Op Ed: Louise Miller On TMC Innovation Coming Back Into View

Louise Miller, managing partner in the Americas for Areka Consulting, sees opportunity for suppliers and buyers to reorient their thinking and emerge from the pandemic crisis with improved products and programs. For travel management companies, the key is to recognize the forces behind innovation.

Over the past five years, we’ve seen unprecedented investment in the corporate travel industry. Airlines invested in premium cabins, tech-first TMCs emerged with exploding valuations and amazing new choices arose for travelers and buyers. Now, with extraordinary suffering in our industry, it’s easy to lose confidence in the future. As buyers and suppliers share their hopes and concerns, there is a longing for more innovation. Innovation will come back into view, and we’ll see it in more ways.

Businessdictionary.com defines innovation as “the process of translating an idea or invention into a good or service that creates value or for which customers will pay.” In recent years, outside investment from venture capital and private equity overshadowed much of the other innovation occurring incrementally as part of business evolution.

While we wait for markets to stabilize and for the return of supplier profitability levels that will fuel investment, the forces of necessity, scarcity, inevitability and sustainability will dominate. These always have been significant drivers of innovation. They are easier to see when massive outside investment isn’t stealing the limelight.

Necessity

We need TMCs to re-establish operational models for a healthy business travel ecosystem for the long run. For years, debates raged regarding what customers would accept in terms of call center configuration: national, regional, global, follow-the-sun, offshore. Is it best to place employees at home or in a center? Should they be shared among accounts or dedicated to just one? Should they be full-time or part-time?

TMCs built services infrastructure on guesswork regarding demand. Indeed, for many companies, there was no safety net in place to protect against a 90 percent drop in demand. Sheer necessity will push TMCs and buyers to take more innovative approaches to pricing and balancing risk.

Louise Miller, managing partner in the Americas for Areka Consulting

At a minimum, TMCs will likely need to shift customer income to a mix of fixed and variable fees. Quite a few customers had been paying for personnel costs plus a set of fixed fees per transaction; however, many went to a purely transaction fee model even with dedicated (or designated) agents in place. An interim shift back to fees plus personnel expenses already underway signals a potential longer-term trend back to a shared cost model. Subscription pricing, common when paying for software, also has been a topic for quite a while. With TMC services becoming more tech-first, subscription pricing may make more sense now.

What new models will arise as we shift from interim mechanics for survival to a resumption of travel program operations resembling something closer to normal? Many companies in various sectors, and certainly small businesses, are suffering along with TMCs and travel suppliers.

On the buyer side, financial and operational risk management necessitates more robust forecasting regarding TMC services and business continuity plans.

Scarcity

Before the pandemic, scarcity of labor was a real challenge for those looking for skilled travel agents. Virtual call center options were limited when agents did not have home internet and a quiet place to take calls. Such suitable conditions are scarce in many parts of the world. Will governments and internet service providers sufficiently close the gaps to make virtual call centers more feasible?

Scarcity of labor was not limited to agents. The demand for software engineers was sky high, pressuring TMCs as they attempt to execute tech-enabled innovations in a post-pandemic environment. As travelers get back on the road, they will expect even more from travel-related technology.

At least for a while, scarcity of airline seats will drive up airfares and thus TMC supplier income. For how long depends on when airlines start to rebuild their networks and whether that occurs in predictable increments. The sooner recovery starts and the faster it happens, the more likely routes will be competitive and prices tolerable.

Scarcity of seats will also likely prompt more advance booking, which benefits everyone in the value chain. Travelers will rely on TMCs to thoroughly search for inventory rather than spending time searching for the needles in the dot-com website haystacks.

Inevitability

Broader use of airline NDC by TMCs is inevitable. Otherwise, travelers will go to OTAs or book directly on airline consumer sites.

Uses for blockchain are proliferating as companies desperately seek efficiencies. Airline ticket processing and settlement have lots of room for improvement. During a 2019 test, ARC used Blockskye technology to track ticket lifecycles from issuance through settlement on United Airlines. The system identified all transaction modifications through smart contracts. TMCs will have roles to play in this type of scenario if they can adapt to new processes.

How do we know the power of inevitability? Follow the history of the cloud explosion over the past 10 years. Despite the economic downturn of 2008-2009, investment in cloud technology skyrocketed. The market grew from less than $35 billion in 2010 to a whopping $300 billion in 2019. Technology set in motion years ago inevitably will bring innovation to our industry as we rebound.

Sustainability

Sustainability will be more of a driver of policy and practice than ever before. Many organizations measure their carbon footprints and invest in offsets. But it’s been difficult to unravel legacy practices. How does one justify using air over rail? Is the carbon footprint of a business class seat worth minimizing travelers’ wear and tear and improving productivity? In addition to purposeful decision making about policies, pandemic-driven outcomes may naturally support sustainability. Decisions to meet virtually instead of traveling will impact demand for many trip types.

What might buyers need from TMCs to operate in a more sustainability-driven world? What already exists that can be leveraged? Online booking tools — whether TMC-owned (Egencia, KDS) or agnostic (Concur, Deem, etc.) — are natural catalysts. They allow for creative messaging baked into the workflow.

Historically, getting the TMC into the middle of the travel-versus-virtual-meeting decision didn’t work for most companies. That decision usually was made before the TMC got involved for trip planning. There now is an opportunity to reset expectations. TMCs have a role in communication and guidance to travelers. They can help collect trip reason codes during the booking process and inform travelers about any mandates to make internal meetings virtual.

Between TMC-enabled mobile apps with messaging to just-in-time texts, corporates will attempt to manage demand at every step of the trip lifecycle. “We care about your well-being. Cancellation is free within 24 hours. Did you consider a virtual meeting instead?” In the pre-pandemic world, most travelers would have found such messaging annoying. Now they may be relieved to receive such guidance.

Everything is up for discussion, and innovation is at the core of our industry reset.