Business travel agents have spent a lot of time and effort during the past decade or so justifying their existence. To a large degree, the agents have been responding to the challenge of the internet and the threat that customers would desert them in favour of online booking channels – or simply do it themselves.
The erosion and, in many cases, wiping out of commissions paid by airlines changed the way travel agents were seen and how they perceived themselves. No longer simply agents of suppliers they began to call themselves travel management companies (TMCs), and the commission was replaced by fees to clients.
A good thing, too, some said, because it would concentrate minds on the value of services being provided but it also forced the agents to demonstrate that savings passed on to customers were significantly more than the fees they charged. This in turn spurred them to develop new services, such as providing companies with increasingly sophisticated information on the travel habits and expenses of their employees.
Have the TMCs succeeded in making the case? The answer is a qualified yes. Mike Platt, group industry affairs director of HRG (Hogg Robinson Group) claims the cost of using a TMC is “no more than 5 per cent” of corporate travel expenditure but can reduce overall spending by as much as 30 per cent.
About 20 per cent comes in the form of air fare savings, partly by ensuring that travellers stick to company policy, flying whenever possible on airlines with which the company has negotiated ticket discounts – and sometimes added value – in return for providing those carriers with certain levels of business. Much of the other 10 per cent, says Mr Platt, is “all the bits round the back”, such as accounting and credit control.
“We have won the major battle in that companies have been over us with fine tooth combs and we have persuaded them of the value we offer. The next battle is to persuade the travellers, who don’t see those benefits. When they are asked to pay they don’t see the bigger picture. They see a low fare they can book direct online and ask why they are paying us extra. The challenge for us and their employers is to get them to buy in – otherwise they will be more tempted to book outside travel policy.” He readily concedes that HRG, which earlier this year broke away from BCD Holdings, the joint shareholder in BTI UK (the name under which Hogg Robinson’s business travel arm previously operated), needs to keep reinventing itself. It has been working towards providing analyses of total trip costs, so that travel managers would be able to review all the implications, say, of a traveller’s decision to book a low-cost flight – from its impact on targets agreed with a preferred airline to the sometimes unconsidered cost of huge taxi fares from a secondary airport miles from town.
“We see ourselves more as a provider of various corporate services rather than purely making bookings. We are doing a lot of work helping clients to deal with anything from a flu pandemic to reducing the carbon emissions caused by travel.”
The attacks of September 11 2001 underlined the importance to companies of being able to locate their staff in emergency. TMCs have taken on this task.
American Express Business Travel, for example, has launched TrackPoint, a web-based tool which enables corporate travel managers to track down staff in the event of such disasters. It is already available to customers in North America and Europe, and is being piloted in the Asia-Pacific region.
Security delays at US airports have prompted efforts to spare frequent flyers the worst effects. BRD Travel, for example, is planning to offer US customers discounted access to the Transport Security Administration’s registered traveller programme, which will be operated by the private sector.
With companies under increasing pressure to limit their contributions to global warming. TMCs are either already providing, or planning to provide them with assessments of carbon emissions. The global distribution system (GDS) operator, Sabre has developed a product that will help them do this. Each report is divided into four sections detailing the number of air segments (single flights) booked over a given period, distance flown, the amount of fuel burned expressed in kilograms and litres, the quantity of CO2 produced as a result, and a breakdown of the other greenhouse gases produced.
All this activity appears to be paying dividends. Figures from the UK’s Guild of Travel Management Companies indicate an overall increase in trips organised by its members over the past two years. Total transactions with suppliers – airlines, rail operators, hotels a car rental companies – increased from about 10.2m at the end of March 2004 to just over 11m a year later and some 12.2m by the same date this year. “It seems”, says the Guild’s chief executive Philip Carlisle, “that the business of business travel is quite healthy”.
A survey published by Carlson Wagonlit Travel painted a similarly optimistic picture in the short term. It showed that in North America and the Asia-Pacific, 63 per cent and 59 per cent of corporate travel managers expected their company’s expenditure on trips to rise this year, while only 8 per cent and 11 per cent believed it would decrease. Europeans were a little less buoyant, with 49 per cent anticipating an increase and 15 per cent fearing a drop. In all cases, the remainder believed spending would match that in 2005.
In the longer term, however, TMCs may still have some defending to do. A significant majority of the managers questioned by CWT (87 per cent, 75 per cent and 76 per cent respectively) thought it “very” or “somewhat” likely that travel would be increasingly supplanted by video conferencing over the next five years. Self-booking tools, which can be primed to establish travel policy, may persuade some companies whose staff make predominantly straightforward bookings, to eliminate the middleman.
If the international or global TMCs, which are able to continually invest in new systems and spread their reach to countries with high business travel potential, such as China, can overcome such problems by offering such a huge range of services, what of the small to medium size companies?
One way is join a consortium such as the UK’s Advantage group, whose members’ turnover ranges from about £4m to £30m a year. Their clients are generally too small to attract discounts from suppliers, so the group uses its combined clout to do it centrally, negotiating air fares, for example. It also offers a centralised selfbooking tool to which members can offer their customers access. “About 5 per cent of members use it at present – but in five years time I can see that being 100 per cent”, says Norman Gage, Advantage director of business travel.
TMCs big and small may benefit increasingly from competition between a proliferation of fare levels for the same flight. Leaving aside any advance purchase or off-peak bargains, says Mike Platt, the price could differ depending on whether it is booked via the airline’s website, through a direct deal between the carrier and the TMC, via one of the new online search engines or even on which GDS is used.
“Potentially you could have as many as five different channels all offering a different fares for the same seat on the same journey,” he says. “It adds to confusion but it also adds to our usefulness. Complexity is our friend – because we bring simplicity from it.”