TMCs in Africa

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As client needs change and with the almost constant pressure on spend, never mind the impact of technology, the travel management industry has had to roll with the punches and re-look its offering, in a bid to remain relevant and attractive to customers.

Depending on your source, it’s widely accepted that the global travel management industry is worth approximately $1.2 trillion, and according to the Global Business Travel Association (GBTA), spend is expected to reach $1.6 trillion by 2020.

That’s a serious chunk of change and a snapshot into just how big this industry is, globally. As that travel spend rises, so too does the role that travel management companies play, and they are an integral part of the corporate travel value chain, regardless of your approach to outsourcing this service, and regardless of the impact of technology on this industry.

The figures above are useful in giving ‘colour’ to a global view, but there’s no doubt that Africa is a big part of that view, with some of the world’s biggest TMC brands enjoying a presence on the continent, in the form of the likes of HRG, Carlson Wagonlit Travel, Wings Travel, American Express Travel Services, and Flight Centre and its associated business travel brands, such as FCM Travel Solutions.

That’s largely due to Africa’s natural resources and the notion that the continent remains relatively untapped, in terms of its potential. You just have to take a quick look at the development pipelines of the world’s big hotel groups to get a sense of how these players view Africa, in terms of potential and opportunity.

Africa remains a vibrant business travel destination and the world’s big TMC brands want a slice of that action. With that in mind, any global TMC trend is likely to apply to Africa as well, with very little in the way of ‘lag’ currently existing, as the worldwide industry remains firmly entrenched on the continent.

With all of this in mind, I’m interested in the global TMC view on Africa, as a serious player in the corporate travel space, and whether or not some of the key principles across the world apply to the environment here, notwithstanding what I’ve already said about global trends.

Yes, the African continent is unique, but just how different is it from the other major markets?

“Infrastructure, communication, political stability, exchange controls and technology adoption are some of the challenges that make the African continent a more unique environment than many others are familiar with,” says Louis van Zyl, CEO of Carlson Wagonlit South Africa. “Our major objective is to ensure we are as informed as possible and are able to work with and around these challenges, while arming our customers with the information, products and processes to deliver the service they expect.”

Whilst it’s difficult to argue with any of those sentiments there are some TMCs that believe that when it comes to the issues facing the African TMC industry, there are some consistent themes that apply across the board, particularly when it comes to more current themes and trends.

“Keeping a close eye on travel costs and looking for efficiencies in procurement and ways for staff to travel most effectively will be a top priority in the African region during 2018,” said Frank Palapies, Wings Travel Management COO for Africa and the Middle East, speaking earlier in the year.

Sure, but that doesn’t sound too different from the some of the challenges faced in other regions, does it?

Wings has carved itself a bit of a niche in the oil and gas space, so it was no surprise to see Palapies reference this segment, as Wings has a vested interest in it, and the knock-on effect of the performance of this segment can be felt in many related areas. The themes he mentioned could quite easily apply to the more developed markets, as well.

“Wings forecasts that oil prices will continue to climb steadily in 2018, barring any major disruptive geopolitical influences,” said Palapies. “This would reignite investment in oil and gas exploration, which energy clients put on hold at the start of the energy sector downturn in 2014. As a result, Wings anticipates travel spend by oil and gas clients to increase by 2019.”

“Unprofitable rigs will now become more profitable in areas like West Coast Africa, where knock-on effects impact travel positively. Oil and gas also has a ripple effect on the corporate travel sector, specifically in associated and related industries, as was evidently seen in 2014.”

So, hope you’re watching that oil price.

SPEND

Palapies mentioned a closer focus on cost, and there’s no doubt that this has become one of the major issues in the global TMC space.

That’s as certain economies have contracted and corporates have re-looked their travel budgets, going carefully through each line item to see where they can shave some dollars, rands, euros, pounds etc.

Almost across the board, the corporate travel industry has seen a significant amount of ‘belt-tightening’ in the past few years.

