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Is Traditional Travel Management Dead in Small and Medium Sized Enterprises?

"At Egencia, we’ve worked closely with Travel Managers for more than 15 years and see that Travel Management is changing drastically, especially in Small and Medium Sized Enterprises (SMEs)." Virginie Pouget, Head of Global Consulting at Egencia, gives us her point of view on the new travel management objectives and concerns for SMEs in 2018.

 

Q. What will be 2018’s key focus areas for corporate travel management in SMEs?

A. Over the past few years, we’ve noticed increased expectations from Travel Buyers within SMEs. They are looking for their TMC to bring more value to the business by helping them generate savings, manage travel spend and understand their travel patterns within the company. They now expect detailed reports, in-depth spend analysis and a positive ROI. These concerns are raised early in the sales process, long before inventory or travel policy matters.

In December 2017, we asked our SME customers to share their top focus areas for 2018. The results were perfectly consistent with our daily interactions with customers as 85% consider that “increasing cost-savings” is one of their top three focus areas for 2018 (with 60% putting it first). The following two other focus areas remain very connected to efficiency as “increasing traveller productivity” (50%) and “improving spend visibility” (40%) respectively come in as second and third.

Therefore, the more traditional focus areas we used to attribute to Travel Management are now in the shadows for SMEs. “improving or expanding travel policy”, “improving traveller risk management program” and “refining hotel or air contract agreements” are the lowest ranked focus areas for SMEs Travel Managers for 2018.

 

Q. How can you explain that Travel Management is shifting to a “cost efficient” function, especially for SMEs?

A. Let’s first remember that the position of “Corporate Travel Manager” was initially created in the 1970’s in big industrial companies for very specific reasons, starting with the complexity to book a trip. Back then, an executive needed a travel agent to book and the idea of hiring one agent or creating an internal structure responsible for all the corporate bookings of one company spread. Travel Management Companies (TMCs) were born, selling their travel expertise to companies. In this model, most SMEs did not see the value of travel management considering their booking volume and the costs of hiring a Travel Manager or contracting a TMC.

As is the case for so many other sectors, technology revolutionized the travel industry, starting with leisure travel and then spreading to business travel, making it easy and less expensive to book a flight, train ticket, car or hotel room anywhere in the world. Online booking tools spread, travelers got used to booking their trip by themselves, TMCs adapted their offer and, like Egencia, developed scalable tools to manage efficiently the travel program, for large and small corporations.

Existing Travel Managers (usually in big groups) had to redesign their mission, naturally focusing on the implementation of a travel program, strategies to boost compliance and reduce travel spend or the relationships with airlines and hotels. The early answers to a survey launched in January 2018 highlighted that, for 50% of Travel Managers from large groups, “increasing cost-savings” is also their top priority for 2018.

In the meantime, SMEs have realized the ROI behind hiring a travel expert within the company. Logically, these “new” Travel Managers have been integrated to Procurement or Finance. This integration can also be justified by structural, economic and cultural characteristics of SMEs:

• More cost-conscious than big companies

• Not enough booking volume to justify a dedicated headcount / department

• Rapid growth (like the two digits growth of some start-ups) can lead to a fast increase of travel spend that needs to be quickly managed. In our survey to SMEs, +53% of them expect their travel spend to grow in 2018.

• According to a 2015 study by the GBTA and Sabre (The Transformation of the Travel Manager’s Role), almost 60% of Travel Managers in the European Union and in North America reported to Procurement or Finance/Account/Treasury.

 

Q. In this context, would you say Travel Management is dead?

A. Absolutely not, but the mission is changing.

In this new context, Travel Managers need to keep up to date and to adapt. In the meantime, companies must empower their Travel Managers to help them manage the travel program, support compliance, deal with travelers’ safety and manage travel spend.

Even if travel management is now integrated to Finance or Procurement Departments, we still identify some key factors of success for the “new generation” of Travel Managers:

“The Insider” – Managing a travel program is not only about buying travel or contracting a TMC: you deal with people and the human factor is predominant. Then, a Travel Manager is more likely to be efficient when he comes from the company as he knows the culture, the people and easily identifies stakeholders. If not, management needs to give a big impulse to integrate “the rookie”.

“Training” – Travel is a very specific and complex industry with a specific vocabulary. Mastering it is a strength, especially when dealing with other industry specialists. For instance, knowing what is a GDS is a key concept to understand the booking system and an asset when you want to launch a RFP to find the best TMC.

“Networking” – The travel industry is moving fast. New technologies, players, rulings appear every day. A Travel Manager needs to have the resources to keep up to date but he will be even more efficient by exchanging with his peers (through associations, events organized by the TMC, …).

Travel Management is not dead, it is reborn! And the good news is that some TMCs have developed solutions and tools (custom reporting, traveller tracking, trainings, supplier negotiation support, market intelligence, …) to help Travel Managers face all these new challenges.

 

Photo: Virginie Pouget, Head of Global Consulting at Egencia.