Corporate buyers demand TMC transparency

Corporates employing travel management companies to organise their business travel have voiced disquiet over the level of income the agencies receive from suppliers.

Research by the Institute of Travel Management shows that more than half of UK companies using TMCs have seen fees increase over the last three years, rising to 62% of companies with a global travel spend.

Companies are paying transaction fees of up to £60 for international flights, although self-booking tools cut air transaction fees on average by 55%.

But savings from using regional or overseas call centres are yet to have any real impact, according to the poll amongst an ITM panel of 90 travel buyers.

ITM executive director Paul Tilstone said: “TMCs have definitely re-positioned themselves from being suppliers’ agents to buyers’ agents.

“Thirty-nine per cent of buyers feel that TMCs are working on their behalf, with a further 43% reporting that their TMCs work for buyers and suppliers without conflict.”

But Colin Goldney, managing director of the ITM’s research partner Argate Consulting, said that many buyers are uncomfortable with the significant income their representatives still derive from suppliers.

“Over 80% of buyers want to know more about how, and how much income TMCs still receive from overrides, GDS payments and sales and marketing agreements (SMAs),” he said.

Tilstone believes that there can only be transparency if TMCs reveal their margins.

“Around a quarter of survey respondents believe that TMCs work on over 15%” he said.

The TMC remuneration model has “definitely” become more fragmented after an initial shift to transaction fees in the wake of the British Airways-led reduction in commission payments to agents, according to the ITM. 

Just 29% of companies now work with their TMC on a management fee basis, compared to 49% three years ago. Those who have switched have mostly adopted a menu-style or bundled transaction fees, fuelling non-compliance as end users pick up the total cost of service.

In marked contrast to their TMC colleagues, Hotel Booking Agencies are still seen as the suppliers’ agent, and continue to rely mainly on commission payments. Half of the buyers surveyed reported that they work with their HBAs on a commission/rebate basis.

“This is bound to mean major changes for HBAs should hotel chains follow the example of their airline colleagues and reduce or even eradicate commission,” said Tilstone.

Report by Phil Davies