“In these economic times, there will always be pressure on the service industry to validate and justify our value,” says Van Zyl. “We are not seeing it any more or less than usual, and our response is to keep striving to exceed expectations and provide the service that our customers know are to their benefit, adding the value they require.”

Aah, value. That really is the magic word in the service industry, and the TMC space is no different.

“The TMC’s role is not to save money on service fees,” says Nicole Adonis, General Manager of FCM Travel Solutions South Africa. “Short-term gains delivered through lower transaction fees do not necessarily translate into savings in the long-term. A TMC needs to add value by providing savings, but also by adding value in other areas. For example, interpreting data to proactively inform your travel policy, supplier negotiations, delivery of technological tools, helping fulfil your duty of care responsibilities, and reducing traveller friction, among others.”

“The justifying of fees has been around for many years,” says Anneke Geldenhuys, General Manager of Harvey World Travel Southern Africa. “The secret is in the negotiation thereof and the value-adds you give to your customer. Our members have established well-priced models for their businesses and offer services according to the customer’s requirements/needs.”

All of this is no problem for Palapies of Wings Travel, who believes it’s only right that TMCs continue to look for cost-saving measures for their clients. For him, it comes with the turf.

“Our role as a specialist travel management company is to help clients keep travel costs down in terms of airfares and hotel rates,” said Palapies. “Using our technology, not only to source the best fares but also to streamline the booking process, saves more time and ultimately cost to the client. This provides us with the ability to simplify complexities and reduce total cost of ownership.”

TRENDS

We touched on a few trends earlier in the piece, but let’s delve a little deeper, interrogating some of the continent’s big TMC brands to see what the talking points are and where they are focusing their efforts.

For Adonis of FCM Travel, there are five major trends worth noting, namely traveller friction, artificial intelligence, managing data, late bookings and personalisation.

“We’ve seen an increased focus on traveller friction, which argues the merits of a traveller-centric programme that boosts employee wellbeing and job satisfaction over a cost-centric travel programme, to achieve better business performance and higher ROI,” says Adonis. “Companies increasingly understand that business travel and business performance are intrinsically linked. The less traveller friction experienced by a business traveller before, during and after the trip, the more productive the journey and the greater the return on investment from that trip.”

FCM Travel has embraced artificial intelligence and introduced a chatbot in the form of Sam (see Technology).

“Travel companies have been using AI for some time to improve searches and handle simple customer transactions, so that consultants can focus on more complex transactions,” says Adonis. “In the world of corporate travel, AI has the potential to anticipate traveller needs, personalise the user experience and reduce traveller friction.”

Adonis also mentions traveller safety as one of the major challenges currently facing TMCs. It’s something that Palapies of Wings Travel picks up on, identifying it as a space to watch in 2018, when looking at his predictions for the year.

“Wings Travel Management is forecasting an even greater focus on traveller safety, not only due to the ongoing threat of terrorism, but also geopolitical instability which will add to the complexities of travel in 2018, making personal safety and duty of care a top priority for companies,” he said. “It goes without saying that safety will still be a priority given the nature of the destinations that energy sector companies are sending their travellers to. That includes airline safety, ground transport, transfers and the associated risks.”

Another potential area of interest is the data space, which has become a hot topic in the TMC industry over the past few years.

“The benefits for travel companies, corporates and business travellers are vast,” says Adonis. “The industry has evolved from collecting data and generating a standard range of reports on a corporate’s current travel scenario, to understanding the predictive analytics to shape a travel policy.”

What should also be shaping policy is a better understanding of the actual traveller, if I’m understanding Adonis correctly. That would make a lot of sense, as much of modern-day travel is focused on personalisation and delivering a much more personalised experience.

“Business travellers are becoming increasingly tech-savvy and discerning and are expecting a personalised travel experience, even in the corporate travel sphere,” says Adonis. “Many travel businesses are quite late on the pick-up when it comes to personalisation and are struggling to maximise the potential of traveller data and behaviour.”

