This dormant category will need some special attention in the near future.
Practically nobody is travelling for business at the moment, and predicting the course of its return is impossible given the unpredictable factors at play. My guess is that it will get back to around 40% of 2019 levels later next year, and 70% thereafter, based on the combined weight of economic recession and the “virtual breakthrough”. And I think there will also finally be a more robust ROI-based approach taken to business trip approval. But even at these greatly reduced levels, category management time and resources will be needed to prevent unacceptable blowouts in risk and cost.
There will be less travel to manage. But for the travel that does happen, it will need more care and attention due to the combination of two things.
1. New Travel Risks
Duty-of-care will be of paramount importance, and a board-level issue given recent legislation. Even after the pandemic subsides and vaccination is available, new needs and risks will have been established and will probably persist.
Firstly, your assessment and selection of travel management companies (TMCs), online booking tools (OBTs), travel IT, hotels, airlines and rental car firms (those that survive) will need to be based on their ability to guarantee best safety practice. Duty-of-care will shift from being a secondary assessment criterion into the selection spotlight, with informed questions and tests needing to be put to each supplier type.
Internally, companies will need to have clear and crisp policies covering the entire traveller experience, and a reliable internal process to apply them. The keystone of this will be a thorough and efficient pre-booking travel approval process using reliable and precise information. This begs the supply chain for a good automated pre-booking approval system, either from a TMC, from an OBT or directly from an IT supplier. Despite the marketing, these are still not well developed and available. But they now become a vital part of travel management kit.
Because the stakes have risen, the usual gap between the marketing and true capabilities, which was formerly just annoying, now becomes unacceptable. You will need to be very careful when you assess and implement a pre-booking approval and risk management system.
Pre-booking is also the time to apply an ROI-based reason-for-travel filter to the travel request. Travel is going to be quite a bit more expensive per night and per kilometre due to dis-economies of scale and new safety requirements. That calls for a much more robust ROI test. Please supply chain, can you include this in the approval software too.
Once a travel request is approved, the TMC’s manual booking process and the OBT’s automatic booking process will need to be failsafe in applying your policies, and in identifying and avoiding risks and difficulties in travel products and in itineraries. Currently they are not. Consider the new complexities around regulations and failing supply. The former will settle down into a known playing field. But the latter will get worse.
The aircraft, hotel rooms and rental cars in which your travellers spend their hours will need to be safe. We will need some form of proof of systematic good practice from travel suppliers. This doesn’t exist yet either. And proof of good practice should also apply to things not usually included in travel management, such as taxis, Ubers and airports.
There is a lot to do before we can safely travel again. The time to start thinking and preparing for this is probably now.
2. Supply Chain Collapse
You will need a TMC and an OBT with processes and systems that specifically manage the new travel risks. The irony is of course that exactly when we really need these suppliers to step up and develop they are in no state to do so. Don’t be misled by some curiously buoyant share prices. The travel supply chain is crumbling. And this presents the second challenge.
When business travellers do return to the airport, many of the current TMCs, airlines, hotels, car firms, consolidators and IT suppliers probably won’t exist. Many of those that do survive will most likely be skeletal. And many survivors will be saddled with debt. I don’t want to sound melodramatic, but consider that most of the people who made your bookings and who managed your account in 2019 have already gone. Already, most aircraft are in the desert and their crews are at home on the sofa. Redeployment of equipment and staff will take substantial time and money. Hotels are more readily recoverable, but they have to survive the crisis. By December, many won’t. And survivors in all sectors will be financially stressed, making it more difficult to restart and rebuild services.
Already, if travel were to return to a quarter of 2019 levels next month, there wouldn’t be the planes or the people to cope with it. If the regrowth of travel demand and travel supply is chicken and egg, the supplier chicken is badly wounded and with a poor prognosis.
There’s one area of supply collapse that is particularly problematic; the TMC. That is because most travel buyers understandably over-relied on their TMC to help them manage their travel. Travel is complex, but it is only mid-level in terms of expenditure and is not critical. And TMCs offered a travel management service, of sorts, covered by standard pricing. So why not use it? But this was never a good idea frankly because (1) TMCs are primarily sales agents for the airlines and hotels that provide 80% of their income, (2) TMCs don’t have the necessary procurement and management skills, and (3) TMCs should not be entrusted to monitor and manage the most impactful part of the supply chain, themselves. The overall outcome was that most companies spent more than they needed to and had very basic management, but didn’t have to bother much with this troublesome area of supply.
Whether you agree with my description of the past or not, it’s gone anyway. TMC account management services are halfway through a landslide.
Moreover, when things do get moving again, the supply chain will probably be in a complete state of flux. Airlines have long wanted to change things. The post-war distribution system that was dominated by TMCs, travel agents and the GDSs was expensive. The fees and commissions that airlines had to pay to the distributors to sell their products were high. IATA’s NDC initiative was a coordinated attempt by airlines to restructure the system, or at least to bargain the costs down. But now, with the intermediaries so badly weakened, the airlines are being presented with an unexpected and historic opportunity. Those that survive will almost certainly push ahead with their NDC project even harder to reduce costs. It will be a very different travel industry that emerges in 2021.
So, these are the challenges as I see them. Sorry if I’m a bit short on solutions at this juncture.
Never in my 22 years of procurement consulting did I think I’d see such tectonic cracking. The travel supply chain has been dominated by the distributors and intermediaries for decades. The buyers and the travel suppliers have always lacked the ability to consolidate and effectively challenge. Now, in New York, London and Frankfurt, strategists are eyeing off the vacant territory opening up in the middle of the supply chain. My guess is that the larger surviving airlines will pursue direct corporate selling by energetically pushing ahead with NDC. And I think that some travel IT firms will try to occupy the TMC space. It’s going to be messy.
Whatever, there’s some internal policy and process work that needs to be done before we can board the 6.15 to Brisbane again.
Tony O’Connor is Managing Director of Butler Caroye. www.butlercaroye.com.au