Where’s the value?

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Are TMCs worth the fees they charge or the cost-savings they claim to offer? Richard Holmes puts the question to some of Africa’s biggest TMC brands and comes away with some interesting answers.

It’s never been easier to book travel, whether it’s across the country or across the world. Fire up your smartphone, tap the screen a few times and – hey presto – your ticket and hotel are arranged. Within minutes a complex global itinerary can be compiled, booked, paid for and confirmed.

What’s more, the user-interface of these powerful booking engines has become simple enough for even the most technophobic traveller to use, allowing corporate travellers to select their own flights, book their own hotels and arrange their transfers from airport to office. Click, click and you’re off.

But that freedom has also opened a Pandora’s box of issues for corporate travellers, and those holding the purse strings. Just because individual travellers can book their own flights doesn’t necessarily mean they should. Are they selecting the most cost-effective fare for the company? Is the ticket in the correct class? What about a group rate for bulk bookings? Why was a 5-star hotel chosen? Does it fall in line with the company’s travel policy? And, at the end of the trip, how does the spend compare with the budget?

For while this new wave of travel technology has made it easier than ever for travellers to click their way across the globe, maintaining a degree of oversight becomes problematic when individual travellers are left to their own devices. Finding a way to balance ease of use – in order to get the job done – and adherence to budget and policy requirements, is often difficult for larger enterprises. It’s a problem that specialist travel management companies in Africa have been quick to resolve with a host of services and tools that have revolutionised the corporate travel industry.

“Business travel is an area that requires management – it’s as simple as that,” says Robyn van Staden, General Manager of Corporate Traveller, one of the three business-focused brands within the Flight Centre stable. “From sourcing the best prices from a wide range of suppliers to analysing spend and reconciling billings, business travel requires a hands-on approach in order to manage it in the most efficient and cost-effective way possible.”

“Managing travel spend is our core business,” agrees Claude Vankeirsbilck, Chief Sales and Marketing Officer at Tourvest Travel Services, the custodians of numerous travel brands, including Seekers Travel, American Express Travel Services (27 franchises across Africa), Maties Travel, Indojet Travel and Travel.co.za. “The key benefit of using a travel management company is having complete control over the travel programme.”

For, unlike traditional high street travel agents who focus on simply making bookings, a travel management company (TMC) becomes a business partner, looking holistically at the travel needs – and budget – of the corporate client. That extends far beyond executing flight and hotel bookings. Depending on the nature of the contract, it can extend to ensuring reservations are made within the guidelines of specific travel policies, fulfilling a duty of care to employees on the road, invoice and cost reconciliation, and providing the tools and technology to streamline the booking process for all employees.

Further, the ability to negotiate the best rates and provide tangible cost savings are key services a good TMC should be able to offer, says Rod Rutter, Chief Operating Officer of XL Travel, which is a travel consortium with a membership base of 120 travel agencies across South Africa, and has offices in Namibia, Angola, and Mozambique.

Then there’s convenience.

“This is the greatest advantage,” says Themba Mthombeni, CEO of Duma Travel. “Prospective travellers can make one call to the TMC and tell them where they want to go. The TMC reviews the options with the traveller or calls him/her back later. This allows the traveller to go about his/her business without wasting time on hold, making multiple calls, or sorting through a million options that are not suitable on the internet.”

“The value a TMC brings is knowledge and access to a wide variety of fares and inventory at a single click of a button, through global distribution systems that a corporate would not have access to themselves,” adds Marco Cristofoli, Managing Director of Harvey World Travel which, as part of the BidTravel consortium, has access to bulk negotiated deals with preferred partners.

It’s an important word – savings. For while duty of care and seamless invoice reconciliation may sound attractive to many companies considering engaging a TMC, that’s the word travel managers want to hear first. With a close eye on the bottom line, corporate travel budgets are often seen as an expense line that can be squeezed more easily than staff costs and capital expenditure.

“Travel is one expense that can be far better managed, as companies have total control of these expenses,” explains Vankeirsbilck. “Hence all the more reason why I see a move towards more stringent control over travel costs. No company doing this on their own can effectively manage these costs better than a TMC.”

Along with new clients looking to consolidate and manage their travel spend, “mature travel programmes are now actively seeking new ways and better opportunities to reduce costs, mining their hidden spend and optimising further savings through supplier negotiations,” adds Kagiso Dumasi, Commercial Manager: Africa for BCD Travel.

“We’ve noticed that clients are keeping a closer watch on budgets and trying to make savings where they can,” adds Cristofoli. “That includes economy class flights instead of business, greater requirement for fare shops, and adjustment of schedules to get the better fare.”

“In the current economy, all corporate clients are under pressure from their directors or shareholders to achieve savings,” says Mthombeni. “Travel is one of the highest contributors to costs and often under the microscope. Sophisticated analysis of the MIS report and discussion with the client around travel behaviour points to ways in which further cost savings can be achieved.”

