May 20, 2024

At your service

With further consolidation, new content demands and service levels under closer scrutiny, it's set to be another year of flux in the TMC space, says Gill Upton in our 2023 TMC Guide

Building back is the current buzz phrase in the industry as travel resumes to just over 80% of pre-pandemic levels. TMCs are whirring back into action as best they can to service their clients and meet new, expanded and more complex needs.

Some TMCs will rise to the challenge more easily with new owners solving the resource, technology and expertise issues, while others could struggle to meet their Service Level Agreements (SLAs) due to the decimated talent pool continuing to put the brakes on ramping up teams and frustrations with the supply chain, namely content.

It means 2023 is likely to see a repeat of the M&E activity which has characterised the TMC sector recently. BTA CEO Clive Wratten is encouraged to see the level of interest from venture capitalists and private equity as testament to the ever-more central role TMCs play with corporates.

See our 2023 TMC Guide and Directory

“TMCs are the pivot point,” agrees Scott Davies, ITM CEO. “They play a critical role in protecting their customers’ best interests.”

Davies reckons 2023 will see more TMCs repositioning themselves as they review customer propositions, and one or two more consolidations.

Omega, Yorkshire’s Travel Company, Eton, Reed & Mackay, Click Travel, Shep and Egencia all succumbed to takeovers in the first wave, while Company Travel, Conferma Pay and Ventur Travel were some of the casualties in 2022. New entrants, such as TripStax, brought vital tech capability. Another newcomer, Take Two, brought high-touch global to the table while Gray Dawes’ acquisition of MP Travel – its 12th – gave access to the Australian market as part of its follow-the-sun strategy. North America was next on the agenda.

Change of ownership

BTA’s Wratten believes there are still vulnerable TMCs, both large and small. “It’s a natural and constant movement as the industry ebbs and flows,” he says.

Catherine Logan, Regional VP of GBTA, reckons most activity this year will be in the mid-market while Chris Thelen, CEO of Take Two, predicts that “some of the smaller guys will run out of money”.

Geography, technological strength or sector strength lie behind many of the acquisitions, says Colin Goldney, MD & Senior VP UK/Europe at Wings Global Travel.

“Size is important and it’s also other strategic objectives, such as the ability to pitch for multi-regional deals, or acquire technology. Today, you’ve got to have a certain amount of kit or reach,” he says.

“Logic says to stay with an incumbent when there is so much uncertainty but already some big accounts have been on the move”

Steve Banks, Chief Commercial Officer at Agiito, also believes acquisition is a quick way of getting resource back. ”It’s necessary in some cases due to the reduction of talent and attrition,” he says, but warns that a combination of the economy, inflationary pressures and Ukraine adds a cautionary element to the ROI of future acquisitions.

Despite the TMC ownership merry-go-round, in the immediate post pandemic world, at least, buyers kept loyal to their existing TMCs.

Wratten believes he knows why: “The pandemic taught us the value of partnership and corporates are now looking at longer-term deals as they are seeing TMCs as strategic partners, which you don’t chop and change.”

An ITM survey supports this theory as it highlighted that the desire to go to RFP in 2023 for a new TMC is as its lowest (12%)  since the organisation began recording data. A GBTA survey also recorded lower than average planned RFP activity.

”In a normal year that would be nearer 33%,” explains ITM’s Davies.

However, 2023 could turn out to be a ‘normal’ year after all. SLAs are being re-negotiated and need to be committed to while “KPIs initially not followed too closely in the post pandemic period are now expected to be met as buyers fully engage with their TMCs”, adds Davies.

“TMCs are the pivot point. They play a critical role in protecting their customers’ best interests”

Any contracts up for renewal this year will give buyers an opportunity to find a TMC which can meet their needs.

Logic says to stay with an incumbent when there is so much uncertainty but already, some big accounts have been on the move, reportedly Jaguar, Shell, Adidas, Airbus, Anglo American and Unilever.

Agiito’s Banks says: “We’ve never had so many tenders fall through our doors.”

He reckons some TMCs are spreading their resources too thinly or are not able to pivot quickly enough “so some corporates are questioning whether they have the right TMC in place, aligned to their objectives. How long can they live with a compromise?”.

Wings says it has won new clients due to shortcomings with SLAs from an incumbent TMC. It is operating with a larger number of staff post-pandemic and is charging higher fees, employing the hybrid model of a management fee for the core operation, plus transaction fees.

TakeTwo has won a major bank client with over 3,000 travellers, creamed off the exec team from another, and has been up against large TMCs in final pitches.

“We’re after corporates who want to partner with us and not procure with us,” says Thelen, ”but also have the balls to contract with a smaller TMC”.

Switch back

James Beagrie, MD of Meon Travel, is also bullish. “The business pipeline is looking OK. We’re picking and choosing new business as there’s enough new business out there. “We’re picking up large clients such as those in private equity, banking and retail.”

Despite losing 70% of staff from Meon’s corporate division during Covid, it has taken some back and fast-tracked others in record time – in three months rather than two years.

Moreover, the company is now operating on 55 staff rather than its pre-pandemic level of 100 (and 40 during Covid), reflecting greater productivity.

“We are paying more to qualified staff, our service levels are sharper and quicker and we’ve instigated efficiencies such as getting rid of 80% of billbacks so that everything is pre-paid,” explains Beagrie. “All we ask of our customer is to pay us on time.”

The labour issues will ease as more bookings switch online. ”There are still too many touches to bookings but online is coming back,” says BTA’s Wratten.

“Service levels have markedly improved but they are still below pre-pandemic levels. Buyers are keen to get a set of KPIs that everybody can live up to”

The slow switch back to booking tools may reflect buyers’ concern that they need to catch up to clients’ needs. (See separate feature on page 18).

It’s definitely still a market in flux, with servicing the top priority for both TMCs and corporates. ”Service levels have markedly improved but they are still below pre-pandemic  levels,” says ITM’s Davies. “Buyers are keen to get a set of KPIs that everybody can live up to.”

TMC staffing levels are almost back to normal despite costing TMCs dear from higher pay packages. Coupled with higher heating bills, general cost inflation, flexibility around office working and still too many offline bookings, inevitably those higher costs have been passed on to corporates.

Top models

The pre-pandemic flurry of interest to introduce new financial models such as subscription hasn’t fully materialised, but hybrid commercial models have, specifically management fee plus transaction fee.

“That’s the most popular,” says TakeTwo’s Thelen, who has increased fees to clients. “The buyers needs to pay a fair price for what it needs. If they want a talented professional servicing them they need to pay for that.”

“We included subscription in our menu but the prevailing trend is a mix of transaction and management fee,” agrees Wings’ Goldney. “It’s important to have the conversation about costs early on.”

“Despite the TMC ownership merry-go-round, in the immediate post pandemic world, at least, buyers kept loyal to their existing TMCs”

At Agiito, some 30%-40% of bids and re-bids over the last year have changed to a different financial model, some to hybrid, some to a fixed fee on a certain amount of business, and some to subscription.

“It’s been variable but really creative and focussed on what problems we’re trying to fix,” says Banks.

This coming year presents a massive opportunity for TMCs to work in partnership with clients and deliver best-in-class service. What is clear is that 2023 will be a year of change – yet again.

See our 2023 TMC Guide and Directory