Navigating the complexity of Corporate travel distribution:

In this document, I will discuss how business travelers connect with suppliers such as airlines, hotels, and car rental companies. Although corporate and leisure travel shares the same landscape with similar suppliers and travelers, there are significant differences between them.

On the supplier side, we have airlines, hotels, car rentals, and activity providers. Global distribution systems (GDSs) sit at the center of the travel distribution landscape, along with aggregators, consolidators, travel tech providers, travel agencies for leisure, and travel management companies (TMCs) for business travel.

While leisure travelers seek inspiration, new experiences, and fair prices, corporate travelers have different priorities. Business trips need to be precise, on time, risk-free, and disruption-resistant, with a higher level of duty of care. Frequent travel also necessitates a certain level of comfort, which is why first-class seats are not just for decoration.

Travel can become the second-largest expense for a company. Therefore, businesses seek better deals with suppliers and GDSs to optimize spending while ensuring travel comfort and enjoyment for their employees. To manage budgets and enhance travel experiences, corporations create tailored travel programs. What are these programs?

What are Travel Programs?

A travel program is a set of policies or rules that dictate how the duty of care is achieved and how supplier relations are managed. As we know in Corporate travel it’s easier to outsource Travel programs to a professional company, a TMC. They will apply all these rules and policies throughout the whole travel cycle from Contracts with the suppliers to post-travel reporting. So how do businesses and TMCs establish and manage their business relations with suppliers? Ideally, the corporation would negotiate some exclusive direct contracts and rates, outsourcing the rest to the TMC, but clearly not every business is capable of negotiating exclusive rates or direct contracts with companies like Marriott hotel or Delta airline. In that case, this function is fulfilled by TMC, which can negotiate great deals because of the sheer number of business client’s data. Fun fact- the largest corporations gravitate to the largest TMCs, while the medium-sized corporations tend to work with lower-tier TMCs.

In the 1st case, the share of discounted and exclusive rates or direct contracts between the suppliers and corporation is sizable. Leaving TMCs predominantly with transactional and service fees with a relatively small share of commissionable bookings.

In the 2nd Case, the Commission from suppliers makes up a bigger share of TMC’s income about 70% in terms of business impact. One of the largest programs that corporations and TMCs have to take care of is “Air travel”.

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Air Travel Programs:

?If the corporation has levers such as the size of the business, it can negotiate substantial discounts with specific Airlines, GDSs, or Consolidators. Businesses prepare historical data on spending destinations, preferable booking classes Etc. Then they approach different suppliers to get the offers. A multi-year contract is usually signed, providing myriads of discount conditions and terms to be met, obviously, the more business you are ready to give to one supplier the bigger discount you likely get in return but on the other hand you have to mitigate risk and avoid putting all your acts in one basket. You have to consider whether you are contracted airline is available in your GDS, their NDC (New Distribution capability) Strategy various limitations that would impact your air travel program, and a whole lot of other considerations. If your corporation works with a TMC, it care of all these nuances I just written above, along with this, there are plenty of different 3rd party Tech providers that bring value to the corporations in their Air travel program, for Example- an Israeli company oversees former fair monitors fare after reservations are done and look for saving on rebooking if the cheaper fare become available. It often works even with non-refundable fares considering cancelation penalties, another example of an amazing third-party service is USA-based Traverse, it connects corporations with Airlines enabling business travelers to book an airline website while being compliant with their own travel policies and they still get corporate fares and perks like frequent flyer upgrades.

Hotel Travel Program:

Unlike air travel, Hotel programs are usually based on a single year contract and require Corporations or TMCs to deal with many more suppliers simultaneously, while creating corporate Hotel programs- Corporations have to understand them.

·?????? Volumes

·?????? Main Destinations

·?????? Proximity to Certain facilities

·?????? Type of hotels and rooms needed.

·?????? Meeting space preferences

·?????? Flexibility options and many more.

Corporations can do it in in-house using their own travel analytics or Seek aid from TMC or Specialized 3rd party products like (BTP Automation), whose bread & butter is the “procurement process”, “Rate negotiation commitments Etc.

Car rental Programs:

Like the Air and Hotel programs, car rentals offer sweeter deals for more business from –

·?????? Better Rates

·?????? Improved car classes

·?????? Better insurance options

·?????? Free upgrades ???

So it’s very common to partner with one or two rental companies especially if they support your flight and hotel loyalty programs and you can spend those points on ground transfer as well. Besides corporations of TMCs acting on their behalf well obviously consider “coverage areas”, “cancellation options” and other conditions. This multitude of different options across Airline, Hotels, and Car rentals creates a remarkably diverse rates and fares picture let’s try to untangle.

