The Beat Letters: Prof. Sabena On The Role Of TMCs

Regarding the discussion about travel management companies inside The Beat community during the past few weeks, it seems that there is an elephant in the room that no one is willing to speak of or tackle. That is the relationship between the global distribution systems and the kickback segment fees. This is disrupting the natural flow of the way that corporations normally handle their suppliers. Perhaps we are focusing too much on the trees and not enough on the forest? What really does make travel so special? Is it really that different from any other good or service a corporation acquires?
In an ideal world, the purchase of travel would be a commodity item purchased in the same way that widgets are acquired for other goods and services that a corporation uses. In this world, the supply chain system would be based on managing the disparate supply environment that in truth is already in place (direct, indirect and from 3rd party vendors). And that just like with any other conventional business commodity, corporations need a flexible supply chain platform tool. They need this type of environment to address differing relationships with their vendor partners, which in turn will be managed by either the internal company facility (corporate travel department) and/or their external partner (TMC). The time has come to separate the unhealthy and dependent link between the GDS and the purchase process, and instead have a consistent service model that promotes a fair and more just commercial relationship. Thus, the TMC would be free to offer its services independently based on quality and performance metrics rather than how much of the platform’s cash is returned to the equation. TMCs would then compete with the GDS-based travel services and tools such as GetThere--as well as the online travel agency-based players such as Orbitz for Business and Egencia--on a level playing field.  

This is not just an ideal world; it is in fact a reality. There are services already in place for this. Indeed if you look at the tools available, their ability to provide this service is not just a nice-to-have but a must have. And at least in Europe, this is available now and offered by the larger TMCs and indeed smaller players as part of the natural flow of things. Ignoring easyJet, Ryanair and other LCC or value-added suppliers just because your vendor doesn’t want to or cannot support that vendor or that service would seem to be a form of insanity.

If we speculate that the airlines and the GDSs will move to eliminate the segment override fee--as seems likely--then this more natural state of affairs will likely start to exist. It will be important for both corporations and TMCs to start to use a conventional (in the other non-travel sense) supply chain system that players such as the NBTA are espousing with its Open For Business initiative. It strikes me that the time is right to move away from the world where the service model is dictated by the tools commonly used and not by the needs of the business. Perhaps the days of the one size fits all model are finally over. It is time to acknowledge that multilateral models have their place but business relationships should be defined by the bilateral focus of the suppliers and customers as commercial partners.

~ Professor Sabena