TMCs need to change and evolve to survive. One only needs to look back 30 years or so when the airline commissions were cut, and TMCs had to pivot by transferring their cost of doing business to their corporate clients through transaction-based fees or some other kind of value-add fee for service.
But COVID-19 has changed everything once again.
Will Tate, a partner at GoldSpring Consulting, notes TMC’s financial structures have been upended, from supplier revenue cuts to near zero transaction fees, causing most to reset service delivery, contract terms and financial costs – all in the hopes of transferring some of the financial risks to buyers.
“Procurement departments have long resisted accepting service provider risks, which is likely to continue,” Tate says. “Thoughtfully considering all sides will require innovation and creativity to find the path forward. Certainly, some buyers and suppliers will not find common ground, so look for a significant amount of TMC RFPs to result.”
As difficult as this time has been, Tate notes smart travel buyers are resetting their programs.
“Air and hotel contracts are now significantly mismatched between demand and supply buoyed by capacity cuts, hotel reflagging and closures, and airlines removing airports,” he says. “Grace abounds in these air and hotel relationships, but the value equation is unbalanced for both parties.”
As for the relationships between corporations and travel management companies, John Keichline, CEO USA for Reed & Mackay, says, “The pandemic has re-defined the value proposition of a TMC, with a greater need than ever for expert white glove service. As we come out of this pandemic our sector will be more strategic – more consultative. It can’t just be about getting from A to B anymore.
Maureen Brady, COO of CTM North America, notes the TMC has seen the demand for advisory services increase significantly with customers asking them to present timely health, safety and regulatory information.
“Clients want to see it consolidated, on a global basis, and for individual traveler bookings,” she says. “They want easy, immediate access. In the past, customers may have looked at us, and TMCs in general, as a commodity or a ticketing service. Now, we are providing advice and information as well as sharing best practices.”
Steve Hartwell, president and CEO of GlobalStar Travel Management, agrees that clients need TMCs to be experienced travel partners and proven at solving global problems in emergencies. “We will need to adopt a different approach to travel in a new era and learn to travel smarter, which means building trust and confidence is going to be critical,” Hartwell says.
“Generally, TMCs are designed for these moments, as we are uniquely positioned and are really the only players that can focus on the end-to-end travel experience to support travelers and travel managers and build the belief and conviction that is needed to get business travel going again,” he explains.
A Changing Landscape
Craig Bailey, president, Americas for BCD Travel, admitted COVID-19 changed the entire company suddenly and unexpectedly. “The impact to our clients’ business reaches well beyond their travel programs,” he says. “As their trusted advisor, we are on the front lines, bringing them the latest travel information, requirements and guidance so they have one less thing to worry about.”
BCD Travel’s COVID-19 response focuses on three key areas, Bailey says: Real-time information, traveler care and solutions and support. “On the air and hotel supplier front, clients are looking for flexibility,” Bailey says. “Customers are expecting longer grace periods to make travel changes without penalties and a quicker turnaround in receiving refunds where applicable.”
Since the pandemic began, Brady notes CTM has seen the level of advisory support it offers its clients increase exponentially in the “new normal.” CTM is no stranger to acquisition and is always looking for opportunities that are the right fit and bring value to its stakeholders, she explains.
“Most recently, we acquired Travel and Transport in October. For us, we knew that the fit was right, the time was right, and the end-user benefits were right to make this acquisition,” Brady says. “We were lucky to come through COVID-19 debt-free and with a strong balance sheet. During the COVID-19 slowdown, we can move quickly to integrate our two companies to leverage increased buying power and the best aspects that each of us brings to the combined business.”
For TMCs in general, Brady does predict there will be further consolidation, much of it due to the fact that revenue streams have dried up since the crisis began. “The pandemic has also highlighted the importance of technology,” Brady says. “CTM had already made a significant investment in technology pre-COVID, such as our own online booking tool, Lightning, and our global portal, which is a great way to get information in our traveling public's hands.”
Andrew W. Menkes, founder and CEO of Partnership Travel Consulting, LLC, notes there’s been a dramatic contraction in terms of TMC activity, with a fair amount of activity on the TMC side trying to renegotiate their agreements. “It’s far from business as usual,” he says. “Fewer TMCs means less competition, but it also means it makes room for new competitors.”
Menkes notes there’s a lot of discussion – though not a lot of action yet – on the subscription model, which is a tough sell, trying to make it relevant to the frequent traveler as well as the non-employee.
Hansini Sharma, head of corporate travel for Acquis Consulting Group, notes consolidation of any type in a travel program poses its own unique challenges, but TMC consolidation is generally a bit more complicated because of agent configurations, pricing structures, reporting solutions and integration capabilities, just to name a few.
“Firms and TMCs alike are going to need to be flexible through this transition and will need to make concessions as the TMCs work towards their new way of operations,” she says. “I would urge clients to prioritize the most important aspects of their existing TMC relationships, whether it be the pricing structure or agent support level or something else, in consolidation conversations.”
Moreover, she says TMCs are really under pressure, and the infrastructure that historically supported their ability to provide all ranges of services doesn’t exist now and may never come back.
According to Hartwell, all businesses have suffered financially during the lockdowns, resulting in new financial models being developed now and others emerging in the future. In any case, he adds, the transaction fee model has not worked well in these conditions.