Continued price sensitivity does come down to the cautious economic climate, but “business has to continue and companies cannot compromise on expansion,” says Frank Palapies, Chief Operating Officer – Africa & Middle East for Wings Travel Management, who says TMCs “need to display value-add above and beyond the minimum requirements.”

But what about the fees, I hear you ask? Surely the cost of using a TMC will quickly erode any savings gained by using a travel management company? Here, it pays to look at the bigger picture.

“The lowest service fee should not be the decisive factor when appointing a TMC,” says Mthombeni. “More sophisticated corporates realise this, but smaller SMMEs are still very price conscious.”

Key to this is insight into how your travel budget is being spent. Knowing where and why the travel budget is being allocated allows TMCs to work with clients on leveraging better value from the overall travel programme, through a combination of analysis and consolidation.

“Accurate travel data is the key ingredient that provides the key areas for cost reduction and traveller behaviour improvements. It is up to the TMC to ensure that the client understands the data and how to act on the data given,” says Palapies. “Wings has recently launched a ground-breaking reporting tool, which has really helped our clients identify areas for improvement in their travel programme. These indirect costs drill down into individual booking behaviours and fare choices, and the impact of costs associated with travel choice. The type of detail helps travel managers educate travellers for future trips and ensures a trend-saving pattern.”

“TMC fees make up less than five to seven percent of the total cost of the programme,” says Vankeirsbilck. “If fees are the only focus then no real cost-saving objectives are going to be achieved. The real savings opportunities lie in the 93 percent of travel costs, and this is where Tourvest has focused its efforts and investments, to provide companies with a meaningful value proposition.”

Fee structures also vary from client to client, and a good TMC will structure a package that suits the travel programme and travel objectives. Harvey World Travel operates on a service fee mark-up, while Corporate Traveller has a standardised list of service fees, but can structure packages according to each client’s needs. Duma Travel offers both transaction and management fee models to cater to the  corporate’s preference.

Although the landscape is beginning to change, it’s also important to remember that TMCs factor in a variety of revenue streams, including client service fees and override and commission payments from suppliers.

Here it pays to scrutinise the package being offered by a TMC. While one TMC may offer a cut-price monthly retainer, the total cost of programme may eventually be higher once marked-up airfare and accommodation rates are factored in.

“In Europe, TMCs are not being remunerated by large suppliers anymore, so they’ve had to look at their efficiencies carefully,” explains Palapies. “Africa is bound to follow suit, which will seriously affect the viability of many travel management companies.”

“Fees should always be transparent and clearly defined, as there should be no grey area on what the client is paying for. Transaction fees have become more popular, as this is an easy and transparent way to charge travel transactions,” says Palapies, who adds that while fees are a direct cost of corporate travel, a more important concern is the indirect costs that come about through inefficiencies in managing a travel programme. “If companies can identify and improve efficiencies around indirect costs, this can outweigh the fees being charged by TMCs, and this is where true value and cost reduction comes into play.”

For using a TMC should be about adding value to your business. While cost-conscious corporates can too easily associate that with instant savings, the notion of value is more nuanced than mere dollars and cents.

“Value is not about the lowest price – it should rather be about the consolidated value-added service, the cost of specialist resources, and peace of mind for the corporate buyer,” comments Dumasi, who says the true value of using a TMC comes with designing a goal-oriented travel programme with measurable performance indicators. “A well-designed programme gives the buyer the right information to help them make the right decisions.”

“True value – value that is measurable and consistently delivered – will not carry the lowest price,” agrees Palapies. “Efficiencies, the ability to consult with the client and provide unique solutions and special offerings, all contribute to position a TMC as superior to the rest.”

“By using a TMC to manage your business travel properly, it is much easier to highlight areas of saving – not only monetary savings, but time savings as well,” adds Van Staden.

As technology provides for seamless booking and increased automation, the role of a TMC is also changing, with companies adapting their value offering to suit the shifting landscape.

“In this context, the TMC shifts from a pure fulfillment centre to a consulting service, which can identify inefficiencies in client processes and offer solutions to improve on them,” says Palapies. “However, price will remain a key distinguishing factor in an increasingly competitive market. The TMC that can consistently offer better deals together with an end-to-end value proposition to a client will naturally come out on top.”

With increasing competition in the TMC sector, consolidation has seen a number of larger players dominate the market, often to the delight of corporate clients.

“There is no denying the benefits that come from bulk buying power, and that should be a consideration when choosing a TMC,” says Van Staden. “At Corporate Traveller we are fortunate enough to have the backing of the Flight Centre Travel Group, and enjoy access to a wide range of discounted products sourced from multiple platforms.”

