Archive for August 2010

Can TMCs Really Influence Business?-Switch selling

In my last two pieces on this subject I explained that airline suppliers still incentivise TMCs in the belief that this will bring them greater volume and share despite the inroads they themselves have made direct with the corporate sector. Also because some fear what they may lose if they don’t as they get denied access to TMC bookers and account managers if they are not ‘in the programme’. I also explained how the shape of these deals has changed in order to react to the removal of commissions and subsequent new style management fee and transaction fee contracts.
But the real cruncher is can TMCs really move their business around between airlines and if so what impact could this have on their clients. Over the next few paragraphs I will give my honest opinion on this vexing subject and hopefully come up with a few things for you to consider along the way. Like all responses to difficult questions the answer can be ambiguous as there are so many different TMCs with varying degrees of ability and strategy so I will focus on what I see as the more professional of the grouping.
Obviously the choice of supplier is by no means only dependant on the whims of the TMC. The corporations have deals themselves that they expect their TMC to support and then we have the traveller who sometimes ignore both. In fact the travellers also have their own ‘deals’ with airlines known as frequent flyer points, upgrades, and lounge access to name a few. However the power to influence travel choices by the TMCs is growing as the market changes and they become more of an outsourced arm of their customers. Ironically many of the actions taken by airlines to remove some of the ‘rewards’ they paid to TMCs (commissions etc) is creating an increase in their ability to influence airline choice.
Getting down to basics here are just some of the ways TMCs can and are moving business.
a) The SME market mainly buys on price and has few direct deals of their own therefore the TMC can choose which suppliers and fares to put towards them.
b) The arrival of online booking tools is giving TMCs a greater ability to select what to promote and exclude those they do not.
c) There are still surprisingly many people out there that seek advice and recommendation about airlines and their services and the TMCs can control what their people say far better than they used to. If a supplier is denied access to bookers then what chance do they have?
d) TMC account managers play a far bigger (sometimes unique) part in what supplier goes into their client’s programme. By working closely with a partner airline they can ensure that they offer the best package of benefits. This should end up in a win/win situation except the supplier ends up having to dig deeper in their pockets to reward all parties.
e) Corporations tend to pick two suppliers on their main routes. For example on the UK/USA sector it is most unusual not to have a two carrier policy to keep both sides of the Atlantic happy. This gives the TMC a superb opportunity to switch sell playing one airline off against the other if they choose to do so. And all this within policy.
f) Another growing area for flexing and switching is unbundling of fares. This creates an opportunity for a savvy TMC to translate true costs of journey in a proactive and rewarding way. The more airlines complicate things the more opportunities arise for the middle man.
g) As mentioned in my previous piece the top TMCs are developing their own platforms so they can choose what fares and services find their way to staff, booking screens and self booking tools. This kind of dynamic pricing will create such a sea change in TMC control and selling ability that airlines may have to think again about their distribution strategies.
h) The decision by many corporations to allow their travellers to ignore set policy and choose best fare on the day provides a further opportunity.
In conclusion I am certain that TMCs can influence business and more than ever before. I would however add that I do not think this should be too worrying for corporations. Yes, TMCs do get incentivised by airlines but hey, if they weren’t you would be paying more so I suggest that ‘sleeping dog’ should be left to lie. After all you still hold the ace card in that the principal way to move business is to offer the best price and product and no TMC would be daft enough to forget that. In the past one could move like for like business but now it has to be cost justified and done with the knowledge of the corporation who still calls the shots.
I hope you found this interesting or at least thought provoking. I plan to write a further summary on where I think all this is going. I think you will be surprised by some of it!

Travel Compliance – So very easy.

After 42 years in the business and 3 years out I am still aghast that almost all corporations I meet and hear about have not been able to crack the compliance issue. By this I mean their directors, executives and workforce being given a travel policy and complying with it.

I cannot really see the point of building a technology and service infrastructure, buying new innovation and deeply detailed specifications only to fail in the most basic and obvious areas of communication and buy-in. You can have the smartest schemes, the keenest deals and the best online and offline support but if you do not tell people what you have done, why you have done it and got the unflinching support of ALL your board then there is very little point for the time and effort put into it.

