Spending In Order To Save

You would think this would make sense. Wouldn’t you? After all it is logical that if you invest your time, resource and money wisely you should see a return on it. Shouldn't you? Not, it seems, when it comes to business travel where the most trusted tool is a sharp scalpel with which to minimise all cost, and phrases like 'speculate to accumulate' are positively frowned on.
At the risk of boring all of you let me repeat the age-old TMC mantra which is that their costs are tiny in relation to the overall price of travel. "No," I hear you cry, "service cost is key and we as buyers should know every last fraction of what you are earning so we can cut it down a bit. We could even shave another 0.75 percent of total cost by making ourselves less important to intermediaries and less popular with our travellers who want good personal service."

Wow, that was therapeutic for an ex-TMC man, but there is a strong ring of truth in what I just said. I still believe as passionately as I used to that travel buyers have simply got their priorities wrong and spend an inordinate time on minutia when there is so much more that could be achieved by addressing the big money issues. OK, I accept that buyers need to know what they are getting and whether it represents good value, but to make so many decisions based on lowest apparent commoditised price is fraught with lost opportunity. I have never seen an industry so difficult to compare like with like in, and I have never seen one where commoditisation and good service are so fundamentally and dangerously opposed.

I have illustrated often how difficult it can be to judge on unit cost alone. In fact, in my last blog post, I gave examples relating to the dark and grey world of transactional pricing and measurement. Equally, I am sure many readers were sitting there thinking they are much too smart to be taken in by such smoke and mirrors, but are they? You don't have to be stupid to be "taken in," as the only folk who do not risk this are those who know every last thing about their current and future travel, and there are not many of those. Why would anyone try to take you in? Because you have driven out any other means for intermediaries to get a return, and taking advantage of your lack of true requirement knowledge is the only way left. Potentially all to help you think you have shaved off that 0.75 percent cost.

There really is another way, and it is not simply to let your TMC off the hook and trust they are not charging you too much. That is unnecessary as, by now, most of their income and costs are clearly understood and it is their profit they reduce to win your business. So what? Well, how much in time and effort are they really going to spend on developing your travel, and using what? They have trimmed and trimmed their workforce as the only way to try and hold profit, so the very resource that could help are likely to be working in a different industry by now.

What is the other alternative? Why not take a fresh look at how you work with this intermediary and what your requirements from them really are. They have changed themselves into outsourced travel management consultants, but most buyers still see them as travel agents and here is the root of the issue: If you are outsourcing or bringing in consultants, would you really dream of linking their payment to some sort of transactional model? No, what you would do is pay them some kind of retainer and then incentivise on results. You would demand to know exactly what technical and personnel resource you would be going to get and what achievement is guaranteed and what could be possible. The TMC would know that the more they achieve for you then the more they achieve for themselves, and they are likely to invest in this by employing extra fare specialists, analysts, communicators and technologists.

So what I advocate is that corporations should invest in the travel team they have taken so long in selecting. Instead of taking the miniscule overall cost saving in cutting the team every time things get tough, think about improving it to bring better savings. I guarantee that one well-motivated travel professional, given a remit to lower fares and improve compliance, could deliver a 400 percent ROI in their sleep. If you got rid of such a person they will take that savings away with them, leaving you worse off. Surely this approach is more logical than buying travel like a can of beans?