“Volume drives better pricing,” agrees Vankeirsbilck, but adds that corporate travel managers need to “consider the overall value proposition”.

Part of that value comes in the footprint a TMC can offer across Africa. With increased corporate travel to regions with limited infrastructure and an immature travel market, local expertise and a TMC with a presence on the ground has enormous value to executives operating in uncharted territory.

Industry consolidation has also seen travel management companies merge and form partnerships to broaden their network of offices, while consortiums like XL Travel and Harvey World Travel can easily tap into the expertise of far-flung affiliates.

“It makes sense for multinational companies, or those corporates doing business in the rest of Africa, to partner with a TMC that can mirror their footprint,” suggests Dumasi. “We operate in 28 countries, and many of our multinational clients are growing their travel programmes into their African operations.”

With strong growth in hotspots such as Nigeria, Mozambique, Zimbabwe, Zambia and Tanzania, adequate coverage on the ground is vital, adds Dumasi: “The network of agencies support each other when it comes to complex requirements such as meet-and-greet, ground support, security, knowledge sharing and even visa assistance. It also gives the traveller a level of comfort when they see a familiar brand in each country they visit.”

“Preferably, the client needs to procure the services of a TMC with a physical footprint in the destination country,” agrees Palapies from Wings Travel Management, which specialises in servicing the oil and gas industries. “The importance of a TMC increases whenever there is business travel into an area that the corporation is not familiar with.”

For corporate travel in Africa comes with a unique set of challenges, from a lack of local inventory on the global distribution systems that are the backbone of the travel industry, to visa restrictions, foreign exchange controls and security concerns.

“Travelling in Africa can be a daunting prospect,” warns Van Staden, who says working with a reputable TMC can provide essential support and infrastructure for clients doing business in Africa. “This includes traveller tracking, ground support and even simply providing tips such as scheduling your meetings to take place at your hotel, so that you can avoid dealing with the traffic congestion.”

“We have invested significantly in our African partner network to ensure we deliver value to our customers in managing African travel,” adds Vankeirsbilck from Tourvest, which manages the American Express Travel Services brand in 27 African countries. “It is true that African travel can be more complex than travelling on other continents, however it’s just one aspect of an overall value proposition to consider.”

However, while Africa has its own challenges it’s not the only business travel destination that comes with plenty of hurdles for corporate travellers to negotiate.

“Travelling in India or China, or even South America, can be just as daunting,” suggests Cristofoli. “However, we do see an upsurge in business travel into Africa now that the Ebola scare has dissipated, and clients appreciate the knowledge and support a TMC can bring when travelling to these destinations.”

The human capital of a reputable TMC is a further consideration for travellers heading off the beaten track. In Africa, where connectivity is often an issue, relying solely on technology can easily lead to trouble, and having a ‘real person’ at the end of the phone when internet connectivity dries up, or travel plans go awry, is an important aspect of the value TMCs add to the corporate travel mix.

Although the Quick Trav application from Harvey World Travel is a seamless way to reconcile travel spend, and clients have access to the Harvey Online self-booking tool, “we do find that our customers still prefer direct contact with the consultant,” says Cristofoli.

“Our customers are assigned a single point of contact, and that travel expert really gets to grips with the client’s business travel and has a real vested interest in their needs,” says Van Staden. “We had a situation where a customer needed to travel urgently, and we managed to get his passport flown up to Johannesburg from Durban where the travel manager personally collected it and managed to get the visa processed in one day.”

It’s a point worth noting. For while travel management technology has streamlined many of the processes that make corporate travel appear seamless, it’s often the human element that clinches the deal. Whether it’s insight into how a travel programme can be improved, or a helpful agent on the end of the line when your flight is stranded in Ouagadougou, going it alone isn’t always the smartest choice when it comes to corporate travel in Africa. Sometimes, it pays to pay the experts.

Travel Tech

Tapping into the professional industry expertise of a travel management company can yield enormous cost-savings and efficiencies, not least thanks to the leading-edge technology that TMCs in Africa are using to streamline travel booking and reconciliation for their clients.

“Technology has to be a part of the TMC offering, and will continue to become more important in the future,” comments Frank Palapies, Chief Operating Officer – Africa & Middle East for Wings Travel Management, who cautions that the level of technological integration needs to be a good fit with the needs of the client. “The more sophisticated the technology becomes, the more you pay for it. In terms of travel procurement, it is all about becoming more effective. You may be paying more in one area, but you could be able to save in others. So I would encourage the travel buyer not to ignore the procurement technology that is out there, but to embrace it.”

Indeed, a key selling point of leading travel management companies is the bespoke technology provided to corporate travellers to manage their own bookings, while ensuring that it falls within the agreed travel policy and budgets, and ticks the right boxes for preferred supplier agreements.