Here there appears to be a big discrepancy between the personalisation being delivered in the leisure space, versus what is currently found in the corporate space, and business travellers just want that same level personalisation, regardless of whether they’re on a work trip or holidaying with the family.

For Van Zyl of CWT, the major trend catching his eye – and further to his earlier comments regarding the TMC justifying its value – is that of cost.

“Current trends we see are increasing downward cost pressure, which in turn requires us as TMCs to continue to look for additional productivity and efficiencies in order to return acceptable margins to our shareholders.”

NDC

Another trend to emerge has been the space around the International Air Transport Association’s new airline distribution standard known as New Distribution Capability. It’s been five years since IATA first started talking about NDC. Now the ball is rolling as airlines have begun imposing surcharges for bookings made through non-direct channels. Lufthansa were the first a couple of years ago, and the likes of British Airways and Iberia followed suit in November last year, charging a $10 fee for tickets booked via GDSs.

IATA touts that the NDC standard will improve the customer experience, enabling airlines to sell all their numerous ancillaries they’ve been offering directly through their website – such as seat allocation, fast-track boarding, onboard meals, etc – through indirect channels. While the industry has been very slow in adopting NDC, it’s now picking up steam, with an expected 45 airlines live by year-end, according to a white paper commissioned by IATA.

As a result, TMCs have had to get up-to-speed on NDC, and it’s clearly an issue occupying the minds of the execs at some of the big players.

“Distribution is one of the challenges we are staying ahead of,” says Adonis. “The ball really started rolling when more airlines began imposing surcharges for bookings made through non-direct channels. Following Lufthansa’s footsteps were British Airways, Iberia Airlines, and Air France/KLM. The Flight Centre Travel Group has now signed multi-year distribution deals with most of these airlines to eliminate the booking surcharge. This means our FCM Travel Solutions clients will be exempt from the surcharge. The reality is that NDC could have a profound effect on how air travel is booked and marketed to travellers in the next few years.”

Van Zyl picks up on this point

“The IATA initiative to promote direct connect capabilities through the NDC platform is something we see as a significant trend worth following,” he says. “As with all new and possible disruptive technology, the NDC initiative is going through the typical acceptance and stability curve, so at the moment it is experiencing its own challenges. I have no doubt that this will be addressed, resulting in a higher level of acceptance and incorporation in our industry.”

TECHNOLOGY

In order to maintain and/or increase their own profitability, TMCs need to raise efficiency levels and reduce spending.

Technology can play a vital role in achieving this goal, by automating manual processes in the mid and back-office. Management solutions assist agents in working productively, while also allowing them to deliver an enhanced consumer experience and ensure compliance. As such, it’s fair to say that it’s a short-sighted TMC that isn’t currently focusing on the business case for technology investment, as they aim to position themselves for growth.

“Every TMC is currently under pressure to showcase their value to clients due to enhanced technology available in the market,” says Nemanja Krstić, Head of Technology at Wings Travel. “This requires a consistent approach in terms of managing the clients’ travel spend and demonstrating in various ways the true value of our partnership. TMCs today have a responsibility to constantly improve in line with the new technology which is becoming available to travellers almost on a daily basis.”

To this end, Tourvest Travel Services made the decision some years ago to invest heavily in a product called Travelit. It’s a complete end-to-end travel management solution, providing services to procurement, HR, finance, IT, travel arrangers, authorisers and the executive management team.

In 2018, Travelit has taken a significant step in the evolution of its offering, by delivering an app to its existing customers.

“We wanted to create a seamless experience for our customers,” says Travelit CEO Philip Katz. “But the whole travel process is quite bitty and drawn-out, so we wanted to spoon-feed them as much as possible. We realised that the easiest way to do this was to create an app that fitted properly into our booking platform.”

The app itself works for both Apple and Android, and starts with the traveller’s profile. That covers everything from personal information and contact details to preferences, loyalty numbers, policy group, card in pocket, and copies of ID, passport, visa, vaccination and car licence documents.

