Maximizing Customer Supplier Relationships with Travel Management Companies
By Donna Brokowski General Manager Partner Solutions Group, Travel and Transport | June 11, 2017
The relationship between business travel buyers (the customer), the travel management company (TMC), and hotels has evolved since the beginning of travel management into one of interdependency. The hotelier must understand the TMC/customer relationship in order for hotels to work more effectively with TMCs to establish, build, and maintain their relationships with the customer.
Hotel companies invest large sums of money to create a direct bond with each traveler, travel manager, and decision maker in a corporation; however, many hoteliers may not realize that the managed travel ecosystem relies on a key entity that is sometimes overlooked or undervalued-the TMC.
The TMC's role has evolved drastically from service offerings that were commonplace 20 years ago-when agent-assisted transactions comprised over 80% of business travel, hotel content came primarily came from the global distribution system (GDS) or directly from the hotel, and the RFP process came by way of paper documents via facsimile or the mail. Today TMC online adoption is over 50%; content is multi-sourced and includes intermediaries such as wholesalers, online booking tools (OBT), brand web sites, and direct connect options; and the proliferation of the electronic RFP process, while efficient, can be cumbersome, complex, and time consuming.
Today's customers find value in partnering with TMCs for a variety of reasons: the movement to adopt strategic procurement practices to drive down travel costs; risk management and duty of care; trip continuity in the event of supplier cancelations or unforeseen geopolitical events; an effort to mitigate rising travel pricing; and the need to manage increasingly complex travel requirements of the business traveler. Today's TMC business model is far more complex than serving as an intermediary to the traditional travel agent. Managed travel has developed into sophisticated, consultative businesses offering an array of services and technology solutions to help customers solve everyday issues related to travel. TMCs help businesses successfully develop, implement, and manage their travel programs with a high level of customization. These services are critical components to the make up of the travel ecosystem and directly influence hotel purchase, stay, and traveler satisfaction.
At the same time, hotels' approach to customers has also changed. Two distinct approaches have emerged: revenue management practices that yield the best rate and the strategic targeting of specific customer segments via channel management.
In today's travel purchasing environment hotels need to understand that channel management does not equal market segmentation. It is a poor substitute for the market-driven segmentation needed to attract the best mix of business, leisure, group, local, and affinity guests that will achieve maximum occupancy and yield. Technology has made purchasing channels transparent to both the travel buyer and the travelers themselves. TMCs are contractually bound to book lowest available rates. TMCs will often be charged for booking online travel agency (OTA) rates, wholesale rates, and the recent proliferation of online-only or member-only hotel rates. This can quickly diminish savings, turning a lower-cost, touchless transaction into an assisted transaction that requires intervention and manual processing. The net effect is a loss in trust between customers and hotels. In order to be effective in meeting the needs of our common customers, true channel transparency is vitally needed. If hotels fully understand the role of the TMC and the TMC's relationship with the customer, they will be able to better position themselves to achieve the best results for all parties.