What has changed in the business travel agency? Do we still need business travel agencies?

In these days, I received the diagnosis: Arthrosis in the thumb saddle joint – incurable, a prosthesis is necessary. The hand surgeon asked about extraordinary strains. Then it occurred to me how many flight tickets, train tickets, and other vouchers I issued by hand during the first 10 years of my time at the travel agency (starting from 1973). That must have been it.

Of course, many things have changed since then. Tickets are electronic now. You no longer receive a confirmed waitlist by occasionally leaving a bottle of champagne at the Lufthansa city office. IATA fares with 'HIP' (Higher Intermediate Point), add-on tickets (to utilize paid miles), and fictitious start of the journey (e.g., in Cairo) and similar creativity are no longer in demand. Almost all airlines are no longer state carriers and compete freely.

The CRS (Computer Reservation Systems) took over, and while they have been declared dead multiple times, they still remain the most intelligent electronic "catalogs" compared to all industries. OBT (Online Booking Technology) exists in many variations, although none of them cover the globe equally well.

Apps are commonplace and expect further development. Virtual meetings and video conferencing replace some travel. The status of the wholesaler for travel agencies has silently disappeared. The "kick-back" has been replaced by the "TAF" (Transaction Fee), representing some forms of compensation from corporate clients to the travel agency. Now, the business travel agency can represent the interests of its corporate clients unequivocally (let's say 80%).

All service providers have one interest: to satisfy the business traveler with their product, preferably on a long-term basis. Many service providers have long wanted to eliminate the disliked "middleman" travel agency. Just look at contracts with hotels that have been negotiated "innocently." They demand that bookings must be made directly at the hotel to get the negotiated "special rate."

And often, the special rate must be booked even if the hotel's revenue manager has posted cheaper prices online. Almost all airlines are creative in designing their websites or at least those of their alliances to show the best conditions only there.

STM (Strategic Travel Management) on the customer's side, which includes a sensible travel policy, implemented through a competent business travel agency (OTM - Operative Travel Management), remains the backbone of successful investments in the "means to an end" of business travel in an increasingly complex travel industry.

Much of OTM can be implemented technologically (OBT + App), but for certain complexities of a trip, the solution lies in the trained, motivated, patient, and polite staff of the travel agency. When was the last time you tried to book a trip online from Africa to Asia and maybe back via South America? It rarely happens. However, it can be said that any flight involving more than two layovers in different countries requires the expert, direct support of a travel agency. This is especially true in exceptional situations like volcanic eruptions, pandemics, terrorism, etc.

There are now some attempts to render the traditional business travel agency obsolete and replace it with individual service providers' pure online offerings. However, it is evident that in such cases, the interests of all service providers remain the same and only shift into the online world.

Some C-level decision-makers even believe, "I don't go to a travel agency for my vacations anymore; I book everything online. It should work the same way for business travel." Recently, I had the opportunity to help such a company. They had expenditures for business travel in the mid double-digit millions (!) spanning over 60 source markets worldwide.

You can imagine the outcome. Fortunately, the dire situation was recognized during the pandemic when there wasn't much traveling happening anyway. Still, "maverick buying" was the order of the day, and any overview of travel behavior and ROI was lost. Not to mention the difficulties of individual travelers booking quickly and reliably. It was quite a task to establish reliable structures here. I began with a global TMC (Travel Management Company) tender.

Now, let's talk about another peculiarity of the business travel industry. TMC (Travel Management Company) – it actually sounds like outsourced STM (Strategic Travel Management). However, there are at least two dynamics that contradict this assumption.

1. Assume that larger travel agency organizations still generate around 20-25% of their revenues from service providers. (In the context of revenue optimization, neutrality may be diluted again.)
2. Almost all purchasers focus on the price of the business travel agency (TAF) in the TMC-RFP (Request for Proposal) because it's so easy to determine.

This means that even business travel agencies are not as neutral as one might assume (see revenue optimization), and almost all of them have been pushed into very thin profit margins through constant price pressure and competition (ROS - Return on Sales ranges from 0.5 - 1.2%). Since approximately 65% of a travel agency's costs are personnel costs, they are the first to be targeted. As a result, call center-like structures have emerged, and in many cases, these call centers are located in low-wage countries.

Unfortunately, it often isn't the most economical option that is chosen but the cheapest travel agency, despite all the vows that quality is paramount. Then, even OTM (Operative Travel Management) becomes a challenge. Do you know any executive assistant who enjoys explaining who they are, who their boss is, how to spell their boss's name correctly, what has been discussed so far, etc., every time they call the call center? And they never get the same agent on the phone.

And don't believe the promises that every "call center agent" has the previous conversation history and all information about the company, traveler, and assistant on their screen. Based on my experience (over 100 projects in SMEs), I can say that any medium-sized company that does not have knowledge of STM (Strategic Travel Management) in-house always pays 15-30% too much, even if the trips look quite reasonable.

And this is independent of the company's size. Yes, DAX companies or Blue Chips often have travel management departments with dozens of highly skilled employees, and then SMEs say, "We can't afford that!" Let's assume your total business travel expenses are €500,000 per year. By consistently implementing STM, you save 15% permanently. Wouldn't it be worth having a knowledgeable part-time employee? Or someone who handles 50% STM and 50% similar tasks? You might even have some money left over!

In summary, each company must design STM itself, and in exceptional cases, it can be outsourced to neutral, external entities – but not to the travel agency. OTM (Operative Travel Management), if we want to use this term for comparison, must be entrusted to competent business travel agencies. These agencies must have access to the most modern tools and information that are constantly being developed and improved in the market. The agency should use these tools themselves and make the sensible ones available to SMEs as licensors

Only then is the combination ensured, ensuring that all investments in business travel are implemented economically and as securely as possible.

?#OBT #APP #VATreclaim #strategictravelmanagement #CRS