2 min read

How Travel Managers Can Prepare for Changing TMC Economics (part 2 of 3)

How Travel Managers Can Prepare for Changing TMC Economics (part 2 of 3)

Following AmTrav’s radically honest TMC Secrets webinar (watch it here), yesterday we shared how TMCs make money and how that could change in coming years. 

In short: while it varies by TMC, a lot of TMC revenue comes from supplier commission and less than half of their money comes from fees that your company pays your TMC. Problem is, those supplier commissions and GDS incentives are already decreasing, which is a big problem for TMC’s revenue picture and bottom line.

So what does this mean for you as a travel buyer, and how can you prepare?

This means one of two things for your company:

First, your TMC will try to raise your fees. It’s unfortunate – as AmTrav CEO Jeff pointed out on the webinar, providers are supposed to raise prices when they provide more value – but necessary. We’ve seen this before with surcharges for Southwest and NDC bookings.

Second, to avoid increased fees, travel programs and TMCs need to lower costs to offset lower revenue, becoming more efficient. For most TMCs travel agent labor is the largest cost, and travel agent labor is driven primarily by how many bookings and changes are made offline (and those silly “online assisted bookings”). And for travel programs, online bookings cost far less than offline travel agent-assisted bookings.

(Jeff and Bryan shared other possible outcomes, come back on Thursday for their hot takes.)

And how can you prepare? 

If your TMC asks for higher fees, the most credible and effective response is to go shopping for a new TMC with an RFP process. With a competitive process you can re-evaluate your company’s needs, see what online technology and offline service fits those needs, and determine if your current provider (who’s threatening you with higher fees) is the best fit for your needs with their competitive pricing bid.

Becoming more efficient by moving bookings and changes from offline agent-assisted to online (increasing your online adoption) is trickier.

The good news is that your travelers probably want to book and change trips online. AmTrav knows this from experience: one customer predicted that only 70% of their travelers would want to book online, but in fact 98% of their travelers booked online (thousands of travelers total). And when polled by AmTrav, 94% of travelers said they wanted to change trips online at least some of the time.

So how do you achieve 95% or 98% online booking rates? If you’re not at or above 95% online adoption today, you need to understand why not:

  • Do you have a lot of meetings or guest travel that’s handled offline? 
  • Or an online booking tool that doesn’t support the bookings you need, including multi-city, mixed-carrier, NDC fares, and bookings with unused tickets applied?
  • And can your travelers change trips online within your travel program at least 80% of the time?

If you find big gaps in what your current online booking tool can support alongside your current TMC, then it’s time to find a way to move those bookings online with your current technology or go shopping for a new online booking tool and TMC. Once again: evaluate your needs, evaluate the technology and service available in the market, and determine the best fit for your company to achieve the high online booking and trip change rate that your travelers want and your travel program needs to avoid absorbing your TMC’s higher costs.

Forgive us for self-promoting, but if you’re looking for awesome online technology and offline service, AmTrav offers both. AmTrav has modern solutions for booking guest and meeting travel online, an awesome booking tool that clients use to average 95% online adoption and easily manage unused tickets, and the best online trip changes in the managed travel market.

Tune in tomorrow (or watch the webinar!) for Jeff and Bryan’s hot takes from the webinar: how AI could shake up managed travel, how less GDS revenue could actually be a good thing for TMCs, and more.

(Separate question: why does the burden always fall on the travel buyer to solve these problems, whether it’s NDC, online booking rates or higher fees? We should do a webinar on that topic!)

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