Buyer/supplier conversations need to be more than a once-a-year get together. They should be a way for buyers to ensure their preferred suppliers are an integral part of the travel program’s strategy – both for cost-savings and service delivery.
Jennifer Steinke, vice president of global travel management at WHoldings, believes there should always be active engagement. While negotiations might happen once a year and there might be quarterly reviews, what’s missing is the conversation around the overall objectives for the managed travel program as it relates to the company’s business goals.
“If suppliers were better equipped to understand why people travel within the context of how the program might change and be much more dynamic as it adapts to the overall business objectives of the organization, I think those conversations would be much more engaging,” she says. “That way, you’re developing a true partnership, as opposed to just a casual conversation.”
Lexi Benakis Honohan, senior director of intelligence and analytics for Advito, BCD Travel’s consulting arm, says buyer/supplier conversations should happen consistently throughout the year. “As we continue to see advancements in technology and the availability of ‘big data,’ suppliers will continue to implement more complex pricing strategies, direct marketing, enhanced customer experiences, and more convenient booking channels,” she says. “These conversations and open lines of communication are critical in ensuring that all interested parties are having their needs met.”
On the financial side, contracts and fulfillment of commitments should be reviewed on a regular basis, notes Cheryl Benjamin, manager, travel services with Dart Container Corporation, to stay current with any trends in the business. Benjamin says she finds quarterly reviews to be easiest, and they also give a company the opportunity to revisit the price being paid and ensure it is in alignment with the terms of any deals.
“That said, conversations should be more than just financial in nature,” she says. “In my opinion, your suppliers should be viewed as true program partners. After all, they are taking care of your travelers and in some cases, interacting with them more than you do. It forms a special relationship, and makes any challenges you may face in the future easier to work through.”
According to DeAnne Dale, senior vice president global strategy and consulting for Reed & Mackay, it’s important for all parties to connect, i.e., buyer, TMC and supplier to ensure all are up to date with policy changes and latest travel trends, to monitor production and enhance relationships. “This in turn will ensure the consistency and relevance of the live contract and partnerships,” she says. “This also provides the supplier with another venue to ensure that prospective clients are kept informed of new services, enhancements, routes, etc.”
Mark Ziegler, senior travel manager of global travel services for NetApp, says it’s important to sit down and review the relationship regularly, and he recommends doing that quarterly to see what’s working and what isn’t, and where the value is being created.
For airlines, he explains conversations must deal with discounts and performance requirements, and how things perform against market share commitments and one’s targets, while with hotels, it’s important to talk about how well things are working for the supplier.
“I am still stunned by how many conversations take place where I don’t see ‘Here’s the savings of what was delivered to the client.’ You would think that would be quite important,” he says. “It comes down to in some cases the mechanisms in place to measure that. If we’re talking to a hotel, we’re looking at ‘Here is the rate that was paid and would have been paid if these were not negotiated rates.’”
A big thing at the moment for hotels is the availability of negotiated rates. Ziegler says this is very property specific and very marketing specific. “I’ve seen properties go out and negotiate the rates and put the program in place and then only 20 percent of bookings they make actually took that negotiated rate. Either there are lower rates available or the traveler upgraded, or maybe the negotiated rates weren’t available,” he says. “This is incredibly valuable information and a lot of buyers may not have visibility into that.”
The reasoning for quarterly conversations is simple, says Neil Hammond, a partner with GoldSpring Consulting: It can affect your discount and your bottom line. “If you don’t have them and you’re not reaching the goals you set or the expectations they have for the contract, at the end of the year they discover you didn’t reach your goals and they won’t trust you to sign a new agreement” he warns. “Your contract will be that much less valuable. You need to know where you are and doing what you can to promote the preferred status of the supplier.”
The Root of the Discussion
In order to ensure that preferred suppliers are an integral part of the travel program’s strategy, Honohan believes it is important to discuss the “why” that is driving the travelers’ booking behavior.
“Historically, we have only looked at the numbers – the volume spent, segments flown or room nights stayed. However, if we are to be more strategic in our program management and add value to both the preferred supplier relationship and the traveler experience, we need to analyze and understand much more than just the numbers on the surface,” she says.
Benjamin says the things that need to be discussed include expectations about contract performance, any upcoming projects that may place additional demands on the supplier (especially hotels), recent changes in the industry and how it will impact both the buyer and suppliers business.
