How Do I Know If My Travel Management Company is Providing Me the Best Fares?

by | Feb 10, 2020

No matter how well you manage your corporate travel program, chances are you have at least a few travelers who are convinced that they can find cheaper rates on air, car, and hotel purchases on their own. They don’t need to use their travel agency and the deals and discounts offered to them through centrally negotiated corporate contracts or Travel Management Company (TMC) consortia rates because cheaper rates are readily available. And how do you really know whether they are right or wrong anyway? Rarely will a traveler present the differing options at the time of purchase – the claim typically comes when its time to submit his expense report and by that time there is no real way to validate the notion that he really did find it cheaper on supplier.com or on Expedia.

Putting aside the possibility of finding better deals outside of the TMC, how about the TMC itself? Are the deals, discounts, and consortia rates really good? How do you know? After over twenty years in the corporate travel business I have yet to witness a TMC report to its client that they are getting really bad deals and they should seriously consider moving their business to a competitor. No. In much the same way that everyone gets that “discount of the century” at the car dealership, the TMC rates always yield wildly low discounts that provide a ton of value to the corporate client. Really?

So, how do you know if your TMC is providing the best fares on air, car, and hotel purchases?

The simple answer is benchmarking. But against what? Do you have the data you need to really provide the spend insight needed to make smart business decisions? What sources should you use? Is the travel spend data you have measurable? Will the benchmarking data you get be meaningful? And once you understand the data, is it actionable?

To put this conversation into some perspective, let’s focus on airfare. Of the over $90 billion spent in corporate travel across air, car, and hotel in the United States alone only a small fraction of that is actually managed by traditional corporate travel agencies. This doesn’t take into account non-corporate (leisure) travel. So, if your TMC is providing you benchmarking data against its client base, you are seeing not only a very small sample size but one that may or may not be closely related to your business in terms of size, industry, or spending habits. The data also doesn’t take into account the very thing that your travelers are identifying – the ability to find cheaper fares on supplier.com. These are considered “leisure” bookings technically and by definition will not be part of the benchmarking data provided by your TMC. The question here becomes whether or not it is satisfactory to benchmark your company spend against a relatively small sample size, against only other corporates, and essentially ignoring any potential cost savings gained by buying on the “spot market.”

While most industry studies suggest that a well-managed corporate travel program characterized by negotiated airline agreements yields up to 20% cost savings off of the company airline program, this rule of thumb is getting harder to quantify particularly in light of the relatively newly minted New Distribution Capability (NDC) introduced by the airlines. With the major airline carriers following through on their promise to take 20% or more of their content off of the traditional Global Distribution System (GDS) in an effort to expand the services and content that they can sell (WiFi, checked bags, in-flight snacks, et cetera) and create more brand stickiness, the likelihood that your colleague can, in fact, “find it cheaper” somewhere else is becoming more of a reality than at any time in the corporate travel industry. Indeed, most traditional corporate TMC’s are in the midst of developing these solutions in an effort to do everything possible to mitigate the loss of content they are able to sell to clients and to avoid the savvy shopper proving that its TMC is deficient in providing the best deal. This paradigm shift is true for hoteliers as well and there is little doubt that all of these suppliers are doing everything possible to keep its customers as close to their brand (their own websites) as possible.
Benchmarking your entire corporate travel program against the best available benchmarking would certainly include sources such as the Airline Reporting Corporation (ARC) and the Department of Commerce. ARC provides reporting and benchmarking against virtually all airfares settled in the United States, taking into account not only corporate fares but also spot market fares. Department of Commerce works much in the same manner; however, uses a cogent sample methodology of tickets used at every airport in the United States resulting in a compelling statistical representation of what a good fare is versus a bad one across the vast majority of travel booked. The result of either resource is a comprehensive benchmark against both your travelers’ habits and the competitiveness of your corporate discounts/TMC’s ability to stay on par relative to the entire industry.

Easy enough, right? Not really. Most corporate clients really don’t ask their TMC from what data source the benchmarking derives. In fact, in my experience a lot of TMC’s don’t really have a satisfactory answer if asked. And, it may or may not be surprising that most TMC’s don’t use these comprehensive data sources. First, it costs money and why use a third party such as ARC or DOC when you can utilize a database you own with little questions asked? Second, data that provides significant and robust benchmarking data will, by definition, shed negative light on many client situations. Keep in mind that only 49% of all airfares (or hotel bookings for that matter) will benchmark favorably versus the average. This reality puts the TMC/client relationship in a tough spot particularly if any poor results are a result of bad decision making on the part of the client. Not many suppliers wish to tell their clients that they are bad decision makers and no supplier is eager to admit they just can’t compete.

To make the situation even more difficult, the TMC can only report on the booking data it has. In other words, if your travel programs books 30-50% of its air and hotel reservations outside of the TMC environment (rogue spend), then neither the TMC nor the client can provide any benchmarking data at all.

CapTrav solves the problem and complexity described herein. We built CapTrav with the sole focus of corporate travel data capture no matter where the reservation is booked. We also built CapTrav because we understand that benchmarking corporate travel purchases is not easy and it may not always be in the TMC or the airline’s best interest to proactively engage in a client discussion regarding poor performance. Benchmarking should be an independent exercise, free of bias, and readily available to the client. Now more than ever, answering the question posited here is more important than ever. With the changing demographic taking over middle management within organizations, more shopping options than ever before, and technology like CapTrav that will both capture and benchmark data using best in class resources like ARC, there has never been a better time to take control of your program to make sure you are indeed getting the best possible fares available.

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.