Skift Take

A crisis can either strain a relationship or cement it. Many travel agencies with contracts expiring on the horizon are about to find out which category they fall into with their corporate customers.

Does it make sense for a company to jump into bed with another travel agency in the middle of a global crisis? It depends on who you talk to.

Travel managers that do have an expiration date on the horizon will be weighing up this dilemma. They’ll recognize that with travel about to look a lot different, what they’ll be needing from their travel agency will be different too.

Skift talked to experts on either side of the (virtual) negotiating table about favorable future terms and conditions for a coronavirus world.

Get the Latest on Coronavirus and the Travel Industry on Skift’s Liveblog

Mind the Technology Gap

Three months into the crisis, and it’s only recently that many travel agencies have rolled out new platforms and features to better look after their clients’ travelers, often for free. Which begs the question: why wasn’t it there before?

An agency’s technology prowess is under the microscope; while most travel management companies talk about having best-in-class technology, COVID-19 and its impacts will be putting this claim to the test.

One travel manager at an international company, who wished to remain anonymous, told Skift the crisis had exposed some flaws in their travel agency and prompted them to look elsewhere.

“We aren’t renewing, and have signed a new contract with another agency,” they said. “Because of what’s going on, a lot of people will want to stay with their agency, and get an extension. But we wanted to go somewhere that was a breath of fresh air.”

One of the main problems they cited was airline refunds, which have been an ongoing bugbear not just for organizations but consumers worldwide. Their previous provider — a large, global agency — was charging different fees to process refunds across different regions.

In some cases, the agency fee for cancelling a ticket, a fee most airlines had waived, ended up costing the firm more than the price of the actual ticket.

The travel manager admits this was something that should have been addressed in the original contract, but it was the lack of agility that didn’t impress them.

“There was less flexibility. The big agencies are more laid back, and not in a hurry to do things. Another issue is that they’re such a big ship, and trying to steer one way or another is impossible. When it comes to rolling out new technology, they’re too big to implement it quickly,” they added. “The big boys struggle with that, that’s my understanding.”

Is this relative downsizing a common theme? Travel management platform TripActions seems to think so.

“We are seeing a lot of new customers coming from legacy providers, mostly because they found themselves unprepared for coronavirus,” said a spokesperson. “They’re finding they need the real-time data and insights, paired with flexible travel and expense management tech, to be able to make, implement and adapt business and travel policy decisions as situations like Covid-19 evolve”.

“Agility is essential given that the future’s uncertain and we don’t know what changes or requirements will be placed on travelers in the future,” added Jill Palmer, CEO of Click Travel. “Corporates will want to ensure that whoever they partner with is able to pivot their technology to support future changes.”

However, Paris-based consultancy Areka Consulting told Skift its corporate clients are more focused on getting their own programs in order: “Regardless of agency, their general priority is ensuring programs are fit for purpose as travel returns. We don’t see a shift away from global agencies for large corporates. The small to mid-size corporate clients in select countries continue to be watching challenger agencies however. Everyone is watching this space carefully for validation of funding and innovations.”

Wellbeing and Duty of Care Refocus

When staff do resume business trips, their safety is set to become even more important.

“One priority in the request for proposal document will be corporates wanting to know how the agency proposes to manage the highly complex, country-specific sets of rules applied to international air travel,” said Andrew Perolls, CEO of travel consultancy Greengage Solutions.

“With these rules likely to be changing all the time, and at short notice, the agency will need to demonstrate agility and expertise in looking after the needs of travelers.”

One procurement expert advises there will be consequences from the strict hygiene protocols, social distancing, and even periods of isolation staff will experience on their next trip.

“I hope traveler wellbeing will have a focus, in terms of whether staff are fit to travel, as well as pre and post-trip health. What should a policy incorporate around anxiety and wellbeing? Is the corporate going to force staff to travel?” said Andy Neilson, owner of consultancy Twisted Orange.

He said he was working with a financial services client on updating their travel policy, and helping them to find a new agency. “I’m setting them a series of questions for them to answer, for us then to do the work. I can’t give the answers, because they need to provide the responses. You need to get all the questions in one place.

“At the moment, I don’t think corporates know how they want to be supported. It’s too early, but as an industry we need to get people together to create consensus.”

However, Neilson cautions against an immediate agency switch because of the lingering global uncertainty.

“If you’re going to market, you’re obviously looking for a travel management company to come up with solutions, such as around quarantines and so on, but nobody knows what they need to build in. It’s all very much the same as before, until someone can clarify,” he said.

“A lot of organizations should work with their existing agency and get to a new ‘ready state’, and then go to market. At the moment it’s better the devil you know, unless you’re in desperate straits with your current provider.”

