It seems odd that less than 10% of the $1.4 trillion corporate travel industry is formally serviced under a traditional management model. Historically, industry suppliers have catered to larger, typically multinational organizations. Travel Management Companies (TMC) have the human and technology resources that can handle large volumes and layers of complexity with a high degree of efficiency and have developed revenue models to accommodate this type of client. In many ways these larger clients pose a distinct and opposite proposition to TMC’s than clients considered “small to mid-market” (SMB) as the latter tends to have dissimilar service needs and is less lucrative business for a TMC. Despite some attempts to create solutions to better serve these clients it is apparent that the SMB market segment has been largely ignored by traditional channels in lieu of the global corporate whale.
Corporate Travel Predictions for the SMB Market
So, let’s set the stage. Even if corporate travel is forever hurt by the COVID-19 pandemic the opportunity to address the under-served small to mid-market is big. It’s very big.
Investments in corporate travel related start-ups haven’t slowed during this “things will never return to normal” period. If anything, money flowing into corporate travel has accelerated. Most new industry entrants seem laser focused on filling the void, spending millions on websites, search engine marketing, and airport billboards all geared toward creating brand awareness and a compelling management solution for the masses.
In many ways the timing couldn’t be better for customers as they consider how best to optimize their businesses or suppliers as they tweak content distribution and incentive strategies. Air and hotel suppliers in particular are navigating an unstable pandemic recovery which is being led by SMB clients at a faster rate than larger, traditionally managed organizations. At the same time, suppliers are vying for the attention of a new generation of middle and senior management. The brand loyal Millennial, many of whom are pushing 40 years old and are in leadership positions, are business savvy, flexible, and won’t waste time on technology or process that seems outdated or inefficient. In no way is this to insinuate that our current models aren’t effective; rather, the notion that innovation has a tendency to make something that’s good pale in comparison to something that seems great. This may play a huge role in an industry transformation. The massive investments being made by new industry technologies and some of the more familiar industry giants are poised to make significant gains while many who would otherwise lead the way may end up ceding this under-served segment of the industry due to lack of resources or foresight. It does not seem unreasonable that many of these new solutions ultimately find a home in larger market clients’ tech stack, ultimately having a lasting impact on how the industry conducts business.
What’s in Store?
Off-the-shelf technology sounds rather unappealing at first glance but many of the one-size-fits all product offerings we are seeing today enable slick, vertically integrated solutions that cover front end booking technology, multiple content sources, quality control, policy, expense, and reimbursement.
The business acumen found among management in these new organizations is part of the costly investment package but I think will prove critical to innovation. Business travel is complex and for many of us “lifers”, we sometimes get lost in our narrow world (remember that less than 10% of the entire industry is managed) of corporate travel. The industry is getting a breath of fresh air from many who may not totally understand this sometimes counterintuitive business but do understand business. New thinking may come with a cost but I think skinning knees and bruising shins is part of the prospectus.
The result is investment to rethink how we do business. Mobile technology has evolved at an incredibly rapid pace from just a few years ago when these tools only aggregated TMC booked itineraries with no real capabilities. The use of machine learning to service reservations and streamline the booking process is no longer something we are contemplating. Integrated procure to pay solutions are no longer limited to that one vendor. The technology to really measure carbon output in a way that is actionable is now gaining momentum and becoming a significant competitive advantage for those who promote sustainability initiatives. Management reporting is becoming more holistic, more detailed. And even air, car, and hotel suppliers are pushing better and more interactive direct client strategies.
While none of these examples may actually grow the corporate travel industry, all will help expand that tent we call “managed travel”. A broader base of corporate clients participating in actively managing business travel spend will yield smarter thinking, better strategy, and more robust product offerings. With so much transaction volume at stake, it is not hard to see how new product offerings for SMB become best practices industry-wide. A transformation may require a push in the form of client demand to solve a lot of the problems the industry faces but if a better solution exists, a few marquee clients can help establish a new normal. We’ve seen many examples of this type of change in the past. I think this time around we will ultimately come to thank the historically under-served SMB’s.
Take a look at CapTrav to see how it can help your corporate travel program to track travel bookings, no matter the source.