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July/August 2017
For Business, Corporate Travel & Meeting Buyers & Arrangers

According to Amon: are your TMC fees transparent?

Travel agent booking air tickets

There are two hard-to-spot issues buyers need to dig deep for when hiring a travel management company (TMC). The first is whether any hidden fees are buried within the contract. For example, which services are within scope and which, such as management information, are not?

The second, and even trickier, is the money flow around travel purchases. Is the TMC charging a mark-up on what it sells you or earning a supplier kickback? If so, are you happy for it to keep this money, or do you want that cash to come to you? And, if the latter, have you framed the contract to leave no wiggle-room for the TMC to withhold some of what it earns?

POTENTIAL FRAUD

I have used this column to hammer home such points before, but they have become very relevant once more after news broke a few weeks ago that Dutch anti-fraud police, the Fiscal Information and Investigation Service (FIOD), had raided the Schiphol offices of ATPI (aka ATP Business Travel).

FIOD suspects ATPI of defrauding the Dutch Ministry of Security and Justice of “millions of euros” while contracted to handle the ministry’s travel bookings between 2010 and 2012. FIOD said that, in return for a fixed fee, ATPI was obliged to offer the most economical booking options and pass on all savings to the client. “The presumption is that this has not happened,” said a statement from FIOD.

The raid followed a civil action brought by the ministry against ATPI in 2014. A court found in the ministry’s favour in June 2015, and auditing is under way to determine how much ATPI must pay back.

Whether criminal charges will be brought against ATPI remains to be seen. But the civil case suggests that, taking what both sides have said at face value, there has, at the very least, been a difference of opinion on what mark-ups the TMC could or could not legitimately hold on to. The day after the FIOD raid, ATPI released a statement which said: “The long-term dispute with the Department involves the interpretation of contractual terms with regards to the provision of airline tickets... According to the court, ATP omitted reporting certain discounts to the Department. ATP has always taken the view that these are savings which fall outside the contract, but obviously respects the ruling of the court.”

FURTHER ISSUES

Actually, there’s another issue to consider in addition to price and money flow: are you paying your TMC enough? According to the Dutch business travel publication Zakenreis, which led the reporting on this case, ATPI’s fee to the ministry was only €0.01 per transaction. TMCs have to make a living. We don’t yet know enough about this particular case but, in general, if the fee you pay doesn’t allow your TMC a profit in its own right, think hard about why your TMC agreed to take you on, and whether your total cost.

Comments

Oh dear, I think caveat emptor comes to mind. let the buyer beware.

If, as the article says, the fee was Euro 0.1 for each transaction then I have to wonder what planet the buyer was on if they thought that was the effective cost of providing the service! Pure madness on the part of the Ministry I would suggest.

It is absolutely imperative to construct a buyer centric contract that is clear, unambiguous, fair to both parties, and clearly lays out where the money flows (i.e. commissions/mark-ups/etc), go.

If you don't clarify this then it is left open to 'interpretation'. And that is no way to construct a contract.

A good way to construct contracts, and one which I encourage my clients to follow, is on the basis of:

1. Clear fees for the work to be done (reasonable and fair to both parties)
2. All commissions returned to the client (with a guarantee of 95% of anticipated hotel commissions)
3. Net fares are just that (i.e. no mark-up and net to the client)
4. Ability for the client's internal audit team to interrogate the books

Simple, effective, fair.

Robert Daykin's picture
Robert Daykin (not verified)

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