The role of the TMC in sourcing business travel
The traditional RFP is on the way out. At least that’s the verdict of recent research which found that 51% of travel managers have changed their approach to hotel procurement in the last three years.
The survey by ACTE showed that 10% of programs have scrapped traditional hotel RFPs altogether, switching to dynamic or continuous sourcing in search of better traveler compliance and satisfaction, greater flexibility and financial savings.
And why not? The only mystery is why 42% of travel managers are still unfamiliar with continuous sourcing, especially as today’s generation of travel buyers is probably less willing to accept the status quo than those who preceded them.
Traveler needs, relationships with suppliers, and travel technology have all changed
Business travelers’ needs have changed a great deal over the last decade. Programs now have to satisfy Baby Boomers, Millennials and Gen Z alike. Travel buyers ignore social peer sourcing at their peril if they are to hit the targets that trigger volume discounts, and with global hotel rates predicted to rise by up to 3% in 2019 and air fares by up to 2%, demand for creative thinking that can unlock more value has never been greater.
Collectively, API access, travel 3.0, better informed buyers, more data and a new generation of travelers is changing the way business travel is sourced. The traditional master/slave relationship that existed between many buyers and their suppliers has changed too. Suppliers’ resources are more limited, so they concentrate on corporate accounts they know, are best placed to service and where there are no nasty surprises. These days, effective supplier engagement is essential.
Although there’s a wide range of travel tech coming onto the market, buyers need to be careful because technology decisions, often made by finance professionals, can have a big impact on travel management. Then there’s the major strategic issue of whether to source locally, regionally or globally. Some of those who have gone global have been surprised to find that the reality is not as good as they hoped.
The role of the TMC will change too
So where does this leave the Travel Management Company in the sourcing world of tomorrow? Some buyers believe they need more from their TMCs, especially around the hotels in their programs. Most agree that TMCs will play a more important role in sourcing decisions over the next few years because of their ability to plug into critical content. No one is better placed than the TMC to know what’s going on in the market and to advise their clients on how to plan accordingly.
With NDC (New Distribution Capability) in its early stages of adoption, TMCs will be a vital conduit for airlines unable to invest the dollars into digitization. The changes in sourcing will be so expensive, the pace of adoption so inconsistent, and the journey so long that TMCs will be put in a position of delivering education on behalf of the supplier community.
TMCs’ unique sales pitch is impartiality. Admittedly, some could do more to demonstrate on which side of the buyer/supplier fence they sit, but collectively TMCs have a duty to protect the reputation of the TMC community by putting their clients’ interests first and always offering the most appropriate travel deals to meet the trip objectives, regardless of any preferred supplier relationships the TMC might have.
The retailing of business travel is changing too. The business is no longer purely transactional, outside of selling air tickets. Most travel technology-influenced businesses have become enterprise relationships based on a set number of users. Corporations are opting for a shopping cart approach, so TMCs will have to become B2B shopping malls where SMEs (Small of Medium-size Enterprises) choose to shop.
In this changing market, the biggest threat to TMCs also provides their greatest opportunity. The bewildering array of tech means that buying decisions are being made based on anxiety and fear. TMCs alone have the understanding, insight and knowledge to guide their clients to make the right choices because they have a holistic view of, and the opportunity to interact with, the market at large.
Continuous sourcing provides travel managers with the opportunity to interact with a wider cross-section of the business travel supply chain. The opportunities for TMCs around new thinking in sourcing are exciting, providing TMCs have a clear technology strategy, know what their core business is, and avoid trying to be too many things to too many people.