It has been a year since I started my blogs and I just had a look at my stats to see which ones of my 80+ posts recieved the biggest 'hits'. It was pretty close but I found the top ones from both my business and humour blogs and am pleased to reproduce them now for those that missed them. They are about TMC/Supplier relationships and a catastrophe I endured in an Australian toilet!
Here they are:
Can TMCs Really Influence Business?
Part 2 -Deals
OK, so we got to the point where we ascertained that TMC/agents still get incentives from suppliers, albeit presented in a different shape. I also mentioned that, in my opinion, this need not necessarily be a bad thing for corporate customers if managed right. What I did not go into in any detail was a) what these deals are b) how TMCs do (or do not) shift business and c) how such deals could benefit all. So let me address at least one of these points now and deal with the others another time.
What kind of deals?
There are three main types which are growth percentage rewards, net fares that can be marked up and increase share payments.
Payments for growth are usually a percentage of net ticket value sometimes paid back to zero and sometimes just for the growth element compared with previous year. Percentages paid vary enormously depending on supplier size, their importance/share of the local market and their strategic need to buy a way into the region. I have heard of deals ranging around 2% from a big volume airline to 50% from someone trying to make inroads into a market. Such deals are pretty unfashionable now in most primary markets but do still happen in numerous places around the globe especially from suppliers who have no effective systems to measure performance.
As time past some of the more major airlines started to get concerned that TMCs might simply start doing growth deals with all their competitors as, in a growing market, the prospects of growing volume with everyone was high. Also volume could vary greatly simply by the losing or winning of a major volume corporate account. This ultimately got addressed by airlines ‘red ringing’ the biggest clients which meant their volumes were taken out for volume and payment purposes.
There have always been a few net fare deals about. This is where an airline offers a fixed net price to specific agents who can mark it up by as much as they think they can get away with. These net fares were targeted towards specialist agencies who were involved in markets such as ethnic or tourist travel. In the main the plan was to gain this business but not dilute their yields by exposing such discounts to the corporate market. Nevertheless there has been growing overlap which usually manifests itself by corporate travellers that gets hold of the fare and demands to know why his TMC cannot match it. This has been going on for many years but in recent times some USA airlines have dallied in this area too by offering net business prices to TMCs instead of overrides.
In an attempt to make future deals work airlines started introducing rewards based on share increase. This is infinitely more difficult to measure and depended on the airline itself to produce the results with no way for the TMCs to verify them. Some of these deals became so very complex that it was almost impossible for anyone to predict what would be paid. .Another issue was that, for some dominant airlines such deals were considered by the authorities as anti-competitive and thereby illegal. However these deals are still widespread today.
Most modern deals are far more sophisticated and linked to ‘service level agreements’ (SLAs) although this term is a misnomer in my view. What they effectively do is reward TMCs for performing (or allowing) certain activities. These activities vary from allowing access to their staff, account managers and senior management to shifting share, providing key MI on their clients, promoting the airline’s campaigns and supporting a particular strategy. All such activities are measured and rewarded accordingly. These ‘incentives’ seem to work reasonably well for both parties as the airline usually sees more volume and the TMC gets it’s money in a way that negates them having to pay it straight on to the corporation as extra client income/overrides.
Originally TMCs used to negotiate SMAs with individual airlines but even that has moved on. Now the suppliers are trying to do deals by Alliances rather than individual members. These usually manifest themselves as umbrella incentives paid only if the TMC performs with a certain minimum number of their partners. This way the dominant airline in any alliance group can demand TMC preferred status for their smaller partners that would not otherwise register on their radar screen. Such deals are highly unpopular with most eligible TMCs for obvious reasons and particularly because many airline partners are either unable to provide accurate data or simply not a product they want in their portfolio especially if they clash with another preferred supplier.
