With the vast majority of UK companies being classed as SMEs, enterprising TMCs have the chance to take advantage of this vast potential market for travel management. Martin Ferguson reports
In the first half of this year, small-to-medium-sized enterprises (SMEs) in the UK and Northern Ireland posted stellar profits, according to a recent report. Despite this seemingly positive news, the SME Finance Monitor, which surveys 5,000 businesses every quarter about past lending and future borrowing intentions, found that eight in ten would not be asking banks for finance to help grow over the next year.
It’s not that they don’t want to drive their companies forward. It’s just that with memories of the recession still fresh in the mind, few are willing to risk taking on any debt unless it’s absolutely necessary. Or until the economy is showing genuine signs of sustained growth.
The good news for the business travel sector is that SMEs are travelling – a lot. The quarterly transaction survey published by the GTMC has shown a steady increase in air, hotel and ground transportation bookings over the last 12 months. That said, there is still a reluctance in some quarters to commit formally to managing travel spend.
Barry Whittaker, executive director of Travel Leaders UK, believes there are still huge opportunities for TMCs to help SMEs save money and get the most from their travel budget. “
A lot of companies do not believe their travel spend is significant enough to merit a managed travel policy,” he says. “But once you sit down and go through spend patterns, they soon realise there are opportunities. They may also employ someone in-house to look after travel for the staff. But when you compare the value of that salary against the cost of TMCs’ fees and expertise, it becomes a very easy decision for them to make.”
The potential for travel intermediaries to grow their share of managed travel in the SME sector is nothing new. When global conglomerates slashed travel budgets post-credit crunch, the big TMC players, such as Carlson Wagonlit Travel, HRG and American Express Global Business Travel all quickly rolled out products and strategies to attract the type of business that was, until then, considered small potatoes.
FCM Travel even created a business called Corporate Traveller to specifically target the Small and medium-sized enterprises sector. At the time, independent TMCs and consortia said their larger competitors would not be able to provide the intimate service demanded by small organisations. The debate continues.
For the most part, SMEs have the same travel and meetings management requirement as larger organisations, says Inntel’s business development director, Jane Dibble. “Many of our Small and medium-sized enterprises clients are market leaders in their own sectors,” she says. “But whether they are large or small is irrelevant in some ways. We still have to look at travel patterns and company culture to identify the best solution.” Dibble is one of those who believes SMEs receive a better service from independent intermediaries, because they offer a more intimate service.
Keeping it connected
TMG Corporate director David Moore agrees, saying the SME-TMC relationship should be more like a marriage than a long-distance relationship. In large organisations he believes there is often a “disconnect” between those responsible for buying travel, the Travel Management Company: An agency which manages business travel for a company. and the travellers themselves.
“Travel policies are, therefore, often geared towards controlling travellers with whom you have very little actual contact,” he says. “In SMEs, generally speaking, you’re dealing with the owner and senior staff, who do both the procurement and the travelling. They don’t just need a booking service. You need to be a full-time travel consultant advisor and consultant to their business.”
Moore believes it is the consultative approach that helps differentiate modern TMCs from old-fashioned agencies. He says breaking into new markets, especially in far-flung destinations, is one of the SMEs’ biggest challenges when compared to larger, multi-region competitors.
“What may have started as a domestic business may now have the opportunity to break into potentially lucrative international markets,” he says. “In large organisations there is already a well-trodden path in terms of knowledge and processes.
“Not so for the Small and medium-sized enterprises. A Travel Management Company: An agency which manages business travel for a company. should, therefore, assist on all aspects of travel and ground logistics. That can be anything from commercial advice for the sales team through to translation services. It is more than just someone on the end of the phone to make a booking.”
TMG takes this a step further by working closely with the UK Department for Business, Innovation and Skills (BIS), as well as chambers of commerce, to help Small and medium-sized enterprises customers take part in trade missions to new markets.
Better and quicker decisions
The absence of large procurement departments can work to the advantage of SMEs looking to formulate a travel programme. Travel Leaders’ Whittaker believes dealing directly with owner-managers means better and quicker decisions can be made.