“As buyers, we need to clearly communicate what our business needs are,” she says. “During supplier reviews they ask (or should be asking) ‘What is going on within your business?’ This is the perfect opportunity to involve your preferred suppliers in your needs/challenges. Our suppliers have a wealth of knowledge we should be tapping into. I think the challenge from the travel buyer side is the feeling that if we give up too much information it could hurt our future negotiations.”
The discussion should include everything from “why are people traveling” to how the supplier meets the needs of the different sectors within the organization, Steinke maintains. The conversation should also include how the travel manager can get in front of marketing efforts as opposed to getting left behind.
“Let’s say we put a lot of spend on Marriott and I know they are doing a lot of direct marketing. How do I make that a part of my program?” she asks. “How do I let them market to my travelers directly with the program’s best interest in mind? If I know what they are doing, I can support that and promote it and help to build the brand loyalty and build a stronger relationship between the buyer and supplier.”
Before any conversation takes place with the supplier and buyer, Dale says the buyer and TMC should identify any needs or requirements which would be crucial to the program. “This would include spend volumes and distribution of airline spend, major hotel cities and properties utilized, etc.,” she says. “The buyer’s TMC will be able to provide suppliers detailed MI which will in turn assist the supplier in offering a competitive program to the buyer based on their historical spend.”
Some of the problems, Dale notes, start with buyers coming to the meeting ill-prepared; she blames limited analysis and insights, time constraints and not asking the right questions. This, she says, is where the TMC can bridge the gap and add value.
“Once the needs are identified, the TMC carries out analyses and bench marking to ensure a clear strategy is presented to the suppliers with the buyers needs and requirements,” Dale says. “Subsequently, the TMC would have a better understanding of which suppliers would be likely to align better for this client’s needs.”
Analyze This
GoldSpring Consulting has a financial analyst who supports the company in these conversations. Normally this starts with the analysts looking at the numbers beforehand so they can compare what the supplier comes up with.
Hammond gives the example of a company talking with a major air carrier like United Airlines. GoldSpring comes out with its numbers and United will have its numbers. The analysts will look at the differences and figure out what’s working and what goals aren’t being met. When there is a discrepancy, the analyst will look at any city pairs that are important.
“San Francisco to Bangalore, India, is the number one international destination. We will look at all the carriers that we bought tickets on and what the average prices were and how many we buy,” Hammond says. “We won’t tell them what we are paying for the other carriers, but we will say ‘you are higher than the other carriers by X percent.’”
Ziegler feels a financial analyst should be included because more negotiating should be part of every conversation. “About two years ago, for the first time, one of the airlines started bringing analysts to the negotiating table and that was a very smart thing because it changed the dynamic,” he says. “The analysts normally have decision making power so things can happen a lot quicker.”
Pooling Resources
Preferred suppliers have great resources at their disposal – data, customer profiles, loyalty plans, etc. Buyers need to set expectations for tapping into those resources so suppliers can deliver the right information to strengthen both the buyer-supplier relationship as well as the traveler-program relationship.
“Buyers also have a great deal of resources that are available to them and not the supplier,” Honohan says. “Buyers and suppliers should be working together to layer this information for additional insight and transparency that will level up the relationship and traveler experience.”
It’s all about setting clear expectations, Benjamin says, and having conversations early on so suppliers know the true needs of the buyer. “As great as our preferred suppliers are, they are not mind readers,” she says. “If you have specific needs for your travelers, the suppliers are more than happy to meet those needs if they can.”
Ziegler feels airlines particularly over the last two to three years have upgraded their reporting capabilities significantly. “They have done a really good job on improving information they are getting to clients as well,” he says. “The clients can see a lot of information and insights into travel behavior. It’s all actionable information that can be important.”
Setting out a business plan, objectives, strategies and tactics in the beginning to ensure all data resources are available is the way to be successful at this, Dale explains. “Utilizing these data sources in partnership would allow travel patterns to be monitored and acted on should changes be required,” she says.
Certainly these days there is no lack of data and information on either the buyer or supplier sides. The challenge is figuring out what to do with all that data. “Even if the sources are consolidated, the integration and insights derived are complex to get to,” Honohan says. “However, when this is accomplished the result is invaluable.”