“Technology is key in providing solutions to corporate clients to help manage their travel investment,” says Kagiso Dumasi, Commercial Manager: Africa for BCD Travel. “A large part of designing the travel programme is understanding how the client’s organisation functions, and finding the best payment and expense management solution. We work with the client to uncover what payment and expense management tools they need during a solutions mapping process. Where there are multiple providers, we integrate them and capture the data to provide a bigger and more accurate picture of travel spend.”

“The increase in travel-related mobile applications has meant that more travellers want the same experience when booking business travel as they would when booking personal leisure travel,” continues Dumasi, who says BCD Travel’s ‘TripSource’ application “includes real-time flight alerts, maps and phone numbers, helpful tips on company policy, expense reminders and company-specific policy messages between trips. Upcoming TripSource releases will let travellers book hotels and ground transportation, store receipts and chat with their travel agent via instant message.”

Tourvest has also developed its own in-house online travel management product called TravelIT, developed specifically with African travel in mind.

“This is not an online booking tool, but rather an end-to-end travel management solution incorporating travel requisitioning, approval workflows, online booking, expense management, document production, and efficient online virtual payment process,” explains Claude Vankeirsbilck, Chief Sales and Marketing Officer at Tourvest Travel Services, who says the “real-time cost saving decision capabilities” can save clients up to a quarter of their total cost of travel programme.

Duma Travel, meanwhile, is currently implementing technology that it says will dramatically improve the automation and integration of the middle and back office.

“The Duma Travel self-booking tool has been developed for the South African market, sits on the internet and can be accessed through various devices,” says Duma Travel CEO Themba Mthombeni. “The tool can be customised to accommodate the corporate’s cost centres and unique requirements, such as order numbers, authorisation etc.”

“Technology is a factor, especially when it can help to streamline the business travel process and create efficiencies,” adds Robyn van Staden, General Manager of Corporate Traveller, who says their online reporting system dovetails with a mobile application that offers useful tools, ranging from online check-in and flight notifications to destination guides and restaurant reviews.”

With its core focus on often-challenging oil and gas destinations in Africa, Wings Travel Management adds another level of sophistication to its technology with real-time traveller tracking of all clients.

“We also use the same technology platform that is standard throughout all our locations, so our team can access travel records regardless of where or when the reservation was made. This ensures a seamless and reliable after-hours service delivery,” explains Palapies.

A seamless technological solution also allows for a standardised service across destinations where levels of education and infrastructure may vary widely.

“The online booking tool trend internationally has seen large adoption rates, and the uptake of this technology has been phenomenal. Locally we are now seeing huge interest in travel technology, from online booking tool to fully integrated end-to-end solutions,” comments Palapies. “Clients are seeing the value and cost-saving potential of online technology, and adoption rates are slowly beginning to improve.”

An Independent View

Travel management companies are all but essential for large corporates with complex travel demands, but for many mid-sized companies the boom in online technology has allowed them to easily manage their own travels with little need for professional help.

“The way in which online booking portals such as Travelstart have transformed things make it so easy to book it all yourself,” says Alvin Visser, who works for a Cape Town-based international market research agency whose staff travel both within South Africa and across the continent each week, servicing multinational corporate clients. “There also isn’t a sense that travel management companies appeal to the medium-sized enterprise, that they will have value to offer us. None of them have given us a reason to believe it’s worth investigating.”

And despite travelling to a host of far-flung African destinations, the lack of TMC back-up has also never been a concern, says Visser: “With telecoms the way they are, our local staff would be on the end of the phone and able to resolve any problems for us. I have more faith in our own secretary than an anonymous company in Johannesburg.”

But “self-booking using online platforms may not necessarily yield the cost of time and savings that might motivate corporate buyers,” counters Kagiso Dumasi, Commercial Manager: Africa for BCD Travel. “Also, most hidden costs and restrictions or conditions only become visible at finalisation of the booking.”

Besides booking travel yourself, or engaging a large travel management company, a third option often proves to be the perfect fit for many companies: using an independent travel consultant (ITC) as a dedicated travel manager.

The ITC model is becoming increasingly popular worldwide, allowing independent agents to operate as small businesses, while tapping into the administration processes and bulk buying power of larger travel industry groups. Globally, Travel Counsellors has seen enormous success in both the leisure and corporate space, while in South Africa eTravel has grown to over 180 affiliated independent travel companies since launching in 1999.

“An independent travel consultant offers a more personalised service,” suggests Jean-Pierre Brink, an independent consultant affiliated with the Club Travel brand. “The client deals with one consultant for everything – day-to-day bookings and after-hours calls.

However, while an independent consultant will add a level of personal interaction perhaps missing in a larger TMC, it may not be suitable for larger companies or those travelling into less-developed corners of Africa, where a stronger support network is required. If there’s a rule, it’s that one size never fits all when it comes to corporate travel management.