To me it is so glaringly obvious that, before anything else, the fundamental communications groundwork must be in place. This should include:
a) What you are doing.
b) Why you are doing it.
c) What will be achieved?
d) A clear rationale for change.
e) Unequivocal evidence of executive management support.
f) A total mandate from the man at the top.

All this as a minimum should have total distribution to existing travellers and new entrants to the company. It should be kept alive by updates, progress reports, competitive performance tables and possibly even a ‘bad boys’ list.

There also has to be two areas that MUST be addressed and the both have equal importance as, without both, you will get nowhere. Firstly you have to clearly answer all the criticism and arguments against compliance before they are ever raised. This is easy as everyone should know what they are. They will range from ‘what if I find a better fare’ to ‘the timings offered were all wrong’ to ‘it’s my budget and I can spend it as my business demands’

The last comment raises the second biggest issue which is managing the cost, savings and credits of policy compliance. If you cannot do this one then I doubt you will move forward from where you are today. The answer could be anything from internal ‘incentives’ to central budgets but you must find it.

So there you are. Easy! No I am not being flippant, it should be easy. After all, if travel is really that commodity you buy then it should be treated like computers, software or anything else you purchase and get the same type of compliance. Then and only then can you move on to all the aids and gizmos available to keep the policy fresh, interactive and easy to follow.

Brushes with the Rich and Famous 4– Richard Branson

I have met some pretty strange ones in my time but I think the weirdest is Richard Branson. Why weird? Because he is to me, a mass of contradictions. He is sincerely insincere. He is brashly sensitive. He may not be what he appears to be on a minute by minute basis. Or put another way, I would not trust him with my granny but I am sure she would say he is such a nice man. I think he is like an entrepreneurial Tony Blair.

OK, I will confess. He makes me cringe. The cheesy smile, the wacky publicity seeking dressing up and the cheeky chappie mannerisms drive me to distraction and are even worse when he is doing it right next to you. I also think he treats women appallingly but at least he seems to have stopped picking them up and flipping them head over heels in public like he used to.

The first time I experienced his Jekyll and Hide personality was on the Virgin Atlantic inaugural trip to Hong Kong. There was a mix of press, travel industry people and corporate VIPs but Richard only had eyes for the newspaper journalists and he was excellent in the way he handled them. He was being briefed all the time by his PR people who whispered feedback into his ear and suggested who he should work on. For example one of his aids found out that a journalist had mentioned that he had left a sick son at home just to come on this trip but Richard had not spoken much to him. Within a minute Richard had located him, embraced him and called him by his first name. He explained how personally pleased he was that the columnist had made the journey despite his sick son and how keen he was to talk to him. The man was on cloud nine and Richard wandered off to use his talents on the next stranger. Pure class.

At the same time as he was working his miracles he was also creating antagonisms elsewhere .Top people from top companies were watching these routines and feeling their own egos being bruised. Some began to wonder why they had come along only to be treated like also-rans. You see that is the trouble with people like Richard. If you perform like that everyone wants a slice of it and gets annoyed if they don’t. If Richard is there and spreads his aura then any of his long suffering team becomes second best in many guests’ eyes and envy grows. As for me? I don’t think he addressed a word to me the whole trip….but I’m not bitter!

My next brush was far more personal. I had been contacted by Virgin and invited to have lunch with Richard at his private home. After I had got over the surprise I willingly set off to his house in a beautiful leafy lane west of Bayswater. It was a big and relaxed home full of family photos, toys and knick knacks and a liberal spread of dust and dog fur. A true home. Richard arrived, greeted us warmly and invited me and the rest of his travel agency guests to relax around his big old oak dining table. Very homely.

The lunch started and it was not very long before the main real agenda was made clear. In short Richard wanted to take the opportunity to rubbish British Airways and encourage us to do similar. It was extremely embarrassing and I felt compelled to gently tell him that I did not share his negative views about his key competitor. This proved unpopular. Richard only just stopped short of calling me a bloody idiot. In fact maybe he didn’t stop short? It did however mean that this particular subject faded away and other issues about Virgin were raised. Avoiding the risk of Richard being rude to me again I found something nice to say about Virgin which was not difficult as I admire them greatly. There was a pause and then Richard turned to me and said ‘You know John (he got my name wrong) that was the first sensible thing you have said today”. You could have heard a pin drop and I replied “you know John; I am still waiting for yours”! Indigestion all round.