“We have seen much consolidation over the past couple of years and I think that this will continue,” he says. “It is a very difficult period for our industry. However, consolidation needs buyers and sellers and currently conditions are a good time to buy but maybe not so good if you are a seller.”
Jeffrey Berk, chief executive officer of Tripkicks, notes 2020 has forced the issue of “quantifying value” for many corporate-TMC relationships – in some cases, they have led to closer relationships, and in others, more distant.
“Without revenue-generating transactions it’s more difficult for TMCs to maintain resources and support across all their clients,” he says. “Some companies have opted to pay for those services directly, which may lead to a closer relationship between the TMC and corporate client. Corporates without the ability to pay directly may see a decrease in support, and perhaps get used to being less reliant on TMC services, and more reliant on a combination of internal resources and technology.”
Any global economic crisis will tend to drive consolidation in all sectors and Bailey notes COVID-19 is no exception, as major travel players have already declared bankruptcy or restructured. “That’s why we recommend prospective clients to take a good look at a TMC’s financial situation before contracting them,” he says.
What’s Ahead for TMCs?
“The restart of travel is a defining moment in our industry,” Hartwell says. “I suspect that the restart of travel is going to be more complex than lockdown.” He points to the inconsistencies across countries and even within countries, with more interruptions and reversals going forward. Although green shoots are beginning to show, Hartwell cautions, “I would not expect a fast recovery but more of a gradual recovery over the next 18 to 24 months.”
As a consequence, he says, in the future every trip is going to be an “event” and TMCs will need to be with the traveler every step of the way.
TMCs see new opportunities in providing additional information, mainly around expectations before, during and after the trip. Tate notes removing uncertainty around areas like citing safety protocols, screening procedures, hotel amenities open or closed, and quarantining requirements give TMCs a chance to offer added value. “Pre-trip requirements will be around a while, so the additional time and effort is another likely area for restructuring the TMC buyer-seller financials,” he says.
“The pandemic has presented in many cases the opportunity to deepen relationships with our clients,” Keichline says. “We’re having different discussions and speaking consistently to a wider group of key stakeholders; HR for instance, or CFOs looking to improve productivity of their teams through smarter integrations with travel and expense tech.”
Many TMCs are looking for ways to be compensated for the advisory and non-transactional service and support they provide. For instance, Brady says CTM is in the phase where everything is being market tested. “Like other TMCs in the industry, we know we have value besides just cutting tickets,” Brady says. “It’s an open market, and we’ll look to see what the market will bear.”
While it’s too early to tell what the new normal will be for TMC revenue models, Berk says it’s better for a TMC to control all the components, versus having to incorporate or react to external commercial structures of partners. “I think we'll continue to see more true consolidation between TMCs and T&E tech, which will help with differentiation and in the long-run be good for competition and innovation,” he says.
Tate cautions that 2021 will be the year of changes that 2020 wrought. “Travel policies will be tightened, HR and legal will imprint travel protocols for the travelers’ – and the company’s – well-being, TMC AI and machine learning will become integral to low-value transactions and TMCs will be pressed to raise prices in the midst of changing the definitions of billable items,” he says. “In-channel purchasing will benefit all parties as the safety flag will lead the charge.”
Bailey says in 2021, one of the biggest questions for travel policy will be, “Is this travel necessary?” If the answer is yes, there needs to be clear steps outlined in the policy for the trip approval processes, and resources for trip planning that provide all the information travelers need to know to be safe.
“If the answer is no, then there needs to be clear, concise guidance around travel alternatives and virtual collaboration technologies,” he says. “It’s important that a framework is put in place now to help travelers decide, ‘Should I stay or go?’ when travel does start to return. That initial guidance will help reduce non-essential travel, mitigate risk and drive adoption of virtual meetings and event technology solutions.”
Brady expects the TMC’s advisory role to continue. “Corporations are looking at the ROI of travel in a new light – not just from a cost perspective but also from a total investment of employee time and wellbeing,” she says. “I see the TMC playing a role in helping corporations monitor and manage this consideration.”
Additionally, as travel returns it’s critical for travel managers to use data to gauge the impact of COVID-19 on travel programs and influence strategy moving forward.
“Technology will give corporations and travelers timely and relevant information to make safe and wise travel decisions,” Brady predicts. “Travelers have different levels of health and safety concerns; therefore, I think technology solutions will be very personalized.”
Keichline points out that travel post-COVID is going to be scrutinized from a number of different angles. “Businesses are also looking at why they travel, how they travel, and the impact on the environment of their travel,” he says. “This applies at a corporate level – but also at an individual traveler level. We take that big data and present it to clients in a way that helps them to make informed decisions and shape their programs for the future.”
In the months and years ahead, Sharma says data analysis and future travel projections will be more important than they have ever been. “TMCs build budgets and projections for their staffing and operational needs based on what their clients tell them,” she says.
“While we want to be optimistic about the return to travel, it isn’t fair to carry over 2019 volumes or optimistic 2021 volumes as a baseline expectation for actual volumes,” Sharma cautions. “If a client doesn’t know how to project volumes, work with your TMC partner to find a solution that is mutually beneficial and flexible for the uncertainty corporate travel programs will face in 2021.”
