Explainer: TMC Profit Margins

It’s not unusual to hear travel management company executives talk about their small profit margins, but their margins are average to above average compared with like industries. 

TMC profits are, however, sensitive to plenty of external factors the companies cannot control. They remain partly lashed to an industry (airlines) that until recently couldn’t post consistent earnings. Because so much of their cost base is for labor, the levers TMCs can pull when things go south by way of a downturn or loss of a large client are limited and painful.

This baggage . . .

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Jay Campbell

Author: Jay Campbell

Jay Campbell in 2004 created travel business newsletter The Beat, in 2006 co-founded Travel Procurement magazine and in 2010 integrated them with Business Travel News. He served as editorial director until 2013. Jay made his travel industry media debut in 1993 at the Air Travel Journal of Boston while earning his undergraduate degree in journalism at Boston University.

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Gaurav SundaramDavid BishopJohn Berkley Recent comment authors
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John Berkley
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John Berkley

Good summary of the TMC financials and the difference between measuring margins on total sales of the air, hotel, car suppliers handled by the TMC vs real TMC revenues which a combination of supplier commissions and incentives as well as buyer fees. Well done.

David Bishop
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David Bishop

I think this is a very balanced and fair piece around TMC economics. I measure my business against my peers in two ways. 1) Gross income per head of staff and 2) Operating profit as a percentage of gross income. So it’s nice to be on the same page. That said, I don’t get the excitement about this whole subject unless you’re involved in M&A (as we are at Gray Dawes … nine acquisitions in four years). I would also point out (and Tony and I had a good conversation about this before Xmas) that banks will look at EBITDA… Read more »

Gaurav Sundaram
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Great insights Jay …. While EBITDA is a universal measure , net income reported on the balance sheet can be greatly skewed by interest and funding costs, especially in non-credit card markets. Customers in such markets prefer on account payments that become a major cost factor for TMCs. Yes, tech investments are large at global HQ levels but the resultant cascade globally is generally very slow. This accounts for the wide disparities between TMC operations in more mature markets versus others. Louise is spot on that scale is important. What I am seeing in many markets is that some mid/large… Read more »