The Business Travel Environment: Activity
Business travel can be a confusing area to study. It's sometimes hard to work out who is the customer and who the supplier. But as with the retail travel market, there are suppliers and customers, and there are intermediaries - those people or organisations who operate between the product or service supplier and the end user or customer. In the business travel sector, the intermediary is the business travel agent.
Remember that the business travel agent sells travel services to corporate customers. Of course there is still a traveller who is the 'consumer' of the service they offer - a seat on a plane, a rail journey, or a car hire package - but the end customer is the organisation (company or otherwise) that employs the traveller. The traveller works for the business travel agent's customer and travels to do business for them - sales, customer support, meetings with suppliers, or whatever.
We saw in the presentation that there are several pressures in the business travel sector affecting the work of the business travel agent:
- Falling commission levels (commission is, or used to be, paid by suppliers of travel products and services to agencies who sell to customers).
- Where no commission is paid, agencies will try to earn revenues by charging fees for their services. These fees are charged to their customers.
- Low-cost airlines have revolutionised the prices we expect to pay for flights - particularly on short-haul journeys.
- Suppliers of business travel products and services are increasingly selling direct to the customer via the internet.
In many cases, these competitive pressures are interlinked. For example, in the last three or four years, many airlines have struggled to survive against the threat posed by the budget carriers. They have tried to maintain their profitability by cutting costs. Many have completely got rid of commissions paid to agencies.
It's not just high street travel agencies that are losing out to the budget airlines - their low cost appeals to those holding a business's purse strings as well! Copyright: Patrick Nijhuis, from stock.xchng.
Responses of business travel agents to changes in the competitive environment
Business travel agencies had to change the way they did business if they were to survive the threats posed by changes in their market. They began calling themselves 'travel management companies' (TMCs). In this way, they could get over the cut in revenues imposed by suppliers 'pulling the plug' on commission paid to agents. What they could now do, as TMCs, was charge fees to their customers. But could they get away with this? Surely the customers would 'rumble' them and demand to know why they should be paying fees, particularly when they could do much of the work of booking business travel themselves?
The response from the big TMCs
Business travel agencies, or at least those that are big enough, have tried to offer added value to the services provided to customers. These TMCs do a number of different things to enhance the level of service they provide:
- They provide better and more information to the customer on the travelling habits and expenses of their staff. This is key to the customer because they may have negotiated discounted fares with a travel supplier, such as an airline, and expect their employees to travel with this preferred airline where possible.
- They analyse the travel patterns of their customers' staff, so that the full cost of taking a flight with a low-cost airline is revealed. Budget flights often look cheap, but the price does not reflect the cost of transfers from out-of-town airports - low-cost carriers often use these - to the heart of a city, which may be the business traveller's final destination. The saving on the ticket may be wiped out by the cost of the return taxi fare from and to the airport.
- Extending their services to provide help to firms and travellers caught up in trouble spots whilst on business. Dealing with a flu pandemic or SARS outbreak would be a good example of this kind of service.
- Responding to environmental pressure by helping organisations with analysis of the carbon emissions resulting from their business travel. Sabre, the global distribution operator, is one company that is already providing this type of service to its business customers.
So, that's what the big players in the business travel agency industry are doing to adapt to changing market conditions. What about the small to medium sized agencies?
You'll remember that in the retail travel agency market, many smaller agencies have joined consortia such as Worldchoice or the Advantage travel group. Well, in the business travel market, the same phenomenon is being seen. If your business travel agency is too small to get discounts from suppliers, then you stand to gain from the greater buying muscle that a consortium can provide.
Advantage also have developed a centralised self-booking tool that its members can offer to customers. This would allow business travel customers to book direct, but stay within company travel policy by booking from a range of preferred suppliers.
Tasks
This article from the Financial Times, 'Come fly with me', takes a cynical look at the business travel market. (http://www.ft.com/cms/s/0a5c2998-30b1-11db-9156-0000779e2340.html)
- Read through the article and make a list of the downsides of business travel.
- Now work with a partner to generate a list of the benefits of business travel. You'll need to focus on the advantages to business customers, as well the benefits to the overall travel and tourism industry (and the UK economy).
- Whilst this article has its tongue firmly in its cheek, it does raise some important points. Imagine a world where business travel is unnecessary; what could replace it? How serious a threat do these alternatives pose to the business travel industry?
- Finally, use the information you have produced to create a one-page poster extolling the benefits of the business travel agency, in spite of the threats posed to their existence now and in the future.
Further sources of information:
- To stay afloat, travel agents alter course - Boston Business Journal article (http://www.bizjournals.com/boston/stories/2003/08/25/story3.html?page=1)
- Business travel agents - FT article (http://www.ft.com/cms/s/9f47643c-3bfb-11db-9c97-0000779e2340.html)
- Inside Travel - General information on the travel industry, provided by Workthing (http://www.workthing.com/career-advice/breaking-into/graduate/travel_ins...)