The weirdest thing about this lunch is what somebody told me about the house afterwards although I cannot prove conclusively that it is true. I was told that the lunch house was his ‘entertaining home’ and that his real residence was next door. They said he gets his people to duplicate what he has in his real place right down to the photos, toys and dog hairs. Could it really be true? If it is it kind of puts into life my perceptions of Richard Branson. A complex man who only shares himself with some but tries to make all feel close. A genius in some things. Loose cannon in others. But despite his possible weaknesses he is one of the most enduring and wealthy self-made multimillionaires in the world today.

Can TMCs Really Influence Business? - Deals

OK, so we got to the point where we ascertained that TMC/agents still get incentives from suppliers, albeit presented in a different shape. I also mentioned that, in my opinion, this need not necessarily be a bad thing for corporate customers if managed right. What I did not go into in any detail was a) what these deals are b) how TMCs do (or do not) shift business and c) how such deals could benefit all. So let me address at least one of these points now and deal with the others another time.

What kind of deals?

There are three main types which are growth percentage rewards, net fares that can be marked up and increase share payments.

Payments for growth are usually a percentage of net ticket value sometimes paid back to zero and sometimes just for the growth element compared with previous year. Percentages paid vary enormously depending on supplier size, their importance/share of the local market and their strategic need to buy a way into the region. I have heard of deals ranging around 2% from a big volume airline to 50% from someone trying to make inroads into a market. Such deals are pretty unfashionable now in most primary markets but do still happen in numerous places around the globe especially from suppliers who have no effective systems to measure performance.

As time passed some of the more major airlines started to get concerned that TMCs might simply start doing growth deals with all their competitors as, in a growing market, the prospects of growing volume with everyone was high. Also volume could vary greatly simply by the losing or winning of a major volume corporate account. This ultimately got addressed by airlines ‘red ringing’ the biggest clients which meant their volumes were taken out for volume and payment purposes.

There have always been a few net fare deals about. This is where an airline offers a fixed net price to specific agents who can mark it up by as much as they think they can get away with. These net fares were targeted towards specialist agencies who were involved in markets such as ethnic or tourist travel. In the main the plan was to gain this business but not dilute their yields by exposing such discounts to the corporate market. Nevertheless there has been growing overlap which usually manifests itself by corporate travellers that gets hold of the fare and demands to know why his TMC cannot match it. This has been going on for many years but in recent times some USA airlines have dallied in this area too by offering net business prices to TMCs instead of overrides.

In an attempt to make future deals work airlines started introducing rewards based on share increase. This is infinitely more difficult to measure and depended on the airline itself to produce the results with no way for the TMCs to verify them. Some of these deals became so very complex that it was almost impossible for anyone to predict what would be paid. .Another issue was that, for some dominant airlines such deals were considered by the authorities as anti-competitive and thereby illegal. However these deals are still widespread today.

Most modern deals are far more sophisticated and linked to ‘service level agreements’ (SLAs) although this term is a misnomer in my view. What they effectively do is reward TMCs for performing (or allowing) certain activities. These activities vary from allowing access to their staff, account managers and senior management to shifting share, providing key MI on their clients, promoting the airline’s campaigns and supporting a particular strategy. All such activities are measured and rewarded accordingly. These ‘incentives’ seem to work reasonably well for both parties as the airline usually sees more volume and the TMC gets it’s money in a way that negates them having to pay it straight on to the corporation as extra client income/overrides.

Originally TMCs used to negotiate SMAs with individual airlines but even that has moved on. Now the suppliers are trying to do deals by Alliances rather than individual members. These usually manifest themselves as umbrella incentives paid only if the TMC performs with a certain minimum number of their partners. This way the dominant airline in any alliance group can demand TMC preferred status for their smaller partners that would not otherwise register on their radar screen. Such deals are highly unpopular with most eligible TMCs for obvious reasons and particularly because many airline partners are either unable to provide accurate data or simply not a product they want in their portfolio especially if they clash with another preferred supplier.

