Forecast for Travel Buying Tools

Are there any better ways to buy business travel, other than the standard RFP/tender?

That’s the question I took on in Lisbon a couple of weeks ago.  This slide summarizes my views on four alternatives.

With a few exceptions, it’s not a sunny outlook.

The good news is that reverse auctions continue to work, to a degree, in the hotel category.  They can work in the rental car category (I saw this first-hand ten years ago), but it depends on the rental car suppliers’ willingness to participate.

Consortia buying, with a few exceptions, is a non-starter for air, and problematic for hotels.  It can work pretty easily for rental cars, so I expect we’ll see more of that over time.

Spot buying, where a buyer skips long-term contracts in favor of constantly-adjustable discounts, is a technique that intrigues me, even though it isn’t practical for most travel programs.

Hedging, a concept announced nearly two years ago, won’t work anytime soon for hotel or car rental rates.  The importance, and by proxy the market size, is just too small.

For airfare hedging, it seems it could work, but probably only if the mega-TMCs or credit card firms wanted to get involved.  I recently spoke to Denver Lopp about his firm’s progress in this area.  “No customers to date, but it’s a long educational road”,  he said.  Worth noting: long-time industry airfare expert Bob Harrell is working with Lopp to maintain a useful airfare commodity price index.

Here’s the 8-page deck that I used in my Lisbon presentation: NBTA Lisbon Over the Hedge It gives a bit more color commentary around my rationale for each forecast.  For more thoughts on this topic, please see this post on consortia buying; this post on bulk buying (paying up front); and this post on recapturing your frequent travelers’ miles.

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This entry was posted in Airlines, Ground Transport, Hotels, Travel Procurement. Bookmark the permalink.

2 Responses to Forecast for Travel Buying Tools

  1. Pingback: Tweets that mention Forecast for Travel Buying Tools | Gillespie's Guide to Travel+Procurement -- Topsy.com

  2. Scott Gillespie says:

    (This was submitted by a senior consultant with a TMC who prefers to not be identified.)

    Saw the latest article from you..

    Consortia.. does not work for a company that’s not an SME. It’s not
    mutually beneficial, the suppliers give and the companies make
    promises, they have zero control. I’d say it doesn’t work, especially not in Europe,
    even for hotels. We see barely 20-30% of hotel spend go through the agency
    channel where the company can control their travelers’ hotels.
    Massive leakage. Travelers go hotel-direct or local admin calls it
    in. Some of this is deliberate, they want a different hotel than the
    one the company chose.

    This is the top question I get from most non-travel procurement people
    “Why can’t our TMC pool volumes and negotiate on behalf of all its
    clients?” They are so used to beating up suppliers or have a
    we-are-XYZ-and-so-deserve-discounts. They assume travel buying can be
    controlled like other commodities. They can’t. Plus, they don’t
    understand (or care for) the travel deal fundamentals; suppliers gives
    you discounts, you give them more marketshare they’d otherwise get.

    Reverse auctions.. another procurement favorite. Airlines is a
    non-starter. Even hotels has to be done in a VERY carefully controlled
    environment. If you don’t have the ability to control share, what’s
    the point?

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