Navigating the Evolving Landscape of Corporate-TMC Relationships, A New Era Begins
The landscape of corporate relationships with Travel Management Companies (TMCs) continues to evolve, as demonstrated by NDC, the recent acquisition announcement between American Express GBT and CWT, as well as new technology solutions. While some aspects have reverted to pre-pandemic norms, many others have embraced change, reflecting the dynamic nature of the industry in response to emerging trends and challenges.
In this blog, we’ll look closer at eight trends we’ve seen between corporate organizations and TMCs in the last few years.
- Embracing Complexity in Relationships
The past couple of years have seen a shift towards more complex relationships between corporates and TMCs. This transition period has been marked by increased digitalization of the value chain, third-party software integrations, and heightened due diligence on the buyer side. With technology driving the need for more intricate solutions and interfaces, contracts have become more detailed and comprehensive, reflecting the evolving nature of the partnership.
- Exploring New Remuneration Models
Amid discussions surrounding subscription models, the predominant mode of remuneration still revolves around transaction-based fees for TMCs. While various models are being explored, including fully loaded transactions and performance-based agreements, the key consideration often lies in budgeting and payment methods. Despite the potential for hybrid models, transaction fees remain a cornerstone of TMC revenue streams.
- Navigating Fee Dynamics
With inflationary pressures in travel prices, the trajectory of TMC transaction fees warrants scrutiny. Existing contracts typically incorporate Cost of Living Allowance clauses, providing a framework for fee adjustments. These clauses define the individual countries reference indexes (multinational agreements) usually capped and applied on all or partial (offline only) fee’s structures. However, competition remains fierce, with pricing driven by perceived value and market dynamics rather than solely by inflationary pressures.
- Adapting Fee Structures to New Market Constraints
TMCs have introduced new types of fees in response to market demands and evolving service offerings. These fees may include surcharges imposed by airlines and their reporting, access fees for multi-channel content (NDC aggregators), or specialized services such as re-shopping for air and hotel bookings. The acceptance of these charges by organizations varies depending on their outsourcing preferences and perceived value.
- Balancing Service Levels with Technology
Staffing issues have posed challenges for TMCs, but improvements are evident, accompanied by a greater reliance on technology. Service Level Agreements (SLAs) are evolving to incorporate tech integration and automation, focusing on user satisfaction, agility, and response times. The goal is to enhance service quality while optimizing operational efficiency through technological advancements, with or without generative AI along the way.
- Defining the Level of Outsourcing Required
As budgets tighten and staffing becomes limited, managing various tasks such as demand management, procurement, user support, and supplier relationships on the customer side can be challenging. Now is the opportune time to assess and align these responsibilities to determine the extent of outsourcing to your TMC and/or third parties.
It’s crucial to prioritize tasks using the MoSCoW method, distinguishing between essential, strategic, and non-essential activities across different functions. Once prioritization is done, define the value-added services, related KPIs, SLAs, and deliverables expected from partners to maximize value proposition.
- Embracing Innovation in RFP Processes
With an increasing number of organizations considering TMC RFPs, the focus has shifted towards aligning with current and future challenges. Key considerations include multi-channel pricing distribution, innovation along the value chain, performance measurement, and sustainability initiatives. Creativity and adaptability are essential for both TMCs and organizations in navigating the tender process effectively. (*Bonus Read: Why run a TMC review before an RFP) And their capabilities to deliver on the promises, commitments and empowerments.
- Rethinking the RFP Approach
The trend of TMCs abstaining from bidding on certain RFPs underscores the need for meaningful engagement and alignment of objectives between parties. RFP processes should reflect genuine interest and investment from both sides, moving away from mere benchmarking exercises. A strategic approach to RFPs ensures that resources are allocated efficiently and that partnerships are formed on solid foundations. This is an area where a continuous improvement approach is key to achieve full benefits of your investments.
In conclusion, this new era is prompting significant shifts in the dynamics of corporate-TMC relationships, and the recent acquisitions could bring about a new direction going forward. By navigating the evolving landscape collaboratively, corporate clients and TMCs can foster mutually beneficial partnerships that drive value and sustainability in the business travel management sector.
About Areka:
AREKA is an independent firm providing customized, end-to-end business travel management services to organizations worldwide. Areka’s aim is to empower travel managers and buyers to reach higher performance targets across all areas of their travel program, including corporate travel, expense, and strategic meetings management. Contact the team today!