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How rates and Fares Work:

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It on the lowest level we have different types of rates and fares from suppliers, for instance, suppliers have discounted or promo rates, Negotiated directly with a corporation or TMC. Airlines may also use “private fare” the deals that they don’t publish on their websites but can be sold directly or in a package with say a hotel room. If the corporation books directly with the supplier it all ends here, but if they use TMC, there is another layer as TMCs get “commissions” from the suppliers. But it doesn’t stop the rate and fare level. TMCs sometimes apply “transaction fees”, especially when they manage the booking with an exclusive rate under a direct contract between the corporation and the supplier. This helps TMCs earn money and there is no commissionable available for such transaction. Other than fees associated with booking directly TMCs may also apply regular “management fees” charged on a monthly, quarterly, or yearly basis if a corporation besides booking uses extra services that “TMCs provide professional service fee” are added for example, a TMC may provide Visa assistance or Insurance and the corporation must add those services to their overall cost breakdown. The share of management and professional service fees is about 30% of total TMC Revenue. All right, this should give some understanding of the parties and the way they arrange cooperation from the business perspective.

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Technological Side of Distribution:

Technological side of things understand that travel despite all the evolution and development is still very dependent on Legacy processes and systems. The GDS's role is not limited solely to distribution. TMCs in operations are in many cases very GDS Centric and these systems are foundational for travel programs, compliance, duty of care, Expense management, etc. For example – the GDS system can be configured to enforce corporate travel policies automatically. The company employees must adhere to guidelines on preferred vendors, service classes, and other policies, and you can configure a GDS to search only for those flights and hotels that meet these criteria. Another aspect of this GDS centricity is that operations and even more, So TMCs use a PNR, as a major container of Passenger information. The PNR or passenger name record is an artifact of GDS-based flight distribution. It’s digital documents that contain the passenger’s itinerary and even if a TMC books a hotel outside of GDS, it is would still add this reservation to a PNR as a so-called passive segment but why? To answer this, TMCs actually use GDSs at their database the information contained in a PNR is then used by back-office systems and expense management software. GDS infrastructure became integral for corporations in TMCs. To keep TMCs as their major partners GDSs even tend to provide access for free, an online booking tool is another part of the distribution equation. Corporations use this system to reserve travel products while following corporate travel policies. OBTs contain profiles of corporate travelers that dictate which carriers and hotels to book, which service classes, and even preferred seats.

Integration with expense management systems allows for seamless tracking and reporting of travel expenses. This integration simplifies the reconciliation process and helps corporations gain better visibility into travel related expenditures, but over the last decades or two the boundaries between technological solutions have become increasingly blurred. It’s hard to segment tools-based functionality and they continually expand the range of services merge with other solutions and so on. One can engage in a length of debates about whether the solution is primarily an online booking tool or an expense management system, as it has functionalities that span both areas. So how is it that TMCs don’t get lost in selecting the best technology providers in such an environment? The top priority is always the corporate client and its business goal. TMCs are typically very flexible and adapt to whatever preferences the client has. Therefore, along with the development of their own tech solution for “supplier management”, booking, expense management, disruption management, etc.

TMCs simultaneously welcome all other 3rd party Tech providers into their own marketplaces so that their corporate clients have all potential solutions at their disposal. Moreover, in most cases, it’s easier for TMCs to partner up with some prominent tech company. Let’s say resolve the challenges of complicated itinerary creation or workflow automation then build such a solution on their own. So, what really happens when the business traveler is ready to hit the road and win the deal of their life?

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Example of Business Trip booking:

I’ll intentionally admit the case of small businesses where the flow would be pretty similar to leisure also, I will not describe the flow with some of the new prodigies like NAVAN, SPOTNANA, TravelPerk but let me shout out to these guys for the incredible solution that they created and for the push they have already given to the industry. So let’s focus on the conventional scenario. An Enterprise wants its manager to fly to a different city for an important set of meeting and they are using a traditional TMC as their services provider.

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Disclaimer: every step of the process will have multiple variations in real life. So don’t take what I am going to discuss here is the only correct way.

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The business traveler initiates a request with the itinerary details that get sent to the TMC. The TMC’s agent starts searching and combining the itinerary according to the business traveler’s profile and the company’s travel policies. This is the most variable part and agents can do this in dozens of different interfaces – GDS, third-party OBTs, direct channels you name it, and after the itinerary is agreed upon with the traveler, the agent books the flight via OBT from the GDS inventory. Making the return leg refundable and the number of meetings might go up. Hotel room and back car reservations are made outside of GDS according to the respective programs, yet the agents store all the information about all the segments in the PNR, which will kept and dealt in case of changes frequently occurring in the corporate travel world. Then a virtual credit card specifically for this trip is issued and send directly to the business traveler’s phone. Issuing this card is a very important part of expense management because it drastically simplifies reporting and accounting. It is created solely for the trip and will be terminated once the traveler get back home. Although the preparation is finished the travel agent stays on top of the process to make sure everything goes smoothly and immediately supports the business travelers in case of any disruption. They may use disruption management software to stay in touch with the traveler and track possible delay and cancelations and off he goes to do more business for his company and justify all the expenses put into organizing just one business trip but that’s a whole different story.

Conclusion:

Corporate travel focuses on different goals compared to leisure travel. It involves complex negotiations, technological integration, and a constant quest for efficiency, making it a uniquely intricate aspect of the travel industry.

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