“The beauty of SMEs in this respect is that they are nimble. Procurement in larger companies often makes decisions based on cost, as if travel were a commodity,” he says. “It’s simpler for SMEs to take a more holistic approach to implementing a travel policy and programme, and so everything can be traveller-centric.”
Paul East, chief commercial officer of Wings Travel Management, says conversations should also involve, where relevant, office managers and executive PAs. But what is the starting point for an Small and medium-sized enterprises that has never encountered managed travel before?
East first suggests a meeting with head of finance to understand the department’s key criteria before moving on to the HR team to discuss its objectives. “From these sessions we are looking to establish the amount of flexibility that is allowed in the policy. Does a traveller have a choice of supplier? Do they have to take the lowest fare regardless of routing? Are ticket upgrades acceptable? Then you build a couple of policy templates and propose them to the client. So, this would be the result if we adopted policy A, or this would be the impact if you implemented policy B.”
Negotiated rates and fares
One of the biggest perceived challenges for SMEs is how they obtain access to negotiated rates and fares. Very few have the volume of travel that would get them a meeting with a supplier to discuss a corporate discount. Many, therefore, have to rely on the net airfares and hotel rates contracted by the TMC or hotel booking agency (HBA).
As part of a large travel company, Corporate Traveller bulk-buys as much product as possible to pass on to its Small and medium-sized enterprises customers. But Graeme Milne, the company’s general manager, says getting discounts is only part of the cost-saving puzzle. He uses hotels as an example. “You have to look at the hotels’ deals to which you have access, and ask: do you use them?” he says. “Are you using ten hotels in one city when you could consolidate to five and therefore generate better savings?”
Milne says his team is currently working with the hotels most used by clients in order to build essential add-ons into the price of a room. “We agree three add-on elements to be included in the room rate. This could be wifi, laundry, chauffeur cars, upgrades or breakfast. It means the Small and medium-sized enterprises has access to these rates through our Smart Stay system, giving them more value and better control of spend.”
Corporate Traveller is also one of many TMCs that obtains cluster fares, which are preferred supplier deals based on the collective volumes of different clients travelling on the same route. “Having a preferred supplier in place within a business, it’s not just about the savings, it’s about the familiarity with a product, and the consistency it brings.” Milne says this is often harder to achieve with airlines, though frequent flyer schemes are often beneficial to SMEs if used in the right way.
Implementation & integration
And what of expense management? Are SMEs too small to work with specialist companies? Not according to Caroline Haywood, interim managing director of Airplus International UK. She says the hardest part of setting up a managed travel programme is getting all aspects correctly implemented and integrated.
“Like large organisations, SMEs will also be looking for good data,” she says. “And this can only happen if the expense management systems, TMCs’ data feeds and financial systems all talk to each other. They will need expense management partners who can offer real guidance and advice as to the steps they need to take, and each supplier must be sure to collaborate.”
Duty of care is also as applicable to SMEs as it is to FTSE 100 companies. While they may not have the budget to create dedicated departments, there are some practical steps that can be taken to mitigate traveller risk. Tim Edwards, health business development manager at Axa Assistance, urges SMEs to check they have an adequate business travel insurance policy in place.
“The primary aim of these policies is to cover some emergency expenses – not to give you access to the practical advice and assistance you are likely to need in planning a trip, or giving you on-the-ground help if something goes wrong. Always check your policy exclusions to be clear on the events and circumstances that are and, more importantly, those that are not, covered before you travel.”
Analysts are predicting the economy should, eventually, return to levels of growth enjoyed in the mid 2000s after a period of flat-lining. What’s clear is that there are still potentially billions of pounds being spent on planes, trains and automobiles by companies who have never considered the advantages of a formally managed travel programme.
TMCs not only have the chance to grow their own businesses by taking a share of this market, but altruistically there is an opportunity to underpin the future success of UK Plc and cement the reputation of travel intermediaries as indispensable business assets.