Prevailing orthodoxy dictates that global travel programs consolidate with global service providers, especially travel management companies. However, evidence suggests this to an extent may be changing. Hogg Robinson Group, for example, shared with The Beat its estimate that 30 percent of requests for proposals for global TMC services end instead with regional selections. HRG group commercial director Stewart Harvey said client sectors in which he has observed this trend include automotive, fast-moving consumer goods, technology, engineering and finance.
Other sources around the industry said they are seeing some buyers shift away from global TMC arrangements, opting instead for a best-in-region approach. Reasons include mounting skepticism that a single TMC consistently can offer excellent worldwide service as travel programs cover a growing number of markets; devolution of decision-making within global companies to regional organizations; improving technology that enables one of a travel program's TMCs to serve as a primary aggregator of data from the others; and a rebalancing of power to employee need from employer need.
It's not a universal observation. "We're not seeing that," said Vicky Fernandez, Carlson Wagonlit Travel senior vice president for Benelux and EMEA product marketing. "In general, companies that procure centrally and globally don't want to procure regionally, giving them more than one service level agreement to manage."
Nomura, though, is one company which this year moved to a regional arrangement. The financial services firm decided not to conduct a new global TMC RFP after the three-year contract with its global provider ended. "We've opted for a separate service in different parts of the world," said head of EMEA corporate travel Carol Neil. "We found, especially in Asia, that a global TMC could not meet all the service requirement idiosyncrasies of some countries. We decided using a local TMC would provide a more high-touch service. We didn't think we could find a TMC that is sufficiently set up for a true global offering, either in terms of technology or data."
Many other travel program leaders doubt that any TMC truly can deliver globally. This skepticism was a crucial factor in a decision by engineering conglomerate ABB to choose regional over global when recently evaluating both options. "TMCs don't deliver the same services in each region. They don't have the same processes," said Michael Flueck, global category leader for travel and meetings. Flueck acknowledged that using different TMCs in different regions requires data consolidation either through an internal system or a third-party provider, but he said that if his company used a single TMC, "I would still have problems. Data is a weak point for them." Flueck blamed TMCs' use of partners and franchisees—rather than wholly owned offices in many markets—which use different back-office and mid-office systems.
Even where local operations are wholly owned, technology platforms may not align.
"One would think that larger agencies would invest in backbone technology that would give them that scale," said Steven Mandelbaum, vice president of information systems at The Advisory Board Co. "But as it turns out, they are not in a better position to serve anyone than a smaller agency. It's this bizarre circumstance, because they are all using someone else's technology in different ways for different people. TMCs are beholden to their suppliers. Nobody has real core technology that allows them to control their platform."
Volvo Group manages travel spending across 25 countries. It used a global TMC until 10 years ago, and successive reviews have not changed the vehicle and equipment manufacturer's decision to go market by market. "One of the common questions in internal meetings regarding travel is, 'Why don't we have one global TMC?' " said strategic purchasing manager Stephan Hylander. "We have analyzed it back and forth but it comes to the same answer, and I see the same trend among other companies.
"There are two reasons," Hylander continued. "The first is that TMCs have one global brand but different performance and service levels in different countries. They do not act in a harmonized way. Even the financial offer is made country by country, and [the pricing] in a country where we have less volume does not reflect the fact we have more volume with the same TMC elsewhere.
"The second and most important reason is that we do not want to be dependent on one supplier," he said. "We want the freedom to switch to another TMC if it is not performing. The value of a diversified TMC strategy is greater than the value of a potentially more efficient data collection process."
Others shared similar sentiments.
"From the RFP all the way through, each country is treated as a separate entity," said Sapient global travel and client experience director Michelle de Costa. "So even though it's a multinational RFP or a global RFP, each company has separate pricing. It's like doing—in my case—14 different RFPs. When you are being serviced by that agency, if you are based in Germany everything you do has to go back to Germany—if you want to change, etc. Everything in the lifecycle of that traveler goes back. We bring in people from India to the U.S. for six months or a year; they're doing a lot of travel in the United States and it doesn't make sense to go back to India, so we build a secondary profile for them. There's just a lot of mechanics to making it work; none of the TMCs are truly global."
