Following the money can redefine value for corporate travel

As money flows in the corporate travel industry shift and commercial models come under the spotlight, one big question stands tall: Do buyers and suppliers really share the same definition of value?

Money: It’s the topic no one wants to tackle head-on. More specifically, how money flows through our industry, and what that means for the future of travel management.

Is the subject sensitive? Absolutely. Is an honest conversation about it necessary? More than ever. To help set the scene, let me share a view of how we help our clients decode the tangled web of payments, rebates and incentives in our ecosystem.

The First Reaction? 

Cutting through this Gordian knot is enough to make even the most experienced buyer’s head swim. Usually, the first reaction is: “Wait! Why is the TMC taking money from everyone?” It’s a fair question. And if you’ve ever wondered, “Why am I paying a TMC fee when they’re getting income elsewhere?” – you’re not alone.

Let’s rewind. Decades ago, suppliers paid commissions, and the client got what felt like a ‘free’ service. But as commissions declined, a funding gap emerged. Enter the client-paid model. Transaction fees. Management fees. You know the drill.

Now, some procurement strategies might suggest, “Let’s squeeze out those extra income streams.” But that’s an oversimplification. TMCs have fixed and variable costs like any business, and yes, they need to make a profit to create a shareholder return or reinvest into the company (and clients) for a viable future.

When you reduce supplier income, client costs rise. When client budgets shrink, supplier dependencies grow. It’s a delicate seesaw.

Follow the Money, Strategically

A great procurement leader knows: Follow the money, and you’ll understand the motivation. Not in a “Show me the money!” (cue Tom Cruise) kind of way, but in a “What behaviors does this incentivize?” kind of way.

If a TMC earns revenue through a GDS, does that shape the tech stack they recommend to you? If there’s a commercial relationship with an OBT, might that influence their preference? 

You get the picture.

Giving Buyers the Power 

During a recent panel I hosted at the ITM Conference in Wales, Jim Davidson, CEO of Accelya, said it best: “The buyer presses the buttons.” When buyers understand the flow of money, they ask better questions. And when they ask better questions, they’re in the driver’s seat. That knowledge puts them in a position of power – not to break the model, but to shape it into something better for their program.

Here’s the real question for buyers: What is value? One comment from the audience at ITM sums up the issue: “If buyers were getting value, would they care about the commercial model?”

Boom. That’s it, right there. If you’re getting real value, the model becomes less of a battleground.

There’s work to do. Let’s create a better way. 

Caroline Strachan  is Chief Executive Officer of Festive Road, with a career that spans 25-plus years in travel and meetings. Caroline has led innovative programs at Cisco, Yahoo and AstraZeneca and more recently as the VP Global Consulting at Amex GBT. She has also volunteered as ITM Chair, GBTA Europe President and has received a number of awards in recognition of her services to the industry. Caroline is a self-confessed strategy geek and loves to bring new ways of operating to her clients and the industry.