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![CWT Deal Scrutiny Alludes To Question Of Whose Interests Come First For TMCs Jay Campbell Jay Campbell February 19, 2025 0 Comments Regulators and lawyers reviewing American Express Global Business Travel’s planned acquisition of CWT explored many topics, but one that received little attention was the transaction’s potential impact on suppliers. The U.K.’s Competition and Markets Authority and the United States Department of Justice made a few mentions of it. Given the commissions and incentives they pay to corporate travel management companies, travel suppliers can be seen as customers of TMCs — in addition to the organizations that buy trips. How TMCs prioritize their masters has been a question in travel management for decades. In its answer to the DOJ complaint, Amex GBT denied DOJ’s allegation that, “In addition to corporate customers, airlines, hotels and other travel suppliers may suffer as well if this acquisition is allowed to proceed.” Under this thinking, global distribution system providers would also be exposed. According to DOJ, CWT’s owners “believed Amex GBT should pay a higher price for CWT in recognition of the increased [supplier] revenues Amex GBT would enjoy post-merger,” thanks to reduced competitive pressure from removing a key rival. “During negotiations, CWT’s owners estimated that the transaction would potentially allow Amex GBT to charge travel suppliers more than $100 million in increased commissions and fees, and they pressed Amex GBT to improve its offer for CWT to reflect those additional revenues,” attorneys wrote in the complaint. Travel management companies earn commissions from suppliers as well as fees from users GBT downplayed those details, saying they represented “an ineffective negotiation tactic from CWT owners in negotiating the proposed transaction.” GBT never underwrote any synergies for what DOJ claimed that GBT “euphemistically” called “supplier harmonization,” according to the company. (After announcing the CWT deal in March 2024, GBT execs talked about synergies on the expense side.) Answering the lawsuit, GBT did not respond directly to DOJ’s references to alleged prior practices: “For example, before it acquired Egencia in 2021, Amex GBT identified an ‘opportunity’ of $50 to $80 million from increasing supplier ‘yields,’ with each of United Airlines, American Airlines and Delta Air Lines ‘likely need[ing] to absorb additional costs of [approximately] $15 million.’ Post-acquisition, Amex GBT reached that goal: it renegotiated fees with air travel suppliers to extract higher fees compared to what they had paid to Egencia. And in an August 2022 assessment of a potential CWT acquisition, Amex GBT projected that it would be able to earn more than $100 million from increased supplier revenues if it achieved the same harmonization rates from acquiring CWT as it did from acquiring Hogg Robinson Group.” There’s no quibbling with the fact that Amex GBT has been building unprecedented scale, but the aforementioned supplier negotiations are normal in the TMC business. Concern about how supplier revenue influences TMC priorities is woven into numerous processes and practices in travel management, including how online booking and price assurance tools are configured to push preferred suppliers or offers (and whose preferred suppliers those are). Buyers in highly managed programs consider it, as do suppliers. While he was still Southwest Business VP and chief sales officer, Dave Harvey referenced transparency and bias in the context of corporates changing TMCs and booking tools. “As these things are getting moved over, they’re not getting moved over clean,” he said during an April 2024 interview. “There are people being opportunistic for various reasons.” When programs make such changes, he advised, customers should make sure “the buyer-supplier relationship and the preferred/most preferred is maintained through that transition.” Referencing hotel booking display filtering that was moving “over to the airline space,” Harvey said, “If a travel manager isn’t on their game or fully engaged in that transition, there’s a lot of less-than-desirable outcomes.” In a January blog post, Emburse chief strategy officer Steve Reynolds argued that with rate re-shopping, TMCs were putting profits before customer cost savings: “Traditional TMC re-shop solutions prioritize converting non-commissionable air and hotel rates into commissionable ones. … Additionally, many TMCs lack transparency in their reporting of re-shop success, leaving customers uncertain about whether they are truly maximizing their travel budgets. Most importantly, it is very difficult to beat a non-commissioned hotel rate with one that is commissionable as commissions tend to be 10 percent to 20 percent of the cost. As a result, TMC solutions only find savings a very small percentage of the time by missing out on the majority of savings found by finding lower fares and rates on both commissionable and non-commissionable bookings. While the TMC service may be free, in reality, the service is providing much more value to the TMC than to the organization.” Industry consultants referenced such concerns during a Jan. 29 online event hosted by The Company Dime. “The TMC really needs supplier revenue to survive and to make a profit so that they can reinvest for the future and it isn’t just client revenues that they are surviving on — which then opens the question to the buyer community [about] whose interests they are they working in,” said Festive Road’s Caroline Strachan . “If it’s 70 percent supplier revenue and 30 percent customer, can I really trust that you are working in my best interests? That’s the issue that buyers worry about. Some of those players absolutely will have a different customer mix, and maybe there’s a retained commission piece there. Maybe they’re working in the SME marketplace, where actually they don’t really care — they just don’t want an additional higher [transaction] fee. They just want a low fee and let you retain all the commissions. So, you have to dig a layer deeper than just the percentage split.” “There’s a convergence of events right now that are happening that really give me concern,” said Bid Logic Solutions’ Bryan Holmes. “We all should have concern about the … corruption of it. One need only to look at Facebook as an example. With Facebook, you’re not paying for anything. You’re not the customer; you’re the product. As the proportion of supplier