A Recipe for Recovery

by | Aug 31, 2020

Corporate travel is complex.

I try to make sense of it by thinking about each component both separately and in terms of the role it plays as part of the whole.  In a lot of ways, the corporate travel industry can be viewed as its own unique, but imperfect supply chain – not linear, sometimes lacking efficiency, and not always what’s best for the client. The coronavirus pandemic has impacted every interdependency across our supply chain and the path to recovery lies in its optimization.  Within each of these elements lies layers of complexity – legacy and new technologies, front end commission payments, back end override payments, various fees and revenues, issues around auditing and reporting, tons of investment money seeking ways to disrupt this supply chain for a return on investment against a trillion dollar global industry, all while courting a customer who views their travel experience in the most personal manner.  And while each technology, process, and supplier type represent a distinct and vital component, all rely on a variable transaction model for most of its revenue.  As a result, recovery to a large extent is a function of time.  So, the question becomes how do we recover faster, better, and with an eye toward the future?

The industry’s financial crisis has begun to drive consolidation which will have a “right-sizing” impact on transactional volume, certainly saving jobs and providing for a speedier recovery.  Ultimately, consolidation results in an asset reshuffle that really won’t create long term value.  Value creation comes as a result of visionary thinking and some companies have begun to re-think the way they approach their business and how they interact with our unique supply chain.  Answers are not easy to come by but I know that recovery and longevity will come to those who start thinking about making our efficient supply chain model more efficient.

How Does This Affect Travel Management Companies (TMC)

Travel Management Companies (TMC) transaction volume has plunged, its variable financial model nose-diving into unprecedented territory.  Some TMC’s once again are trying to move its clients from a variable cost model to a fixed fee.  The problem is that many TMC clients only perceive value in the transaction itself even though the TMC provides a valuable management function for a complex spend category.  So, while TMC transaction volume has plunged 90% since the pandemic, huge opportunity for organizations exist and a significant amount of management work from the TMC is now required.

Today, TMC’s are negotiating with client airline partners to get credits or refunds applied to millions of dollars’ worth of unused tickets, getting creative with 2021 preferred hotel rates resulting in savings as travel starts to come back, and re-vamping travel policies and developing critical risk programs that can mitigate duty of care issues and potential costly litigation.  These travel management functions have nothing to do with variable transaction fees but TMC’s generally do not do a great job of articulating the value they bring to their clients or are not given the opportunity.  Now is the time for TMC’s to evaluate and update technologies, help clients consolidate business in anticipation of things to come, and perform audits across all operations.  Many TMC’s are asking for additional fees from clients for some of these activities but at this terrible time, the requests are primarily coming from a place of duress, not value.  For each client, the TMC has the opportunity now to demonstrate value that creates a return on investment having nothing to do with a transaction.  TMC’s that can articulate this value proposition will recover faster and position themselves more favorably for the next inevitable downturn.

We are seeing interesting innovation and thought leadership from other suppliers which may have the benefit of not only speeding recovery but also creating a ton of good will that will enhance their place on our corporate travel supply chain.  Hotels re-purposing guest rooms into “work spaces” is one example.  Here, unused rooms are going through vigorous cleaning and sanitation and then used to “hotel” workers.  Among those organizations who have issued mandates to work from home for all of 2021 or even permanently, this may be an idea that sticks in one form or another and one that potentially accelerates the recovery for participating properties.  Uber is being leveraged by some organizations to encourage meal deliveries.  In some cases, companies are providing stipends for employees to eat lunch at home while supporting both Uber and local restaurants.  This has also become a way for colleagues to “meet for lunch” – perhaps both a morale boost and a way to engender long term brand loyalty to the ride-share model.

The advent of integrated expense systems enabled automation of a procure to pay process that increased efficiencies along the entire corporate travel supply chain.  Reconciling payment solutions to corporate travel bookings and automating the reimbursement process was a “game changer” and for many organizations is standard when implementing new TMC solutions.  At minimum, automated expense has helped to bridge the gap between corporate travel departments and finance.  However, challenges remain.