Consolidation by alliances is one thing but the ability/desire to agree a global incentive agreement is even harder and suppliers have, in the main, been reticent to do this either with TMCs or corporations. Don’t get me wrong, there are some prototype deals out there but I am highly sceptical of their current value to anyone. After all the airlines still work on a system where they cannot tell their overseas offices what to do as they are cost centres in their own right and have the authority to say no.

Finally I expect to see a new type of deal arriving and it is not a million miles away from the net concept. Well actually it is here now but only in it’s formative state. The arrival of TMC specific fares is here and expanding. In the past, probably as a result of past legacies, airlines have stuck to treating all TMCs the same as each other as far as fares are concerned. This is changing with the arrival of new generation TMC technology platforms that can be very specific about who sees what fare where and when.. This will enable them to drive business to (and from) airlines at the press off a button. Airlines will be able to flex the fares they offer depending on need and thereby have a tighter grip on their yields in a similar way to what they do on their own dot com sites…if the TMC is incentivised enough to support them. As I say, it is early days but worth watching.

This subject is vast and worthy of a day seminar rather than a brief blog entry however I hope it gives some a basic grasp of what is going on in this somewhat secretive area. More on how such deals are supported and how I think all could benefit next time.

Brushes with the rich and famous 3 – Naomi Campbell

What with all the recent publicity about the lovely Naomi I thought I should award her an exclusive in my humble blog. Like those wonderful cosmetic advertisement ‘She’s worth it’.

I have flown with Naomi three times and got hugged by her once. Not bad averages really, especially as she was in her pyjamas at the time. Let me explain.

The first two times I saw her were on Concorde (naturally). There I was sitting at the back of the cabin with one of the only two remaining empty seats next to me. The flight was clearly being delayed for someone and suddenly she was there. She glided through the door flowing along with tight pants and a sheer silk blouse that left zero to the imagination. You could have heard a pin drop as she sasheyed further towards me and I thought ‘oh my, she is going to sit next to me. At the very last moment she gave me what I then thought was a shy and coquettish smile and……walked straight past. Behind her was an enormous Texan with a gut like a zeppelin who levered himself into the seat next to me, smiling knowingly saying “I guess this ain’t your day son”.

I have to say though Ms Campbell was sensational in that she is one of not too many that looks far better live than she does on the cover of a glossy magazine. She also seemed to have a skill that turns tough international business travellers into fawning lap dogs. “Do let me get your bag off the carousel Ms Campbell”, Let me help you with that Ms Campbell” “Where are you staying in New York Ms. Campbell”. And that was only me. The other passengers were far worse! My last view of her on that occasion was seeing this vast luggage belt with all the male Concorde passengers plus Naomi jammed in one small area as they all vied to carry her Louis Vuitton overnight bag.

My last brush with Naomi was really weird. I was sitting in seat 1A on a flight to Sao Paulo and just before the doors closed I was asked if I would move back a seat to 2A. Reason given was they had a VIP boarding and she always insists on 1A so as not to be bothered by anyone. Being an amiable soul I agreed to move and on wafted the lovely Naomi once more and plonked herself in my ex seat. She then proceeded to talk simultaneously on two phones and a blackberry while we taxied to the runway. She was finally asked to stop by a rather wary air hostess as the engines revved for take-off.

Once in the air she was straight in the toilet and emerged about 20 minutes later dressed in a pair of those grey BA first class pyjamas and a face covered in cream. On any one else it would have appeared awful but on her she looked 1 million dollars. I guess that is why she is still one of the world’s top models. She would make a potato sack look classy.