Noting that agencies' mid- and back-office tools often differ by country, Reed Elsevier director of global travel services Jim Sisco said, "It's mind-boggling the limitations that are put on us in certain countries even though we contract globally."
CWT's Fernandez rejected the notion that global TMCs provide second-best local service delivery. "Providing a global travel program doesn't mean to say we offer the same everywhere, but it does mean we can offer service through 350 offices," she said. "You need to understand how to act locally but that isn't in contradiction with being a global TMC." Fernandez also argued that global TMCs "have the ability to attract and develop highly skilled talent" and appeal to multinational customers because of their financial solidity.
Operations in about 45 of the 150-odd countries in which CWT is present are wholly owned, but Fernandez said lack of total ownership is no obstacle to consistent service. "We manage our partners with strict contractual agreements," she said. "It is in their interest to comply so they can continue to receive CWT's business. Data reporting is the same wherever you are with CWT."
Both HRG and Radius Travel take a more nuanced view, arguing that diversified technology requirements in different geographies have led some clients to reconsider whether a single TMC is necessary. "Some clients are deciding they don't need to strive for uniformity by having the same supplier in every market because there is no uniformity," Harvey said. He noted that a trend towards TMC globalization started in earnest about a decade ago but has tacked back toward regional awards during the past two years.
Radius head of global sales for EMEA and Asia/Pacific Rafael Gonzalez cited China, where, he said, 80 percent of travel is domestic and TMCs therefore must meet the unique marketplace requirements. Bookings are not made through Western GDSs and, thanks to a simpler distribution infrastructure, the country is forging ahead of the West when it comes to mobile reservations. "Response times are one to five seconds, but if you can't offer technology that quick, travelers won't go through that channel," said Gonzalez. "They are ahead of the game in China, so if Asia is a key driver for your travel program, then those kinds of requirements at a local level really have to be taken into consideration."
Many have cited the extension of managed travel programs into Asia, a far more diverse region than Europe or North America, as a primary reason for the trend towards regional TMC choices.
Paradoxically, true travel program globalization seems to be pushing some companies towards decentralized selection of service providers. "Five years ago, we focused on our top 10 markets, covering 70 percent of our spend, but today senior management wants 100 percent covered," said ABB's Flueck. "Especially in Asia, you need to get buy-in from countries which weren't managed in the past. If you select at a regional level, you get a much stronger buy-in."
Gonzalez agreed. "Historically, [you only had to worry about] one key contact, 90 percent of the time based in the U.S., but the growth of these other markets means you have to take the other regions into greater consideration," he said. "Regionally based travel managers are having more of a say in the TMC selection process."
Likewise, Harvey said that "spend is shifting toward areas where companies are expecting higher future growth. That means companies are devolving to regional power bases, and that means senior management is more likely to be on the ground in the regions. Travel management is following that same structure."
Alongside this geographic decentralization of power, some travel professionals discern a related deprioritization of the global procurement function in favor of the traveler. Balancing the requirements of employer and employee long has been arguably the central dilemma of professional travel management, but perhaps that balance is tipping more toward the employee at present, owing in part to the consumerization trend and rapid acceleration of mobile technology.
Some, including Areka Consulting U.K. director Carol Randall, believe that recalibration is resulting in more localized decision-making and is one of the reasons several of her clients moved to regional TMC contracts from global. "Travelers are demanding more, and they are now regarded internally as customers," she said. "The role of travel managers is becoming more to give travelers what they want, otherwise they fear they will lose them out of the program."
If global TMC selection really is falling out of favor, where does that leave those TMCs that have gone to great lengths to market themselves as global service providers? "It could be a threat, but I see it as an opportunity," said HRG's Harvey. "Half of our top 20 clients started with us in one country. We have to park the idealism and PR sales message and adjust to the regionalization that is becoming part of our clients' culture rather than the globalization that is reflective of TMCs' aspirations."