The Left Hand Doesn’t Know What the Right Hand is Doing

Too often, finance departments drive the purchasing decision of an expense solution without understanding how or if the data being captured for expense reconciliation and reimbursement purposes is sufficient for corporate travel departments when leveraging that data for optimal preferred supplier discounts.  The result is that expense driven data can sometimes miss data elements such as ticket numbers, confirmation information, and data normalization that is critical to managing corporate travel departments.  Virtually every automated expense solution cause data management/supplier leverage issues for corporate travel professionals.  This is one of the key reasons why the industry is witnessing unprecedented venture funding for end to end corporate travel solutions that take into account the entire supply chain.   Expense companies are focused on expense solutions.  Corporate travel companies are focused on optimizing corporate travel.  The two don’t always coordinate and the result is an inefficient supply chain.  In terms of recovery, the solution isn’t incredibly difficult.  By capturing the expense data corporate travel managers need to optimize their programs, suppliers and clients would gain immediate and lasting benefit through better and more usable supplier data.  Better data means optimization which results in a faster recovery.

We created CapTrav in large part because we believed that the value it brought impacts virtually every aspect of our corporate travel supply chain.  Today, the success of the supply chain relies heavily on all travel transactions moving through a central source – the Travel Management Company.  When travelers book outside of its approved TMC, the supply chain starts to fall apart.  TMC reservation counselors cannot help a traveler in need, TMC negotiated supplier discounts are unavailable, automated expense is no longer automated, and clients open themselves up to risk management issues dealing with people tracking and duty of care because there may be no way to know the whereabouts of the traveler.  In fact, this “leakage” accounts for between 30-50% of most “well managed” corporate travel programs.  And considering that only a small portion of global corporate travel is formally managed through a TMC at all, the vast majority of corporate travel is not well accounted.  CapTrav sought to solve the leakage problem by capturing corporate travel booking data no matter where the traveler booked.

How Do We Recover Faster from the Pandemic?

In terms of a faster recovery, utilizing CapTrav or even one of its direct competitors, automated expense companies, TMC’s, airlines, hotels, car rental companies, and risk management companies stand to gain significantly by capturing and leveraging “leakage” data.  Today, most TMC’s are operating at 20% of its normal volume, if that. CapTrav and other off-channel competitors capture all booking data no matter the source so what we see is a bit of a different picture.  While the TMC, expense, and suppliers are only seeing that 20%, CapTrav is seeing between 30-50% more than that because travelers are booking through both the TMC and through supplier direct and aggregator websites.  Unless these transactions are being accounted, the speed to recovery is truly a waiting game and one that is not being fully optimized due to leakage.  These TMC, expense, and client “labor-less” transactions provide a faster and smarter recovery for our corporate travel supply chain.

History proves that great things emerge even when things seem darkest. Singers, poets, activists, politicians, business leaders, and sports figures have contributed inspirational quotes over the years about turning adversity into success.  The opportunities positioned here only scratch the surface of what could be and only across a small part of our corporate travel supply chain.  I talk to clients and suppliers every day across all industries and of all sizes and while our industry is in its worst position perhaps ever, in the not too distant future we will look back and recognize that the real winners were those who rejected the notion that only time will heal our recovery.

Learn more about the CapTrav solution and how it can help your corporate travel program. Request a demo today.

Brandon Strauss

Brandon Strauss

Co-Founder

Brandon’s career initially focused on supply chain management consulting for mid-market organizations.  Brandon was fortunate enough to get introduced to some senior executives at WorldTravel BTI (BCD Travel) and helped create and manage the first end-to-end self-service booking platform for the company and the first generation of such service in the industry.  Over the last 17 years Brandon has served as a Partner, head of consulting, and co-founder of KesselRun Corporate Travel Solutions, a leading corporate travel consultancy and in 2018 co-founded CapTrav where he currently serves as President of the company.

CapTrav is the market leader in comprehensive corporate travel data capture. Because we collect all corporate travel data no matter the booking source, your program enjoys the ability to better leverage supplier deals, make smart business and policy decisions, and track all travelers in the event of an emergency.