the arrangement resonates well with tech clients as it resembles software or cloud-based pricing models. Travel Planet also offers a subscription- based pricing model but says the traditional transaction model remains its most popular offering. “We have less than five per cent of clients on it and I don’t see it growing by much,” says the TMC’s UK chief executive James Diaz. It offers monthly, quarterly or annual billing and expects those on the subscription model to have upwards of 70 per cent online adoption. “We price it based on the expected number of trips per month – not how many travellers they have or their total spend. That is then their bucket. If a customer’s number of trips varies widely from that bucket we’ll take a look at recalculating it. If it’s within, say, ten to 15 per cent we probably wouldn’t do anything about it but anything more and we’d probably sit down with them and look at which way the fee needs to move.” A DIFFERENT TAKE Some travel management companies have found success with different versions of subscription pricing. “Business travel has traditionally been completely transaction fee-based but as a TMC the booking is only a part of what we do and it’s not the part where we attach the most value,” says Geert de Boo, vp global business travel, JTB Business Travel. “With Experience Zero, we
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businesstravelnewseurope.com | SPRING 2023
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