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Lesley's Column

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26th July 2016

Travel management company value

In this rapidly changing world, where companies have to reinvent themselves every day, travel management companies (TMCs) have to prove more than ever the value they bring.

If a TMC sees itself solely as a distributor of GDS content and efficiency of transaction, then it’s already at a dead-end.

The evolution for TMCs from travel booking and fulfillment agents to travel management companies was driven by customers questioning the value. Today TMC’s must demonstrate that value across the wider corporate mobility landscape.

That said, many business travel accounts continue to be awarded on the basis of the lowest transaction fee. The result is that there is a constant downward pressure on these transaction fees.

It comes as no surprise then that one of the major TMCs is currently offering zero transaction fees to at least some of its clients for any booking that is handled completely online.

A transaction fee of zero sounds like a non-starter until you think about how modern TMCs make money. The transaction fee is becoming less important compared to the ancillaries – the fee for a consultant to pick up an online booking, any change fees, the cost of using the 24-hour service, and so on.

TMCs also make money from override commissions for the volume of business they bring to a supplier (and extra overrides for delivering increasing market share to them), from sales and market agreement (SMA) fees for promoting suppliers through advertising or events, and from GDS incentives – fees paid by global distribution systems (GDSs) to the TMCs for booking through them.

A move to zero transaction fees would mean the TMC would have to rely increasingly on these other income streams, with a business model starting to resemble low cost carriers.