Author: Tony O’Connor
A number of shady practices have appeared in the corporate travel supply chain. Here they are. If your TMC is doing any of these things, you should get a new one.
- Switching to payment by EFTPOS
It can be wise to check your invoices carefully. There have been cases of the payment method being switched from the agreed credit card to EFTPOS, with higher arbitrary fees applied. Most TMCs do not mark-up credit-card fees. Or when they do, they are transparent, agreed and minimal. Also, fees in the credit card industry are now subject to scrutiny, downward pressure and regulation. It’s hard for TMCs to make money from the fact you pay by card. But EFTPOS fees are different. When you go into a shop, the EFTPOS fee or the minimum transaction amount is entirely up to the shopkeeper. So too in travel. They can charge whatever they like. Make sure that your payment method hasn’t somehow been switched to EFTPOS under your nose, even if it’s only for some of the bookings.
- Early Ticketing to Increase Post-Ticketing Fee Revenue
For international air bookings, the ticketing deadline is determined by the fare conditions. The ticketing deadline is usually fairly close to the departure date. After locking in the availability with a confirmed booking, a good TMC tickets as late as possible, usually on the deadline day, to increase the chances of finding a better fare for you after the booking, and to make it much easier for you to change the booking if your dates or needs change, as often happens in business. It is much harder to make changes after ticketing. Many TMCs apply fees for changes after ticketing, ticket re-issues, ticket cancellations and ticket refunds, which is fair enough. But an unscrupulous trick is to (1) have these fees in place, and (2) ticket early so that you get to charge these extra fees much more often. The opportunity of lower fares is also lost. It’s a double whammy to your travel costs.
- Hidden Mark-Ups to Wholesale Airfares and Hotel Rates
I have written about this before. Hidden mark-ups are the grand-daddy of TMC “revenue enhancement”. There is a fundamental difference between retail and corporate travel. Retail travel agents mark-up wholesale fares all the time. But you are completely free to shop around and go to the next travel agent or website. You can walk away. However with business travel, it is completely different. You are locked into booking only with your TMC because that is the only way to access your airline, hotel and car discounts. TMCs are not meant to add five hundred or a thousand bucks onto the fare whenever they can get away with it. If it is not contractually illegal, it is certainly a financial spit in the face. They are meant to be acting in your interests. Mark-ups are an insult. And be careful of invoice terms, because this can be a way to facilitate mark-ups.
- Excessive Invoice Payment Terms
If, for some reason, you do pay for your travel by invoice, check the cost of this “service” carefully. TMCs more or less eradicated payment by invoice across their client bases over ten years ago because it was costing them too much. If it’s back in fashion we have to ask why.
- Unavailable Hotel Rates Defaulting to TMC “Corporate” Rates
Your contracted discounted rates at your preferred hotels naturally won’t be available all the time. But sometimes the non-availability might be, shall we say, “induced”. The problem for the TMC is that your negotiated hotel rates are almost always “net”. That is, they do not carry a commission. A good TMC will book your discounted hotel rates whenever possible in the quest to save you money, and will settle for its transaction fee and not chase extra revenue. But a bad TMC will chase extra revenue. It is very hard to know why a contracted hotel rate is not available. There can be several reasons. And so it is hardly ever questioned. If, when your rate is not available, and the same room at the same hotel is offered at a higher rate, then the alarm bells should ring. If this higher rate is the foremost presented option, or the only option, (either from the booking consultant or in the online booking tool), then you should be worried. You are possibly being directed away from your discounts towards rates that carry commissions, or a hefty mark-up for the TMC. Up goes the TMC’s revenue. Up go your travel costs.
- Unavailable Hotel Rates Defaulting to Commissionable Rates at Other Hotels
The same situation as above. Your contracted hotel rates are too often unavailable. But instead of higher rates at the same hotel, you are directed towards some other suitable hotel. This will quite possibly be at a TMC’s “corporate” or “consortia” rate, which will probably put a commission payment straight into the TMC’s pocket. Up goes the TMC’s revenue. Up go your travel costs.
- Non-Loading of Your Hotel Rates
A really neat way to avoid using your contracted discounted net hotel rates is to simply forget to load them into the GDS. Availability is then a convenient zero percent! A large survey in the US a few years ago found that this was more prevalent than people imagined. If you find that any of your rates haven’t even been loaded, you should change TMCs.
These are certainly not the practices of most TMCs, and most TMCs are ethical. But these things seem to be happening, happening now, and perhaps happening to you.
Tony O’Connor will be presenting a session entitled “Show me the money” at BTTB Australia on 4th & 5th May in Melbourne, shedding light on the often opaque travel supply chain and arming travel category managers with what they need to know to ask the right questions. Travel buyers can attend BTTB Australia free under the hosted buyer programme. Full details here: www.bttbonline.com
Tony O’Connor has been Director at Butler Caroye Asia Pacific (independent corporate travel management consultancy) since 1998. For more information, visit: www.butlercaroye.com.au