She obviously planned to go straight to sleep and, as I had a flight load of work to do, I popped round to her side and asked if the light would bother her. She reacted as if I had poked her with a cattle prod by recoiling back, muttering something incoherent and looking the other way. Having faced that apparently hostile response I slunk back to my lonely seat and grappled out my PC and spent the next four hours preparing numerous emails about very little.
Suddenly something changed. I could see a dark grey shadow moving towards my small pool of light preceded by the smell of a heavenly and expensive perfume. It was Naomi. Next thing I had been grabbed and clutched to her bosom. Am I hallucinating I wondered? Should I have stopped at two brandies after dinner? But no, it really was Naomi Campbell suffocating me in a most original but not entirely unpleasant way. She finally released me and said huskily that I had been very nice to her earlier on and “thank you”. Wow I thought, maybe some sections of the media were wrong about her and she was a sweet thing really.

I drifted off to a perfumed sleep and woke on the final approach to Sao Paulo. What woke me were Naomi’s phones, all of them, and she was going ballistic at some poor soul on the other end of one of them. She was demanding to know where he was, who he was with and threatening to get the next plane home. This was before her flight in had even landed and none of the crew seemed inclined or brave enough to tell her to stop.

We got to the gate and set off for the baggage hall. By this time Naomi was screaming at people demanding her bags NOW so she could check in for the return flight. The fuss she created was so great that security was called and I beat a hasty retreat through customs.

The next morning I was having breakfast and listening to the news when her name came up again. The newsreader was saying how Naomi Campbell had collapsed apparently ill at Sao Paulo airport and was rushed to a Brazilian hospital to have an emergency cyst operation. So that is what it was all about I thought. Or was it? Life is never boring when flying with Naomi Campbell.

Brushes with the Rich and Famous 2 – Conference Moderators

Like many large companies we used to hold annual conferences for our staff and we always used to hire interesting/celebrity guests to either occupy a guest speaker spot or moderate the main sessions. The results were sometimes fascinating, sometimes disappointing but never boring. It was not at all easy for them because our workforce was young, fun loving and also pretty merciless to those that they felt were either patronising or disinterested in them.

We always tended to book people like newscasters, TV presenters, explorers, travel industry leaders or suchlike and their performances were as diverse as their occupations. Here are just a few of the people we used and what we thought of them.

The most interesting speaker we ever had was Sir Ranulf Fines. His ability to casually explain how he cut his own frostbitten fingers/toes off was pure theatre and the knowledge he imparted on some of the coldest most hostile parts of the world kept the audience rapt. Unfortunately he was also the most boorish bad mannered guest I ever met. He arrived and refused to speak to anyone. He said he was being paid for one purpose and that was not small -talk to our directors or VIPs. He literally went from snarling egotist to fascinating hero and back to egotist at the blink of an eye. A thoroughly unpleasant person in my view but I would re-book him tomorrow for his spellbinding speech.

Other explorers we used were Benedict Allen who demonstrated how to eat Witchety grubs and Quinten Kountze who took off his false leg to show us where a lion had bitten it off! Both good value but best not just before lunch!

Newscasters and TV hosts were another good source, particularly as moderators. The best I remember was Fiona Bruce who I admittedly drooled over especially when she charmingly ‘slapped down’ my over attentive boss. The very worst was Adrian Chiles who rivalled Sir Ranulph’s ego and lack of interest but sadly not his genius. He stomped in still wearing his cycle clips clearly un-researched and overtly showed he could not wait to leave..

The very best at his job was Peter Sissons. We booked him to moderate in the style of his show ‘Question Time’. Boy did he make me and the rest of the executive team squirm as he close questioned us on our salaries, strategy and staff benefits! Some still bear the scars but sadly not those who had the hides of rhinos but the guiltiest consciences.

The great thing about Peter was the way he really tried to join in which was almost his undoing. So much so that I could possibly still blackmail him if I had the desire to do so! We wanted to get all 1200 staff to the conference so we decided to run three back to back day sessions along with three evening dinner parties. It was like a huge endurance challenge and my part of the project included running the evenings and paying the bar bills. The latter were costing at least £11,000 a night which adds up to quite a few pints of beer and made my expenses claim interesting to say the least.

Peter stuck with us from start to finish. He was extremely self aware because of his public profile and very careful not to compromise himself in the slightest way. He wore exactly the suit and tie he uses on TV (he has a wardrobe full of the same suits) and behaved soberly and impeccably almost to the end. By the third night we were all pretty exhausted. Peter had worked hard all day and his guard began to slip slightly especially as he had been targeted by three of our naughtier girls from our London office who’s table he was sitting at. By the end of the evening I spotted him half asleep, jacket off, tie undone and the girls undoing his shirt buttons. I stopped them immediately after I took my all too damning photograph.

