T RAVEL management companies are feeling the pressure. A Covid- induced slump in customer revenue was followed by an ongoing battle for talent, while content fragmentation and shrinking supplier revenues are taking their toll. The challenging circumstances have reignited conversations around TMCs’ remuneration models – subscription fees are not necessarily the answer (see p14-16) – and the proliferation of fees and charges. Meanwhile, some buyers continue to call for total transparency in a world in which TMCs earn their living from conflicting revenue streams. “TMCs are in a difficult position right now and that is leading to a lot of new ideas and fees,” says Martin Warner, principal at MW Travel Consultancy and former executive vice president, market strategy and segmentation at CWT. Proving problematic for many TMCs, he says, are declining GDS incentives and an “acceleration in supplier revenue decline”, together with a talent shortage and, as a consequence of that, higher labour costs. Lastly, he says, online booking adoption rates have not typically returned to pre- Covid levels – meaning more human intervention is required – and that bookings are still taking longer and require more assistance. Indeed, last summer the Business Travel Association said the proportion of bookings that required assistance or changes had gone from around one in ten to one in four. “Some TMCs are trying to increase their fees or introduce new fees and some are talking with their customers and working out how they might consume their services differently now,” says Warner. And with content becoming increasingly fragmented, there are costs associated with bringing it all back together. “TMCs are embracing more and more non-GDS technology… and I think there’s an
argument that supports the TMC’s justification of more cost with new or increased fees,” he says. “But then how long as a customer would I be prepared to tolerate a TMC’s inefficiency to get hold of that content for me?” Meanwhile, as supplier revenues fall, the balance of TMCs’ revenue is moving towards the customer side. Speaking in December, BCD Travel’s chief executive John Snyder estimated that the TMC’s revenue was “hovering around that 50/50 mix of supplier versus customer revenue”. He went on to spell out the shift: “If I had to predict, and given where some of the changes are evolving in the industry, I think the customer revenue piece is going to grow, and the supplier [revenue] is going to stabilise or neutralise where it’s at. So I think the percentages are going to move over time. We’ve got to get more revenue from the customer at the end of the day. So I think we will see that start to tip a little bit over time.” FEELING THE HEAT Those TMCs that increased fees or introduced entirely new ones during the pandemic felt the heat from customers – even if they could see the rationale as TMCs carried out extensive work for no reward. Some argue that corporates are themselves partly to blame, having driven down transaction fees long before the pandemic took TMCs’ revenue away. “I think there’s an unwillingness on the part of some companies to accept that there is a price to pay for having the services that they want,” says Margaret Birse, travel practice lead at Wolfe Procurement, and former global travel director at Serco. “Some [corporates] try to push fees down to the point where it creates the wrong behaviour on the part of the TMC. We completely understand the desire to get the
best possible fees, however, the fee cost is small compared to the overall travel cost and we remain focused on ensuring that the cost and service are balanced for programme optimisation.” Guy Snelgar, business travel director at the Advantage Travel Partnership, agrees. “In a model where corporate buyers are looking to achieve the absolute minimum cost for each different transaction type, that is inevitably going to lead to a complex fee structure to match.” He continues: “For example, if a booking fee has been sliced so thinly on a product that might not deliver any commission back to the TMC, then the removal of a GDS incentive, or additional costs incurred from having to manually process changes to the booking, can make that fee unsustainable without a surcharge or increase.” How long as a customer would I be prepared to tolerate a TMC’s inefficiency to get hold of content?
19
SPRING 2023 | businesstravelnewseurope.com
Made with FlippingBook Online newsletter maker