There’s recently been a run of articles in the US business travel media about global travel deals. Here, Tony O’Connor shares his views with PASA.
The gist of the articles was that, yes, TMCs are not really global operations. Yes, they are far from seamless. But nevertheless, the majority of large global travel buyers have or want a single consolidated global TMC arrangement anyway, despite many knowing of or having experienced the downside. I am surprised. The downside can be considerable.
One TMC suggested an 80 / 20 outcome. They conceded that about twenty percent of world markets on the fringe cannot really be operated and managed to the full extent of a tight global SLA, therefore implying that eighty percent can. Depending on the countries involved, I think it can be more like 50 / 50.
It’s useful to understand how TMCs developed. Back when airlines were price regulated, they relied upon travel agents for customers, and they paid them commissions to gather them in. (They still do.) Back when commission was king, travel agents sensibly consolidated into buying groups so that they could sell larger and larger parcels of customer preference to the airlines for higher commissions. That is why we have large travel agency groups still today. The groups developed brands, and shared some services. In the corporate half of the industry, these groups became the TMCs. Global TMCs began not as fully owned single companies that grew geographically, but as many separate businesses in different places that buddied up.
Global TMCs vary in their cohesiveness and homogeneity, but none are the single unified entity that a single brand suggests. They are varying combinations of fully owned branches, joint ventures and franchisees. In different regions, and even in different neighbouring countries, they can have different GDSs, different online booking tools, and different mid and back office systems.
Their managements can be autonomous and even competitive, within the TMC. Global and regional account management requires a degree of cross-border cooperation that may not naturally exist. And single global pricing, with all its conveniences for the client, can be hard to obtain.
In a recent global TMC and IT tender that I helped with, we wanted single global pricing. Instead of a dozen or more different fee and commission arrangements that would each need to be monitored and managed, we asked for a single global financial deal. All but one TMC resisted. Most of the others qualified their way out of it. One global firm even declined to participate because of it. I thought this was telling.
From experience on the other side many years ago, I know the difficulties that TMCs can face with global pricing. There are obviously forex concerns. Operations in different countries can have their own P&Ls and local TMC management are loathe to sacrifice their local revenue for the greater global good. A global fee can be very generous in India but inadequate in Japan. Revenue transfers may need to flow behind the scenes. Transparent commission on-payment can be standard in one country but anathema in another. “Give the commissions back? Are you crazy?” There is a bit to work out. There is also the risk of substantial over or under payment if relative volumes across the countries shift.
And so, various additional adjustment mechanisms are necessary to ensure ongoing fair pricing, and when you add these into the mix, we are back to living a life more complicated.
Also, single global pricing can be tricky internally on the buy-side. A US$9 booking fee can seem highly over-priced compared to local prices in India, thus causing leakage and dissent. You’d really need to hide the fees from the travel bookers in such cases.
Since consolidated pricing is inherently difficult, and for the added reason alone that different TMCs are better in some countries and regions than other, my view is that a single global TMC arrangement is often not the best model anyway, unless … Unless I can receive a truly consolidated assembly of systems and services. I want a single online booking tool that works well in each country. (Some are not well adapted locally.) I want consolidated data with no gaps or glitches, supporting online reporting that works. I want a global account manager with effective authority in every country. I want a single profile system. And I want the services offered in the large markets to be available in at least “eighty percent” of the countries in my scope. If I can get these things, then I’ll be happy to live with different fees in different markets.