Show Me The Money

While technology and systems have been exposed, another aspect the crisis has brought to light is the agency’s traditional business model: the transaction fee.

Travel management companies do more than just buy tickets. But when the bookings stop, so too does the agency’s revenue, as well as hidden supplier commission, override and incentive revenue they might also rely on.

As a result, agencies will now likely negotiate with a management fee in mind.

“This situation will surface in every contract review and retender from now,” said John Harvey, founder and chief marketing officer at Globalyse.

“The current situation presents a unique opportunity for agencies to break their dependency on supplier revenues and mark-ups and create a completely different proposition for clients.”

He proposes a “Travel as a Service” model that would be based 100% on user fees. However, he added that a challenge for travel managers is that a budget would need to be created for paying the agency fee — and a method established to ensure any supplier benefits are captured and returned for the client, heralding a return to the “open book” travel management.

“Agencies need to view their primary role as a provider of corporate service — and not as a seller of travel,” he said

In the immediate and post-COVID 19 world, corporates will ask agencies to play a greater role in data analysis, traveller tracking, wellbeing, safety, security, account management and hotel program management, environmental impact — in short, looking for travel “assurance” and services that go way beyond buying a ticket, Harvey added.

Greengage’s Perolls thinks agencies will also add minimum booking volumes into contracts, below which different pricing applies.

Financial stability is also under more scrutiny. Related to the above, many agencies have been placed under intense financial pressure, and the longer the crisis goes on the more questions will be asked around their long-term stability.

As a result, greater due diligence is needed around the financial resilience of agencies involved in a tender process, added Greengage’s Perolls.

“From a risk perspective, corporates are going to want to work with agencies that they know will still be around in the future, with a team able to support them from a crisis perspective when things go wrong as well,” said Click Travel’s Palmer.

Green Shoots

Sustainability was a major industry talking point prior to the pandemic. And according to a poll of travel buyers at the recent Institute of Travel Management conference, it’s still top of mind, Perolls points out.

In fact, the pandemic has influenced attitudes towards sustainability. In the poll, 40 percent of travel buyers said sustainable travel was now being given higher priority than pre-COVID-19; 56 percent said there has been no change; and only 4 percent said it is now a lower priority.

“Prior to COVID-19 we had already seen a far greater emphasis on sustainability within travel tenders,” Perolls said. “This will continue with agencies being scrutinised for the practical steps offered to deliver clients a more environmentally sustainable travel programme.”

Sourcing the Right Suppliers

Touchless travel is a growing trend, from contactless payments to mobile check-in at hotels.

In a recent BCD Travel poll, business travelers said they were most concerned about “enabled cleaning and transparency, such as sealed rooms”, followed by online check-in and digital keys. Speaking at a webinar, Nestle’s travel manager Marc Zuber said: “The whole digital experience will be accelerated, so it’s going to be important to respond to that and have the right suppliers that can provide the right solutions.”

“With hotel sourcing, agencies need to be able to come back to the company and say, actually, here’s the measures, here’s hotel stock that offers online check-in,” said Twisted Orange’s Neilson. “The true winners out of this situation will be the people who can innovate around that piece, and provide that as a differentiator.”

Pivoting the Pitch to Virtual

Travel managers and agencies will also need to hone their presentation skills to the video conference format.

“Zoom presentation of sales pitches and demos require a different approach and skill set,” said Click Travel’s Palmer, who in the last month renewed its contracts with UK’s North East Procurement Organisation for public sector travel, and civil engineering and construction business VolkerWessels after lengthy tender processes.

“It’s less easy to establish a rapport and needs more discipline with not talking over each other. We’ve been using Zoom for a while, so we’re experienced, but most of our pitches in the past were face to face — that’s changed. Whether it will stay like this remains to be seen.”

The international company’s travel manager is hopeful their new agency relationship will blossom. “They’re tech savvy, which is one part. The other part is they’re still quite new. The employees working there seem excited, and eager, and keen. Overall the newer travel agencies are keen to impress, and go above and beyond.”

However, they added: “When they get to a bigger size, who knows if they’ll still be as willing to be flexible.”

For Globalyse’s Harvey, this type of competition between travel agencies ultimately benefits the entire industry.

“This will be what drives innovation,” he said. “This next phase in the travel management market represents a threat to those who remain stuck in the past, and a great opportunity for those who try something new.”


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Tags: bcd travel, click travel, coronavirus, tripactions

Photo credit: The effects of the pandemic on travel will also impact the way corporates negotiate with their agency in the future. Cytonn Photography / Unsplash

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