Legacy business travel systems can add 10%++ in direct costs!

                                                                     

Do you operate a business travel program in India and emerging markets?

  • Does your travel agency give you a free implant/s + extended payments facility + free reporting + free technology + free account management staff  +  low transaction fees + a “beck & call” service?
  • Why does your travel agency normally recommend manual systems like email / “call to book” or “implant” led fulfillment?

Note:

This article does not intend to make a sweeping generalization for the entire market. In India and many emerging markets, there are very high quality ethical & professional Travel Management Company’s (TMC’s) who run very successful operations nationally and globally.

There are no free lunches!

If your answer to the questions above is YES, you have a serious problem. Our suggestion as a business travel consultant is for you to either conduct your own validation of the operational & financial processes deployed by your incumbent travel agency or engage an external business travel audit.

In our markets, buyers place a very high focus on fees & transaction fulfillment. Hence they end up working with a travel agency V/s a TMC, primarily due fee pricing attributes. The general preference is to choose the lowest fee vendor.

A good way to get started is to ask your incumbent vendor to present a full  P&L for your account. This should give you several pointers, on how operations are being run.

No one does business at a loss!

The P&L presented must explain the profit that your vendor makes from your operations. If your vendor indicates that they make no money in managing your account or operate at breakeven, there is clearly an issue!

  1. Every business, especially a travel agency, conducts business with you, only if they make a profit!
  2. If any business claims that they will run your business at a financial loss or simply to achieve breakeven … you are getting ripped off somewhere else in the program!
  3. In the above statements, we have referred to a “travel agency”. This is deliberate. Normally an entity that supports your business travel operations is referred to as a travel management company (TMC). However, if your incumbent vendor operates similar to the manner outlined above – they cannot be deemed to be a TMC!

Be aware!!

Make sure your vendor contract have explicit due diligence clauses that allow for:

  1. Client specified audits of travel agency operation at a time of the clients choosing
  2. Travel agency being obligated to allow inspection of all your specific account-related transactions
  3. Specific’s on how  the agency will report and allocate direct & consequential revenue generated from your business travel operation. This would include, but not be limited to
    • Airline direct commissions
    • Ticketing point of sale incentives ( Overrides )
    • Airline productivity linked bonuses (PLB)
    • Direct hotel ./ accommodation revenue
    • Mark-up’s & transaction type-specific service fees
    • Any other direct revenue generated from your operations
  1. Penalties for creative ticketing, invoicing integrity & refund mis-management
  2. Adequate business continuity planning (BCP), should you need to induct a new travel agency?

Act now!!!

a. Employ a business travel consultant

Business travel is a complex specialized function. You need to be  fully conversant with the intricacies of the industry & have the resources to navigate it. Engaging an independent supplier agnostic business travel consultant & market specialist is vital for your success. This is a worldwide accepted best practice; as such specialized knowledge may not be inherent in your travel administration team.

b. Legacy business travel operations are opaque

Legacy operations are generally promoted by travel agencies because they are opaque and allow abuse of systems to generate additional revenue for the travel agency.

Further travel agencies generally target clients based on price leadership rather than technology & best practice implementation. They don’t generally invest a lot of resources in such initiatives, which is also a reason why they can operate at such low fees.  Hence they promote legacy operations.

Creative ticketing, cancellation penalties, refund mis-management & invoicing integrity are some of the most common industry malpractices that the legacy system perpetuates.

This can result in a financial loss of over 10 % in your direct costs annually.

c. Technology delivers transparency & control

The penetration of self booking technology is very limited in India and emerging markets. This is largely due inability of the industry to articulate the value. In addition, an in-depth understanding of technology solutions is not an industry-wide feature as travel agencies don’t invest a lot in training their staff. Many solutions locally available are essentially mid office / back office automation tools that have been given a client facing interface !

Corporate buyers are hesitant to deviate from accepted business practices because of the fear of being a “first mover”. This inertia is a massive factor for the lack of innovation and radical thinking!  An excessive focus on costs to the exclusion of more strategic cost optimization results in selection off the lowest common denominator. Additional corporate leadership at the CXO level does not regard business travel as a strategic program, that requires management focus. 

Business travel self booking technology, automated payment & expense systems automation have  been around globally for over 2 decades. In our experience, if effectively implemented, this solution can effectively eliminate most malpractices that legacy systems lend themselves too.

d. Question your travel agency

Given the pressure of fees etc., travel agencies promote sub-optimal technology solutions. If your travel agency suggests low-cost self-booking options, as part of their service offering, independently evaluate the solution for

  • Adequate operational safeguards to protect your interest
  • Guarantees to stop fare & fee markups
  • User interface quality
  • Functionality & effectiveness of the mobile application
  • Ability to aggregate air + hotel + car rental in a single transaction
  • Reporting & MIS capability

To state the obvious, call for presentations of multiple solutions and benchmark the capability set offered by your vendor versus other solutions. Evaluate more advanced solutions to understand what else is possible, should you later plan to upgrade your program.

Implementing self-booking and automated systems for payments & expenses have far greater enterprise-wide repercussions and benefits …. It’s important to take a well thought out decision.

Smart buying strategies can ensure that you have a robust program. Be aware of what you may get into if you go by default with the “lowest cost vendor”. Having a supplier agnostic independent business travel consultant can help you navigate complex emerging markets like India.

High quality best in class program delivery has a basic inherent cost …

Beware of vendors who promise the moon, while being paid peanuts!!

They may be taking you for a royal ride !!!

 

 

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ProKonsul ® optimizes the business travel lifecycle of its clients. It delivers domain expertise in enterprise business travel. Established in 2014, it is the pre-eminent business travel consultant firm in India, Asia & emerging markets. We are located in Gurgaon, India. ProKonsul ® advisory services are supplier agnostic & governed by a robust integrity policy.

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