When a small or midsize enterprise doesn't have enough volume to warrant preferred hotel rates, travel management company rates can provide discounts an SME company would not get on its own. A TMC rate basically leverages the aggregate power of the TMC's clients to provide discounts—and sometimes additional benefits—to its customers.
"The benefit [of a TMC rate] is consolidated buying power in places where you don't travel enough to get your own great rate," said HRS SVP of enterprise solutions for the Americas Suzanne Neufang. American Express Global Business Travel VP of hotel strategy Wes Bergstrom agreed with Neufang about that fundamental value. "With our preferred extras hotel program … we are basically rolling up our volume to help [SMEs] get the discounts they deserve. Otherwise, in many cases, these SMEs just don't have the buying power; 250, 500 even 1,000 room nights—hotels don't want to deal with that."
Competing TMCs offer varying benefits for SMEs, so the travel manager must determine what his or her company's priorities are. SMEs focused solely on price might be well served by online travel agency rates if they're equal in price to TMC rates. But OTA bookings present issues. "Hotels can see the OTA sold that rate," said ConsenSys travel manager Mat Domaradzki, who used to work for Hilton. "The service of that rate or individual goes to the bottom of the list. The traveler will get the worst room, and if the hotel is overbooked, they will be the first one to be walked to another hotel." Booking on a consumer OTA also don't come with reporting or capture companies' spend with hotel brands, and travelers would not get loyalty points, a big driver for travelers choosing where to stay.
Other SMEs prioritize value. Price is part of that, but amenities also factor into value. Some TMC rates offer just rate discounts. Others include amenities, which vary depending on the deals the TMC has made with suppliers. CWT's standard TMC rate includes a discount of up to 10 percent, last room availability, loyalty points and 72-hour cancellation. Bigger discounts and a minimum of six amenities are included in its premium program, RoomIt by CWT, which is a separate division.
So a TMC rate could seem higher than an OTA rate at first glance, but when you add in the extras, the TMC rate might offer better value. "It's the value-adds we can bring to the table that are important to the SME market, be it free breakfast, parking, Wi-Fi, food and beverage discounts, upgrades subject to availability, late checkout, no early checkout fees," said GBT director of global hotel strategy Margaret Bowler. "It's the overall cost."
While CWT, GBT and BCD Travel are the biggest TMCs, there are plenty of others in the industry, and some smaller ones affiliate with larger companies to provide the best of both worlds. "We use a smaller, more boutique TMC, Milne Travel," Domaradzki said. "They're 51 percent owned by Altour, so we get Altour supporting us in the back end."
Some technology-driven TMCs cater to small and midsize enterprises that are lightly managed and don't need or cannot afford fully managed programs. One is Lola, which last year partnered with GBT. "We're definitely not at the scale where we're working with any suppliers directly, other than one hotel, which we spend a lot of time negotiating with," said Lola customer and Flywheel VP of finance Steve Isom. "In general, since Lola announced the partnership with GBT … we basically are getting that pricing. So we now have lower fares through that partnership" than Flywheel did when it used Lola on its own."
TMC Egencia—which is owned by Expedia, an OTA—offers Egencia Preferred Rates. But rather than focus simply on price, the company is more concerned with "understanding [the business traveler] as it pertains to the supply world and turning that into the right system and tools," said COO Mark Hollyhead. It isn't just about amenities being included, but more about "the relevance of the trip," he said.
To that end, Egencia can refine the hotel offer for the buyer within the confines of its Preferred Rates partners. Its Smart Mix tool uses artificial intelligence to consider a hotel's price, policy, proximity to a corporate office, whether a traveler has stayed at a property previously, how many colleagues have stayed at a hotel and available reviews of the property. According to Hollyhead, the tool puts the best match for that traveler at the top of the search results so it's booked quickly. "We understand what business travelers value," he said. "A free bottle of wine may be fine for a leisure traveler on the weekend, but it's not fine for the business traveler who may prefer that airport transfer or free Wi-Fi. That's the type of Big Data we are churning to make sure we understand the elasticity of those different offerings."
Are TMC Rate Strategies Changing?
