Consultant Tony O’Connor updates his thinking on industry associations with a new twist as he perceives a great realignment in buyer-supplier dynamics.
Travel buyer associations are an important part of the business travel landscape. They are the vehicle that can enable disparate buyers to join forces and have a say in the issues and changes affecting the industry. But we need advocacy and representation that is less compromised by supplier influence.
I am sounding the bugle because we are heading into a critical period of new challenges to travel buyers’ interests.
Suppliers are fewer in number, larger in scale and better funded. There are hundreds of TMCs, hundreds of airlines and hundreds of large hotel groups and chains. If we consider only those with significant weight, they number in the dozens. Suppliers have their own powerful associations and lobbying groups. Travel buyers, however, number in the tens of thousands. Individually, only some of their companies are big enough to match muscle with suppliers across the table. There are neither commercial means nor motivation for buyers to join forces — with the exception of a buyer association.
You might think my tone is a touch adversarial and I’m overly wary of travel suppliers. In my view, the travel supply chain that grew around travel agents in a time of regulated airfares — a supply chain structure that we still have — is fundamentally problematic. It is an unhealthy combination of conflicted interests and a lack of transparency. The intermediaries that dominate the distribution chain are majority-funded by sales commissions from suppliers. While providing services and making commitments to travel buyers, their commercial priority is given to the interests of airlines, hotels, car firms and others. That is the conflict.
Whatever talk there is of “transparency,” the travel supply chain is opaque because the center is blanketed with a plethora of supplier deals and confidentialities. Therefore, good travel procurement requires a degree of wariness. An overall view that looks at comparative bargaining strengths is appropriate. To deal effectively with a classically conflicted supply chain, travel buyers must gain strength by joining together.
This has always been the case. But the need for buyer strength will be even more significant in the next several years.
We are in the early stages of a major supply chain restructuring, with a perfect storm of better travel IT, greater use of NDC, increased supplier strength, commission cuts and post-Covid cost and operating problems all putting much greater pressure on TMCs than they have seen before. They are battling this by consolidating, accelerating in-house IT development and raising fees. All of these pressures will likely hasten the transformation of the TMC ecosystem. By 2030, we will probably see the powerful intermediary space dominated by travel IT firms, some of which used to be traditional TMCs. Some already are positioning themselves this way.
The question is, will the new tech-rich travel environment continue to live off sales commissions? Will the conflict in the middle live on in different clothing? Travel buyers possibly have a twice-in-a-century opportunity to help form a supply chain that primarily serves their interests. And so, to the matter at hand: buyer associations. Are they up to the job?
We need buyer associations with unsullied purposes. This is currently not the case.
The problem happens when a buyer association becomes too dependent upon sponsorship money from suppliers. I’ve seen this happen more than once over the past 25 years. As an association grows, it tends to run more larger and fancier events. Keynote speakers can cost up to $1 million. Staff size grows, expensive offices are leased, management costs double and so on. The association resembles a profit-seeking company, pursuing growth for its own sake, hungry for more money and prestige. But if that money comes mainly from the sponsorship side, the purpose, value and mission can be lost.
We need a strong and unified travel buyer presence without compromises to protect and pursue buyers’ interests through the choppy waters ahead. It is difficult to create an effective body that can operate solely on fees from buyer members. However, this is more feasible than ever, given the ability to run online information, education and networking. An online buyers’ association could more easily live within the limits of its buyer funding — not yield to the temptation of supplier money and influence — and remain fit-for-purpose to help build the new industry order.
A new, online buyer advocacy group must demonstrate its value to attract sufficient buy-side funding. Even if the supply chain doesn’t enter a period of restructuring and uncertainty, there are already enough deficiencies and challenges to warrant broad support. The value is mostly longer term, but that doesn’t make it less valuable. If a few large travel buyers got together, they could get the ball rolling.