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A tricky return to travel | What procurement managers need to do to clear the 2022 runaway

Tony O’Connor has been an expert commentator for PASA for more than 20 years covering travel procurement in depth. As runway traffic increases and travellers eye off post-pandemic deals, Tony looks what’s on the cards for travel managers in 2022.

Tony is Managing Director of Butler Caroye and the CEO of fare auditing company Airocheck. Established in1998, Butler Caroye is the region’s leading independent management consultancy specialising in the corporate travel supply chain.

Hear from Tony at the exclusive one-hour “Time to Travel” free webinar on 20 April – limited places. You will learn the inside knowledge on what you need to do to ensure safety, supply and value in 2022. 

What’s ahead for travel in 2022

Without over-stating things or looking for problems, what do procurement managers need to consider as travel recovers in 2022? 

We will be hearing from three experts in our “Time to Talk About Travel” webinar on 20th April. In preparation for that, here are a few issues that occur to me.

Services lagging

Firstly, the supply chain isn’t what it used to be. Domestically, most air routes will be humming again, but the number of services will lag demand due to the difficulty, time and cost involved.

And airlines need to be certain before they commit. 

Some routes will have reduced services ongoing. The same applies to hotel rooms and cars. It will be harder to go wherever you want whenever you want. Travellers and managers expectations will need to adjust accordingly. As we have seen this week with Sydney airport carnage the return to the check-in lounge for passengers has teething problems compounded by delays. 

Prices on the rise but discounts in play

Secondly, things will cost more; in places, for a time, substantially more. The oil price aside, costs for almost all travel suppliers have risen due to diseconomies of scale and scarcity of inputs inside disrupted supply chains. Airlines and hotels might offer more discounts to reignite demand in the coming months. But this is costly and risky, and balance sheets will overrule eventually. Prices will rise and settle higher until those supply chains are repaired. Also, on various air routes and in many locations, fares and rates will be sucked higher anyway by reduced competition.

PASA unveils new travel event for 2022

The game has changed with supplier deals

Thirdly, your supplier deals may be irrelevant or unenforceable, leaving you exposed to the slings and arrows of market pricing. 

Most of your deals had volume commitments that you cannot satisfy. And, even when contracts have been extended and those terms relaxed, airlines, hotels and car firms will have difficulty honouring many of the discounts, pricing and other commitments on their side. 

Later this year and next, there will be a lot of creative re-contracting to do. If buyers are just reactive, the new terms will end up too far shifted towards suppliers’ interests. Surviving travel suppliers will be red-raw with risk aversion.

Time to revisit travel policies

Looking internally, traveller safety is obviously a bigger concern. There are two main consequences. Travel policy needs to be updated. And the systems and services of your TMC really need to be up-to-scratch to apply the necessary new policy and risk management measures. Note that there has been a shift in the flavour of corporate travel policy. Pre-Covid it was largely a means of setting what travellers can and cannot do. Now, it is more about travellers’ safety and rights.

Look to upskill 

Bookings are more complex. The travel restrictions and complications caused by Covid will linger. The recovery so far has been domestic. When international travel picks up, hopefully before 2023, planning and booking an itinerary will be a more complicated exercise, perhaps for years. Greater levels of skill, knowledge, consultation and experience will be needed from the TMC.

Which brings us to the TMC; probably the most impacted of all travel suppliers. Not to pre-empt the webinar, but it’s already clear that TMCs cannot find the booking consultants that they need to cope even with the recovery in just domestic travel so far. Clients are suffering long delays. Experienced former staff are not responding to offers of higher salaries. They have moved on. Online booking tools should be able to alleviate the problem in the short term, but not when international travel recovers.

And if your TMC has not yet closed, merged or been taken over, this may yet occur. TMCs are suffering the double whammy of bookings starvation and a commissions slump. Airlines are cutting the sales commissions they pay to TMCs, which in 2019 accounted for over 70% of TMCs’ revenue. Expect TMC fees to rise. But also, this means that you have to be more vigilant in preventing the two main ways that TMCs augment their incomes behind the covers; hidden commission chasing and hidden mark-ups. 

Register now for travel webinar

Register free for “Time to Talk About Travel” on 20th April. 

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