Tripbam founder and CEO Steve Reynolds said it's important to note how travel management company rates are changing, particularly with the advent of HRS, which has introduced some downward pressure on the market. "[TMC rates] used to be chain- or brand-level discounts. All were dynamic and roughly a small percentage off the best available rate. The megas are now negotiating property-level deals, both static and dynamic, to better compete against HRS rates," Reynolds said, adding that some are up to 15 percent off best available rate with commission and a few amenities. The shift in strategy from the hotel companies has complicated rate loading and shopping scenarios for TMCs. They now have two rate tier codes in global distribution systems: one for their historical chainwide deals and a second for any property-level discounts recently negotiated. While TMCs might drive these deeper discounts to newly packaged solutions like RoomIt by CWT or Stay by BCD Travel, the strategy is unlikely to be clear cut. TMCs have the ability to bring in those rates for any client where they feel the business could be vulnerable.
There's More to Consider with TMC Rates
Plenty of TMCs and booking tools are digging into machine learning and artificial intelligence to deliver those relevant results. Newcomers like TravelBank have built businesses off harnessing these technologies. CWT's RoomIt has created a revenue stream, as well. And while such algorithms do weigh relevancy, they also likely are weighing additional considerations like TMC commissions.
Providing special rates isn't necessarily an altruistic practice for TMCs. Depending on the terms, hotels and TMCs form agreements by which the TMC might get a percentage of the booking when a traveler books a hotel room through the TMC. And, according to HRS's Neufang, "It's not always transparent … so let the buyer beware." To increase the chances of getting that commission, a TMC might configure the online booking tool to show a commissionable rate in a higher slot than other options. Or if all else is equal, the commission could be the sole differentiating factor that pushes the commissioned rate to the top of the OBT display.
There is a lot of power in the display of OBTs. Neufang said 30 to 40 percent of the hotels that corporate travelers book in corporate OBTs had appeared in the top five places on the tool. "These are not inconsequential placements," she said.
Commissions are "for each individual company to understand," said Mira Rosenzweig, director of travel services for midsize company KBB Partners. "The traveler does not know the commission is a piece of it. It's not stated typically that the rate being booked has a 10 percent to 20 percent commission. I want what is best for the account, not whether it is commissionable to the agency. Travel managers need to be aware of that and have a technology solution in place or closely monitor that information [to make sure] the agency is disclosing all the commissions." KBB uses a reshopping tool that can parse commission data.
TravelBank, known as a T&E management platform, is also a TMC, but it does something different with its commissions. It splits them with the corporate client in the form of a rebate. Traditional TMCs may or may not accept a commission split within the terms of a client contract, and it's less common with SMEs. TravelBank offers such a split upfront, but an annual contract with TravelBank usually requires a minimum spend.
"If the company books, say, $1 million through our platform, they may be eligible to get 1 percent back when their 12-month term comes up for renewal," said co-founder and CEO Duke Chung. "That is our way to share commissions back to companies and find [them] another way to save some money. Many of our clients enroll in it." Of the 650,000 or so properties in its system, about 40,000 have rates exclusive to TravelBank, some with discounts as high as 30 percent. All hotel bookings on the platform earn TravelBank some kind of commission, and this is the company's primary revenue stream. "We offer this [rebate] on top of the discounts when [clients] hit their minimum spend," he said.
Travel buyers also should note the reshopping policy a TMC follows. Most will rebook a reservation in a like-for-like room when a better price appears, but some might move the traveler to a nearby hotel if a better rate is found. If the travel buyer does not want that to happen, he or she should stipulate it in the TMC contract. Rosenzweig recommended that a buyer ask his or her TMC to implement a tool that not only reshops but also checks the accuracy of the agency. She has seen instances when an agency rebooked only rates that were commissionable, avoiding noncommissionable rates. "That's not the purpose," she said. "It's to have a benefit for the program. If it comes with an increased commission, that's great. But it should not be priority No. 1."
Deciding What's Actually Important
Then there's the question about simply going direct to the hotels, now that there are ways to capture direct bookings. "Leakage is always a problem for hotel [programs]," GoldSpring Consulting partner Neil Hammond said, referring to the fact that in a typical hotel program, only 55 percent of travelers will access those special rates through the TMC. "For the travel manager who doesn't want to fight that no-win battle, particularly on the SME side, they may want to consider a solution like Traxo, where you can capture the post-booking [data] through different channels. It allows the traveler flexibility and alternatives while still being able to capture" the transaction.
Remember, though, that TMC relationships are about more than accessing better hotel rates and, even if the discounts come with strings attached, they are often better rates and come with better amenities than an SME is likely to get on its own. Plus, there's both traveler service and program support built into that relationship. Those are critical benefits that SMEs otherwise may not have the resources to provide. The important thing is to know what you are buying.