HRS, Others Respond to Commentary in The Beat

HRS today offered a response to my commentary published last week (and repeated below) criticizing the online hotel booking company for skewing data to slam travel management companies. Two other readers responded more positively ...

"We read with some interest your comments on the HRS UK Companies Business Travel Report 2008. We understand that you are commenting from a US perspective but I wanted to draw your attention to the fact that this was solely a local UK report attempting to identify trends in the UK marketplace. The issues in this country are, in our opinion, very different because of the fragmentation of the distribution channels primarily for hotels in this country. Our clients are always telling us that their TMC does not provide them with electronic access to non GDS internet content, hence the comments. We strongly challenge your view that agents are embracing the Internet when all our evidence suggests that issues such as override income from preferred hotel suppliers are driving the choice offered to the client by many TMCs. We do accept that many TMCs are embracing new technology but the legacy commercial agreements in place for the larger TMCs does mean that this is a difficult transition for some agencies to make.

"In fact, rather than being anti-TMC which is the way the comments were interpreted, we work closely with a number of forward thinking TMCs who clearly see value in extending the range of hotels available to their corporate client base. We are pleased to be leading the debate questioning the way we deal with business travel and asking the questions that corporates should all be asking of their agents. For the TMCs to have to demonstrate their true value to their clients is not always a bad thing."

~ HRS commercial director Grant Appleton

"Thank you so much for highlighting the glaring inconsistencies concerning the conclusions reached in the HRS UK survey. I hesitated to dignify or draw attention to it by initiating a reply stating the obvious discrepancies in its analysis and I am therefore grateful that you have done so. It has to be a concern when a relatively small UK-centric organisation can put out such potentially misleading information into the marketplace. As an example, HRG in the UK books well over 200,000 hotel bed nights a year. This number is growing as we see the hotel market vital to the provision of a full travel management service. It is also higher than almost any corporate hotel booking agency in Europe."

~ HRG group industry affairs director Mike Platt

"Kudos on your riposte to the HRS UK survey. It has the rare distinction of being both analytically and politically correct. My career focuses on extracting the greatest value possible from TMCs, but the value exists."

~ TRW Travel Consulting's Tom Wilkinson

Previously published:

COMMENT: HRS UK Surveys Helping No One

The Beat ~ a travel business newsletter
New York City
2/6/08 5:22 PM

Does anyone despise travel agents more than European online hotel booker Hotel Reservaton Service? The company for the second consecutive year has published survey results that its executives think prove travel management consultants (sic) are "losing ground" to "specialist agencies," fleecing their corporate clients and facing extinction. The clients, meanwhile, are supposedly apathetic and wasteful.

The travel management companies' demise has of course been wrongly predicted, over and over, for longer than HRS has been producing polls on the topic. There's an argument to be made that misinformation should be ignored rather than spread, but longtime readers know The Beat has a tradition of helping them fight the hype. Isolated in a press release, the HRS announcement could be harmless. But after it was picked up by multiple publications, mainly in Britain, the CFO or CPO in your company or at your client may today be asking, "For what do we need a travel management company?"

HRS is asking the same question, no doubt because it prefers to offer its own service directly to business travelers and their companies. That self-interest notwithstanding, no question should be taboo. It's just frustrating to travel professionals when claims and questions about their livelihoods are so ill informed. One would think that also harms the reputation of the information's source--in this case, HRS.

HRS does raise some interesting questions, but its interpretation of the results (assuming those numbers are to be believed) are so far off the mark that the company appears to be over its head in commenting about travel management. For its survey, HRS engaged Pulse Research, which in November and December "contacted 300 businesses," including 50 large companies and 250 additional firms with more than 200 people.

The company's resulting press release headline stated that, "TMCs lose ground to specialist agencies in the battle for business travel." This is supported by a reduction to 47 percent from 61 percent a year earlier in the share of respondents whose firms use "a single agent to book their corporate travel." The rest either "don't use an agent" or use "a variety of different specialists." HRS noted that the reduction was most pronounced among the larger companies--which are exactly the types of firms that are more likely to have multiple "agents" anyway--especially as they grow multinationally. While it is rare to find a large corporation that uses one single agency around the world, multiple agencies or TMCs was evidently not an option in the survey.

Those that use a "single agent," according to HRS, are "driving management and transaction fees down, ensuring that TMCs are made to work harder for their commissions." This is a flawed statement, as fees can drop for a variety of reasons, not the least of which is business traveler use of self-booking tools. Once TMCs are set up to support it (and most are), self-booking does not necessarily require more work or cost.

"It is likely this is being driven by the pressure of the Internet and the no- or low-cost options now available to corporates and consumers alike," HRS stated. Fair enough. But if HRS officials are aware that TMCs also offer "Internet" options, they didn't present their survey as though they knew that.

One question that resulted in key findings supporting the firm's positions asked respondents if their companies book travel "centrally" or "individually." Since 71 percent of the larger firms allow "individuals and departments to organize their own travel," HRS suggested, "it seems that increasingly companies are decentralizing their procurement departments and handing travel budgets to individuals or teams." But that question and its answers do not lead to that conclusion at all. It could simply mean that firms have expanded the use of self-service reservations tools, which, if anything, help centralize--rather than the opposite.

HRS also drew awfully flawed conclusions from a question about travel policy. "One in three U.K. companies admits not having reviewed company travel policy for at least three years or have no idea when it was last reviewed--an 8 percent increase on last year," the company found. But half of those "one in three" said they did not know when policy was reviewed--hardly an indication that those companies are "apathetic," as HRS stated, about reviewing policy. The share of respondents who said their firms have not reviewed policy within three years was under 10 percent, while 65 percent said they had reviewed policy within the past two years.

Frequent policy reviews can be seen as a best practice, but not doing so should not, as HRS suggested, lead companies to consider dumping travel policies in favor of allowing travelers to "compare as many competitively priced deals as possible online." There may be a case for such spot buying, but HRS failed to make it. It also failed to offer evidence that "increasing company compliance and booking with preferred partners ... doesn't necessarily lead to the best offer on the table. Perhaps companies need to accept that gone are the days of full compliance."

The contradictions in HRS' own comments may be enough to invalidate this so-called research. Last year, the firm said, "These businesses must hope that staff are Internet-savvy and know how to get a good deal. But when you're spending the company's money, are you really interested in getting a good deal? And is the company aware of how much time is spent ?nding that deal ... is this a cost that companies take into account?" Sounds like an argument against spot buying.

Overall, HRS claimed that "the area of corporate travel buying" is "stubbornly resistant" to "the promise of the Internet, made at the end of the 1990s, to disintermediate every industry, putting middlemen out of business everywhere."

That's because the middlemen have proven that in the Internet age, they provide value. Indeed, many are thriving ... not only by coexisting with the Internet, but also by harnessing it.

~ Jay Campbell