TMC Fees Must Define Value

I heard it again yesterday, and I need to object for the record.

It seems to have become dogma for travel management companies to urge travel managers not to focus on TMC fees so they can focus on much larger travel costs more effectively. The warning is usually uttered with appropriate gravitas by senior level TMC exec in a dark suit, doing their darn-dest to convey the wisdom of age and experience. "Don't be lured by the sirens of quick fee savings," they warn ominously, "lest you be ruined on the craggy rocks of fiscal profligacy." And then the inevitable: "You realize that agency fees are only about 3 percent of total travel spend. Some folks even have pie chart Powerpoints illustrating the comparison between 97 percent and 3 percent. Wow! [more]

I'm not quibbling with the numbers, which are pretty close. But I renounce the fractured logic that the relative size of travel and TMC costs makes it foolish to negotiate TMC fees. And what really gripes me is the complete lack of recognition of irony (and self serving conflict of interest) by these portentous TMCs! It's especially vexing when the same warning is intoned by multiple TMCs in a short period of time.

We--the corporate travel manager and their hired gun (me)--appreciate the importance of managing down travel costs, and the essential role that TMCs must play in reaching that goal. If we didn't, we wouldn't be there. It does NOT follow, however, that TMC fees and costs are unimportant--any more than it means that the cheapest (lowest fee) TMC is always the best.

As sophisticated buyers, we evaluate service and fee proposals separately. We judge which TMC seems able to meet our service needs and help our company control travel costs. After we make that judgment (which often is difficult and always at least somewhat subjective), we look at fees and costs, and hope that that our favorite is also the least expensive. (We need to understand the "total cost of ownership.") If not, we have a choice of awarding our account to another--lower-cost--provider or negotiating for lower fees.

Bottom line: It's all about value--getting the most for our money. Buyers understand the benefits TMCs add, but also need to assess the costs to determine total value. TMCs who advise clients to do otherwise, even in good faith, don't appear like an ideal partner to help control total travel costs.