There's nothing like breaking ranks with tradition, and over the course of the year we'll probably hear more about this type of travel management-as-a-service offering.
The time for talking about new commercial structures to survive the pandemic is over for one travel management company, which has made the leap to charging a subscription for its services.
London-based Blue Cube Travel believes it’s one of the first traditional agencies to break new ground with this latest adaptation.
While some technology-focused platforms already operate a subscription model, managing director Bex Deadman said Blue Cube, which had gross sales of nearly $50 million in 2019, could be the first traditional travel management company to offer such a structure for its consultancy services.
It will continue to offer the industry standard of a fee per transaction, which it’s now calling “pay as you go”.
Off the back of its new subscription model, it recently won a new client — an international company with a pre-Covid annual travel spend of nearly $7 million a year. Other customers are in the pipeline too, attracted by the new proposition.
Deadman said that Blue Cube had been looking into the idea for the past 18 months, with the pandemic reinforcing the fact that it was the way to go.
“The pandemic actually made us rethink our approach to our clients regarding the new commercial model, as we were suddenly potentially in a situation of asking them to pay for something when they weren’t traveling,” Deadman said.
“Where we have ended up is interesting, a sort of hybrid model which gives our clients flexibility as they work out what their future travel programs might look like. For a travel management consultancy such as ourselves, the travel booking itself is just the beginning of what we do for our clients … it’s the conduit for the other services, like traveler wellbeing and analytics, that we offer.”
The shift reflects the fact that even during a period without corporate travel, advisors still perform a range of tasks, such as refunds and consulting. In the leisure sector, subscriptions and memberships are also becoming a compelling way for travel companies to create lasting relationships with consumers.
Covering All Bases
It’s not the only corporate travel agency that’s taking action, following calls by industry observers for change. “A travel management-as-a-service model is seen as a more transparent one and a number of agencies are considering this approach,” Clive Wratten, CEO of the Business Travel Association, told Skift in April.
Another agency, ATPI, has told Skift it has now renewed its focus on management fees.
“As we’re doing so much more work that doesn’t equate to an actual transaction, we’re doing more around the management fee,” said Gary Pearce, chief commercial officer and regional managing director, Americas.
ATPI had a turnover of more than $500 million in the UK in 2019. While it’s been impacted by the downturn in business travel, it has benefited from its maritime client base, with the energy sector among few to maintain travel.
“There’s an increase in people understanding that our people are doing work. We’re tweaking individual contracts at this point in time, saying look, we’ve got to cover our costs,” Pearce added. “It’s more a consulting fee, so we get paid for the work our people do even if a transaction is not accomplished.”
Pearce also said hybrid business models would likely appear as business returns.
“Everybody’s making cuts,” said Pearce. “This is the time where you have to sit back, and along with your client base, ask: why have we always done things this way? Do we get back to a simpler time?
“It’s a normal course of business that inefficiencies get built into business the more you grow, the longer things are the status quo, and this is giving everybody an opportunity to take a step back.”
Meanwhile, Blue Cube has made further changes to its business. It has formed a new homeworking division, Blue Cube Travel Services Ltd, to take on independent consultants and offer them the relevant licenses to trade.
It has also developed Beyond Booking Analytics, a reporting suite which delivers clients actionable data. “In its simplicity, we present total trip costs, something which has been asked for by travel managers for a long time,” Deadman said. “But we factor in other unseen factors such as environmental costs, as well as wellbeing and the loss of employee productivity. This extra data reporting ties in with our move to a subscription model, as it demonstrates our value.”
Photo credit: Subscription models provide a more stable revenue stream for corporate travel agencies. Gerrie Van Der Walt / Unsplash