TMCs Rethink Revenue Models for Open Booking Environment

Patrick Linnihan has figured out how to get paid in an open booking environment, where employees freely book travel outside approved channels. His firm, Gant Travel Management, charges a fee.

But it’s not your typical flat per-transaction fee, said Linnihan, president of the Bloomington, Ind.-based TMC. In a pilot project that offers open booking geared for small and medium businesses, Gant charges a fee to provide reporting and visibility – but not to handle transactions.

Gant charges a separate fee when any assistance is required on a reservation. That makes it moot whether the traveler originally booked through Gant, a supplier website or some other portal. The client company simply pays Gant directly for its travel management services rendered.

Cleared to act
The approach frees employees to book whatever they want, wherever they want – and it frees Gant’s agents to service those transactions without worrying about policy.

“We service travelers in the same manner that a great executive assistant would have done it for an executive who is traveling for the company,” Linnihan said.
 
“When we have an agent agreement in place with the company, we’re cleared to act on the traveler’s behalf. That’s standard agent practice.”

It’s also an answer – and potential business model – for TMCs who have been wary of open booking.

Core issue for TMCs
The worry about open booking has not been that some portion of corporate travel is booked outside of approved channels. Out-of-channel booking has long been an industry secret that hides in plain sight while most players pretend to ignore it.

The real problem is how TMCs will get paid for servicing travelers who book outside accepted channels.

The Global Business Travel Association put a spotlight on out-of-channel booking last summer, when it reported that about a quarter of all business travel is booked out of channel. It doesn’t seem to matter how strict or how relaxed policy is, some travelers just don’t follow the rules, GBTA research found.

Focus on data
GBTA’s findings shifted the arguments around open booking. Rather than being seen as caving in to out-of-policy travelers, open booking is increasingly viewed as a methodology to collect data on travel outside the program.

Focusing on the potential for better data collection opened a more fundamental question for corporate travel agents and travel management companies: If I’m collecting data on transactions that happen outside my system, I’m servicing transactions for which I never collected a transaction fee. So how do I get paid?

But providing data services without getting paid has turned out to be more of a problem in perception than in reality.
 
Shift in strategy
The travel business has long been viewed as a succession of discrete transactions fueled by transaction fees. But transactions are largely automated. And the actual cost to make an automated booking is so small that some TMCs have abandoned transaction fees altogether in favor of service and consulting fees.

Charging for actual services rendered helps underline the real value that TMCs and travel managers bring – data management and data visibility. It is those data services that make the difference in managing travel budgets, travel spend, travel productivity and duty of care.
 
Servicing data, not travel
From that perspective, travel management is a data services business, not a transportation and housing business. So why not get paid for the real service you are providing?

Gant Travel Management is taking one approach, charging for each incident or occasion a service is provided. For Gant, it doesn’t matter whether the service is data reporting linked to a transaction within their system or to a transaction that was completed elsewhere.

Either way, the company is charging for the service, not the transaction.

Subscription model
For technology companies such as SAP, a provider of travel management software, focusing on value-added services, rather than transactions, is standard operating procedure. And so is payment by subscription rather than payment by incident of service.

“The subscription model works very well in other sectors and it is working in travel,” said Hendrik Vordenbaeumen, vice president, product management, for SAP’s Cloud for Travel and Expense.

“The transaction is not important; the data is what is important. And what you do with that data is even more important. With the subscription model, you pay for the information services and technology that are what travel management really is about.”

Next time: Does open booking violate Sarbanes-Oxley?