Additional functionality includes all the traveller’s trips and itineraries, and an easy-to-use expense claim section. Here, for example, the traveller can take a picture of a particular slip – in any currency – and file it away.

There are a couple of other key features of the Travelit app. Firstly, its extension from the online portal means that it’s customizable to specific corporates and their travel policies, which was the main reason why Katz and his team couldn’t – or didn’t want to – take a white label app solution off the shelf.

“We believe it’s exactly the future of where travel is going,” says Katz.

The same could probably be said for artificial intelligence, and it’s here that FCM Travel has invested.

It recently launched its chatbot, Sam, which is an interactive “Smart Assistant for Mobile” that supports users with all aspects of travel via a conversational interface to answer questions, make recommendations, and perform actions.

“The launch of Sam comes at a time when modern and tech-savvy corporate travellers are increasingly demanding more freedom within framework and the power to manage elements of their trips on their own,” says Adonis. “The travel bot is the perfect technological answer to address these modern business travellers’ needs.”

According to Adonis, Sam is designed to simplify life for corporate travellers, 24-hours of every day. The bot assists business travellers pre, during and post-trip with everything from itinerary management, air and hotel bookings, flight updates, local city and country information, local weather and restaurant suggestions, to security notifications, ground transportation, driving directions, immigration advice and vaccination status.

Once integrated with the online booking tool, all bookings made via FCM consultants automatically appear in the traveller’s itinerary. It’s also configured in line with the corporate’s travel guidelines and prompts the user to take actions that are within policy, “thus improving compliance, controlling costs and supporting duty of care,” says Adonis.

Wings Travel launched goSecure in 2017 – a travel risk management solution for its clients that allows them to track and communicate directly with their travellers via a mobile application, coupled with a sophisticated Wings24 emergency contact centre, which proactively manages risk and traveller safety on behalf of its clients.

There’s also a big focus on data.

“Our Wings globally-owned operations and standardised IT platform allow us across the globe to provide our clients with consistent and reliable real-time data, offering them access to all our proprietary products,” says Krstic. “Wings boasts a ‘best-in-class’ reporting tool which is accessible via URL and includes live data with many enhanced features, offering clients a snapshot view of their travel spend, travel patterns and detailed insights into traveller behaviour, allowing for a proactive approach in terms of managing their spend.”

However, not every TMC is developing its own technology.

“We prefer to take our customers ‘by the hand’ and lead them to the most effective and relevant technologies underlying the most prominent objective of excellent service delivery,” says Van Zyl. “Our new products are not so much new applications or systems, as we believe there are great technology companies out there developing the products. We see our role as introducing the enabling technologies and bringing our customers in to connect with the leading-edge technology products in our industry.”

CONCLUSION

Challenges remain, but in this regard, the travel management industry is just like every other industry out there, trying to get ahead.

The trick is to stay abreast of the trends, adapt accordingly, listen to one’s clients, and make the smartest use of technology, in order to stay relevant.

The travel industry is changing rapidly, so only the most nimble players look likely to survive.

THE CONSORTIUM MODEL

Consortiums – or consortia – are large groups of travel agencies often driven by multi-national companies that have joined together to form a consortium. Originally started to assist smaller travel agencies, consortiums have grown dramatically and have become major players in the travel industry. By joining a consortium, travel agencies can increase the effectiveness of their marketing to their customers by offering competitive rates. Travel agencies may operate under one global name, or may operate independently while using the consortium’s relationships and tools.

The XL Travel Group is a South Africa-based travel consortium with a membership base of 150 travel agencies spread across Southern Africa. Due to its size and influence (annual sales exceeding R2.5 billion/$175 million), it plays a prominent role in the South African travel and tourism industry, having the ability to maximise procurement benefits with major suppliers within the airline, hotel, car rental, inbound, and tour operating industries. Members of the XL Group are therefore able to extend a wide range of cost-saving benefits to their clientele through approximately 900 highly-trained travel consultants. According to XL Travel, the strength of the group lies in its diversity and the entrepreneurial spirit of its owner-managed agencies and travel management companies.