revenues make up how a TMC makes money for your program, the more you become the product and not the customer.” Commissions and GDS incentives can fluctuate with changing economic conditions, distribution strategies and leverage — even by market. Festive Road CEO Caroline Strachan in 2023 Festive Road CEO Caroline Strachan in 2023 Image: GBTA When the CWT deal was announced, former American Airlines sales leader Hank Benedetti, now chief customer officer at Blockskye, said that he didn’t think large suppliers would feel an impact since agency incentives had been trending downward. During the Jan. 29 event, veteran consultant Martin Warner said, “I think the percentage of supplier revenue is falling after many years of growing. As transactions outside of the traditional GDS increase, then the revenue associated with the GDS will fall.” Still, Warner saw warning signs for “certain buyers” as distribution structures change. “How sure are they that they’re getting access to all the relevant content they need?” he asked. “Not only are they getting access to it, but what premium might they be paying for their TMC to deliver that? And as airlines try to scale the changes to their distribution strategies, how easy is it to measure that premium being paid?” “Help me to understand how a TMC being able to have more leverage with suppliers to get more commissions helps the buyer,” said Holmes. “What mechanism is in place that it’s helping the buyer?” Does Facebook squeezing more out of its advertisers make Facebook a better product for users? Holmes believes the answer is no. Agreeing with the thought process, Warner asked, “Is that simply a margin opportunity for the TMC which is being realized, or does it only reflect in using that supplier revenue scale to subsidize and have a lower transaction fee, and that’s the only way that it can be measured?” Festive Road describes four models for TMC configurations, which incorporate such elements as whether the online booking tool is proprietary or third-party. Strachan said interest in the “build your own” concept that gives buyers the most control was driven by customers who were “maybe frustrated with some lack of progress.” Festive Road’s Four TMC Strategies Closed Shop: TMC acts as conduit for all services, using proprietary tools or its chosen partners. Customers trade control for reduced administrative complexity. Open Shop: TMC will bring on customer-preferred tools, assuming certain conditions such as participation by vetted third-party providers. Department Store: “The TMC is one or more ‘departments’ in a buyer-defined construct.” Booking tools, data services, re-shopping, etc., may be obtained directly by the customer, which increases customer control but also the resources required. TMCs may not align with certain aspects. Build Your Own. “The majority of services are contracted directly and a TMC is only used to manage the ‘long tail.’ ” The buyer is in full control and can access “favorable commercial terms.” The choice of TMCs that support this approach may be limited. The best model depends on the customer’s profile, culture, bandwidth and level of executive support, according to the consultancy. The smaller they are, the more likely customers are good with the closed shop and happy to use any negotiated benefits a TMC can pass on from their preferred partners. Even large companies may use these programs to supplement their own, via the open shop or department store concepts. The U.K.’s CMA on Tuesday reversed its opposition to the GBT-CWT deal in a move that an unnamed competition lawyer told the Financial Times was “very rare, if not unprecedented.” It has a March 9 deadline for a final decision on the transaction. The U.S. case is scheduled to go to trial in September.](https://www.thecompanydime.com/wp-content/uploads/2025/02/commission-TMC.jpeg)
Regulators and lawyers reviewing American Express Global Business Travel’s planned $570 million acquisition of CWT explored many topics, but one that received little attention was the transaction’s potential impact on suppliers. The U.K.’s Competition and Markets Authority and the U.S. Department of Justice made a few mentions of it. Given the commissions and incentives they…
We’ve been telling you for a few years about airlines aiming to minimize corporate discounts, limit who gets them and shift to other forms of contract value. (See here, here, here, here, here and here.) Reflecting all that, a new American Airlines offer sits between the AAdvantage Business small business program and bespoke, large corporate…
Festive Road’s Caroline Strachan predicted she would often say “it depends” when unpacking the government reviews of Amex GBT’s planned acquisition of CWT. It turned out that she wasn’t the only one during a live online discussion on Wednesday. Do large customers and small customers need different services from travel management companies? It depends. Can…
American Airlines has new deals with many of the corporate accounts that were most disadvantaged by its previous strategy and a few dozen of the largest corporate travel management companies, executives said. They presented this as evidence for ongoing corporate share recovery. According to AA, its fourth-quarter revenue share in indirect channels was 9 percent…
Preferred agreements should never be signed and forgotten. To continuously improve their relationships, savvy corporate travel buyers and sellers commit to regular dialogue, including business performance reviews. These face-to-face meetings, often conducted quarterly with airlines, hotel companies and travel management companies, are integral to supplier relationship management. They allow the two sides to track performance…
American Express Global Business Travel in November marked a grim milestone for corporate travel buyers, reporting that carrier-imposed surcharges this year exceeded $2,000 for business class roundtrips to London Heathrow originating at New York JFK. Although added to international ticket prices (labeled as YQ or YR), these charges are not subject to negotiated corporate discounts….
As antitrust authorities in the United Kingdom weigh industry input on concessions designed to garner approval of the proposed Amex GBT acquisition of CWT, the review raises questions about who can sufficiently serve large corporates and whether that’s been changing. GBT and CWT argued that up-and-comers like Navan and TMCs using Spotnana, plus traditional rivals…
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