For a while after I still heard from Peter who always casually mentioned that photograph and wondering if he could have the original negatives. He never got them but I never used them as he was a good presenter and a great guy who behaved impeccably throughout.

Our conferences are legend and I will reveal all of what went on when I feel brave enough. In the meantime here are some verdicts on other ‘guests’:

Dara O’Brien the comic. Like most comics a miserable man when not performing. Spoke to nobody before/after although his act was great.

Steve Davis and Jason Leonard. Great sportsmen and good speakers. Both went out of the way to talk to our VIPs.

Bill Giles the weatherman. Awful.

Tiff Needell the car presenter. Bombed badly.

Can TMCs really influence business?

Ever since travel agencies were created by airlines as the most efficient way of consolidating and distributing their product they have had to incentivize them. Somewhat ironic really that in many ways they created their own Frankenstein’s monster which, despite their best efforts, they cannot kill.

They desperately needed to find a way to deal with the then need to seamlessly interline their services with other airlines using one fare on one ticket and the travel agent, ultimately to become travel management company (TMC), fitted the bill perfectly. They could do all the messy bits for the customer at a fraction of the cost that an airline would have to incur in order to do it themselves. In those days there was minimal technology and very little direct competition unlike modern times.

As time passed the airlines expanded and serious competition arrived on all the main air routes. Instead of being able to assume they would get all, or at least a fair share, of passengers on their services they now had to fight it out with a whole bunch of others. The big snag however was that they had created this TMC middle man who had all the access, relationship and knowledge with the end customer. They were also very firmly entrenched as they offered a ‘free’ service to the traveller and, in many cases, actually paid their company to use them.

So it was that ‘incentive overrides’ were born. This is where airlines not only paid TMCs a standard commission but also gave extra percentages on top in payment for extra passengers and/or higher share. The TMCs used this money to increase their profits, win business and subsidise other services they had to offer their clients that were not otherwise cost effective. They also used these deals co create new ones by playing one supplier off against another. Airlines hated it but always had a nagging doubt about how much business they might lose if the climbed off the incentive roundabout.

Finally things started to change as suppliers decided they could not afford these distribution costs, especially in this new technological world. They really did not like the lack of contact with their end customers and their doubts got greater about whether these incentives delivered a return on investment. After all the TMCs ended up doing deals with practically all the suppliers so who were they going to move business from? And, with the arrival of corporate procurement managers, could they influence business anyway? The main national airlines decided enough was enough, pulled the plug on commissions and, searched for other ways to incentivise that would yield better returns. Airlines can be a little like sheep in that whatever the national carrier does in their own market the others follow.

This brings us to today. A today that is supposed to mean that TMCs work for, and get paid by, their clients and the suppliers give all their incentives to the end user through lower pricing. Oh, if only life and business could be that easy. In actuality various types of incentives are alive and well albeit a little more covert and targeted than they used to be. In fact I believe most TMCs would have to shut down overnight if they ceased earning income from suppliers. Many of the incentives are relatively customer friendly and shaped in the guise of service level agreements (SLAs) but, be under no illusion, their purpose is to build an individual airline’s share whichever way you look at it. I leave it to you to decide if this is a good or bad thing.

So, back to the main question. Can TMCs direct business? My view is a qualified yes if they go about it the right way. By right way I mean with their customer’s knowledge and agreement and using the right methodology. There is a win/win possibility here with improved services, value adds and efficiencies being the end goal. Does it happen now? I have been out of ‘hands on’ touch for a while but I think the answer is probably not. I believe the relationship (financial and otherwise) between supplier, TMC and customer still has a way to evolve and will become one of the next big issues. I predict tomorrow’s ‘incentive’ battleground will revolve around dynamic pricing where TMCs will control what fares and preferences will be in their databases and distribute them in a way that brings them greater return. A key factor of which TMC a corporation uses will be the ability of these databases to deliver best value.Let’s see if I am right!