In my last two pieces on this subject
I explained that airline suppliers still incentivise travel management companies in the belief that this will bring them greater volume and share despite the inroads they themselves have made direct with the corporate sector. Also because some fear what they may lose if they don't as they get denied access to TMC bookers and account managers if they are not "in the programme." I also explained how the shape of these deals has changed in order to react to the removal of commissions and subsequent new style management fee and transaction fee contracts.
[more]But the real cruncher is, can TMCs really move their business around between airlines and, if so, what impact could this have on their clients? Over the next few paragraphs I will give my honest opinion on this vexing subject and hopefully come up with a few things for you to consider along the way. Like all responses to difficult questions the answer can be ambiguous as there are so many different TMCs with varying degrees of ability and strategy so I will focus on what I see as the more professional of the grouping.
Obviously the choice of supplier is by no means only dependent on the whims of the TMC. The corporations have deals themselves that they expect their TMC to support and then we have the traveller themselves who sometimes ignore both. In fact the travellers also have their own "deals" with airlines known as frequent flyer points, upgrades, and lounge access to name a few. However the power to influence travel choices by the TMCs is growing as the market changes and they become more of an outsourced arm of their customers. Ironically many of the actions taken by airlines to remove some of the "rewards" they paid to TMCs (commissions etc) is creating an increase in their ability to influence their business.
Getting down to basics here are just some of the ways TMCs can and are moving business.
a) The SME market mainly buys on price and has few direct deals of their own therefore the TMC can choose which suppliers and fares to put towards them.
b) The arrival of online booking tools is giving TMCs a greater ability to select what to promote and exclude those they do not.
c) There are still surprisingly many people out there that seek advice and recommendation about airlines and their services and the TMCs can control what their people say far better than they used to. If a supplier is denied access to bookers then what chance do they have?
d) TMC account managers play a far bigger (sometimes unique) part in what supplier goes into their client's programme. By working closely with a partner airline they can ensure that they offer the best package of benefits. This should end up in a win/win situation except the supplier ends up having to dig deeper in their pockets to reward all parties.
e) Corporations tend to pick two suppliers on their main routes. For example on the UK/USA sector it is most unusual not to have a two carrier policy to keep both sides of the Atlantic happy. This gives the TMC a superb opportunity to switch sell playing one airline off against the other if they choose to do so. And all this within policy.
f) Another growing area for flexing and switching is unbundling of fares. This creates an opportunity for a savvy TMC to translate true costs of journey in a proactive and rewarding way. The more airlines complicate things the more opportunities arise for the middle man.
g) As mentioned in my previous piece the top TMCs are developing their own platforms so they can choose what fares and services find their way to staff, booking screens and self booking tools. This kind of dynamic pricing will create such a sea change in TMC control and selling ability that airlines may have to think again about their distribution strategies.
h) The decision by many corporations to allow their travellers to ignore set policy and choose best fare on the day provides a further opportunity.
In conclusion I am certain that TMCs can influence business and more than ever before. I would however add that I do not think this should be too worrying for corporations. Yes, TMCs do get incentivised by airlines but hey, if they weren't you would be paying more so I suggest that "sleeping dog" should be left to lie. After all you still hold the ace card in that the principal way to move business is to offer the best price and product and no TMC would be daft enough to forget that. In the past one could move like for like business but now it has to be cost justified and done with the knowledge of the corporation who still calls the shots.
I hope you found this interesting or at least thought provoking. I plan to write a further summary on where I think all this is going. I think you will be surprised by some of it!This post was republished with permission from the blog of former managing director of HRG UK Mike Platt