Managed Travel 2.0 has a huge implication for travel management companies (TMCs).
Namely, the business model for TMCs is going to change.Here’s how I see it:
Fifth in a series on Managed Travel 2.0
First, let’s start with the core issue – the booking transaction. It’s the center of the TMC’s universe. They organize and price their business around this function. Everything else is basically an ancillary service. It’s all about the transaction fee.
No surprise that clients view the transaction fee as a bull does a red cape. It’s highly visible, a tempting target, and instinctively from a procurement perspective, it’s something to attack.
And what’s worse, from a TMC’s view, is that many clients expect everything to be included in the transaction fee – for free. Mid-office quality control. Data reporting. Mobile tools. Advisory services. Maybe not absolutely everything, but enough so that TMC execs shudder at the prospect of trying to pass on the cost of making or buying a new value-add service.
Will this focus on the transaction fee ever change? Yes. It has to. For two reasons.
2) Safety trumps every other aspect of a managed travel program. So companies will prioritize getting the booking data, regardless of where or how a traveler books. The technology will exist to capture these non-compliant bookings.
There we have it. Business travelers will have better booking experiences via consumer sites, still get discounted pricing, and companies will get that booking data.
Who needs a TMC anymore?
Or asked differently – What should be the core mission of a TMC?
Answer: Traveler safety and service.
Forget about relying on a transaction fee. Focus instead on knowing how to protect and serve travelers through the trip cycle. Isn’t that what companies fundamentally want?
And who better to provide those services than a TMC? A TMC with a broader vision of its core mission; one that can evolve with the times, the trends and the technology.
I see a future where TMCs bid to protect and serve the travelers of a company in the same way a healthcare insurance company does. The bidder sizes up the traveling workforce, understands the travel patterns and booking paths, and quotes an all-in traveler safety and service fee. Maybe it is $200K, or $2 million – but it isn’t a $20 transaction fee.
Under this model, TMCs compete on their safety and service capabilities. What will count is their ability to acquire booking data from a wide variety of consumer sites, and their ability to serve travelers regardless of where they booked.
Instead of a red cape, buyers should offer this new target. TMCs that come closest to hitting this bulls-eye will be the winners.
Previous posts in this series:
- Why Traveler Friction Matters
- The Convenient Fiction of Program Optimization
- The Rise of Managed Travel 2.0
- Key Principles of Managed Travel 2.0