FIVE NDC BENEFITS FOR CORPORATE TRAVELLERS

This is according to FCM Travel Solutions:

  1. Offers tailored to your preferences – With NDC, travellers can choose to save their information to their profile. By saving your information, you can have the benefit of easily customising your search results. Thanks to NDC, airlines will also be able to access any personal information the customer is willing to share to construct an offer tailored to that specific client.
  2. Faster service from your travel agent – For the travel agent, the new communication standard means they can pay for a preferred seat, add additional baggage or re-order catering through any GDS they are using, instead of having to book this on the airline’s website. Right now, if you want to book pre-boarding or pre-pay for your luggage with the travel agent or the TMC, the consultant has to leave the GDS. With NDC, agents will be able to shop for all these services in a single transaction in one place. For the traveller, this means that the travel agent will be able to offer you a lot more options in a more efficient way, whether you would like extra legroom, extra baggage fees, comfort class upgrades or special meals.
  3. A visual representation of what to expect from your travels – Since NDC is based on a high-quality XML standard, both travellers and travel agents will have access to a rich content experience with pictures and videos. It also makes it easier for you to compare several items (and airlines) at once. For travel agents, the visual representation means it becomes easier to communicate with clients about product differentiation beyond price and schedule.
  4. The ability to compare apples with apples – It can sometimes be hard to understand exactly why your travel agent or TMC advises you to pay more for a flight that leaves at about the same time and follows the same itinerary. Thanks to NDC, the travel agent or TMC can show you what the seats on your chosen airline look like, help you compare what you can expect from the lounge, and what mileage you earn on each airline.
  5. An easier way to book low-cost carriers – The rise of low-cost carriers, which were traditionally outside the GDS, have seen travel managers lose visibility and control of a growing proportion of their air spend. NDC could help in this regard. IATA explains that for low-cost carriers with no GDS presence, NDC will enable such a carrier – which today only sells direct to the customer – to sell via travel agents and TMCs, using technology compatible with their website.
THE SHARING ECONOMY

Over the last few years, the sharing economy has exploded, with rides on bikes, in cars, and on planes being shared. Private rooms and even entire apartments and homes are being opened to the public. And, with the lines between work and private life blurring more by the day for Millennial and Generation X employees, the sharing economy is entering the business travel industry with full force.

But as travel managers endeavour to meet the demands of their travellers, they must do so without compromising their organizations’ duty of care for employees and travel policy compliance.

According to a recent study conducted by FCM Travel Solutions and the African Business Travel Association (ABTA), almost 90% of business travellers in South Africa are using Uber and Airbnb for business travel purposes. However, as many as 40% are doing so without the permission or endorsement of their companies.

“We have already seen an increasing role in our space,” says Louis van Zyl, CEO of Carlson Wagonlit South Africa. “We do, however, have to match new aspects and opportunities to enhance our customer experience with our role to comply with our customers’ governance and compliance requirements. These are serious responsibilities we have to fulfil and trying to be early adopters and offering cost-cutting opportunities at the expense of corporate traveller safety is something we can’t afford.”

Both Airbnb and Uber – arguably the two biggest names in the travel space, from a sharing economy point of view – have made it clear that they want a significant stake in the corporate travel market, and as such have already developed products targeted specifically at this market.

The former has Airbnb for Work, whilst Uber for Business claims to “help organizations across the globe perfect ground transportation programmes, making them more efficient and cost-effective,” according to Uber.

Uber has gone a step further by entering into partnerships with various travel management companies. As a part of the collaboration, Uber for Business will benefit from additional insights from the travel management industry, allowing it to further enhance products and solutions tailored to the needs of every business.

There’s no fighting it – the sharing economy is going to continue to play an even bigger role in the corporate travel space. Sure, issues such as duty of care and the integration into travel policy perhaps aren’t solved yet, if one looks at the industry across the board, but it’s just a matter of time, and, again, those looking for an edge can steal a march on their competitors if they are proactive and receptive to change.