Consolidation by alliances is one thing but the ability/desire to agree a global incentive agreement is even harder and suppliers have, in the main, been reticent to do this either with TMCs or corporations. Don’t get me wrong, there are some prototype deals out there but I am highly sceptical of their current value to anyone. After all the airlines still work on a system where they cannot tell their overseas offices what to do as they are cost centres in their own right and have the authority to say no.
Finally I expect to see a new type of deal arriving and it is not a million miles away from the net concept. Well actually it is here now but only in it’s formative state. The arrival of TMC specific fares is here and expanding. In the past, probably as a result of past legacies, airlines have stuck to treating all TMCs the same as each other as far as fares are concerned. This is changing with the arrival of new generation TMC technology platforms that can be very specific about who sees what fare where and when.. This will enable them to drive business to (and from) airlines at the press off a button. Airlines will be able to flex the fares they offer depending on need and thereby have a tighter grip on their yields in a similar way to what they do on their own dot com sites…if the TMC is incentivised enough to support them. As I say, it is early days but worth watching.
This subject is vast and worthy of a day seminar rather than a brief blog entry however I hope it gives some a basic grasp of what is going on in this somewhat secretive area. More on how such deals are supported and how I think all could benefit next time.
My Life in Toilets – Part 1
Yes I know…a strange title but stay with me.
In the process of writing these blog ‘memoires I started to realise how often the word ‘toilet’ was coming up. This sounds odd to me too but I began to realise that toilets had played an important (albeit traumatic) part in my career over the years.
Some of you who may have read my rambling will remember how I fought an Australian in a Sydney W.C. and a large female attendant in a toilet next to the Paris perimeter motorway but these are just small skirmishes in my war with public conveniences of the world. I have fought with and in toilets across all continents and I feel I owe it to posterity to clear my conscience now as I lurch towards my twilight years. After all, how many people can say they have lost business, ruined relationships and been arrested whilst simply trying to relieve myself.
My most disastrous first memory was when I got arrested for indecent exposure in Perth, Western Australia. It was an awful misunderstanding. I had flown to the other side of the world to visit my then girlfriend who had been ‘forced’ to emigrate with her parents a few weeks previously. I travelled on airline staff tickets and it took me two sleepless days to make the journey. I found her address which was in the suburbs of the city and presented myself on her doorstep unannounced. Her new boyfriend answered the door!
What has this terrible tale of a jetlagged and broken heart got to do with toilets? That came later when she, her new boyfriend and her parents felt obliged to take me along to a dinner dance they were about to leave for. I was clearly as welcome as hem aroids .We sat at a big table with huge flagons of cold Swan Lager in the middle and I sat and watched the lovely Sue dancing with her new love so closely that you could not squeeze a cigarette paper between them.
There was nothing for it so I turned to drink. After consuming one flagon by myself I felt the most excruciating need to relieve myself so I stood up and made my way unsteadily across to the corner of the room where the toilets were. It was all a blur to me but apparently I first went into the ladies and got ejected. I went through another door which said ‘MEN’ and there was a further plain door on the left going into the toilet itself and another on the right that provided access to another entertainment room.
By this stage I really feared I was not going to make it in time so I started unzipping and preparing as I walked. I was out and ready as I turned right and fell into the other function room where they were celebrating a golden wedding. There was uproar. One of the people there was an off duty police officer and he immediately pinned me to the wall, read me my rights and arrested me for indecent exposure.
He phoned for back-up and a car and marched me out onto the pub forecourt whilst I continued trying to pull up my zip. The zip got caught (some of my male readers may understand the pain) which made things even worse. To cap it all they would not let me go back in so I had to pee against the wall which added another charge to my sheet.
My lovely ex and her family knew nothing of this until they got a call from the police station and an order to come and collect me. By this time I had been able to explain my jet lag, tiredness and misery and they took pity on me after having a good laugh at my expense. Needless to say I was disowned by my reluctant hosts who drove me to Perth Airport where I spent the night in the departures hall.
Whenever I go back to Australia I always wonder if one day I will stand at the immigration desk and this arrest with reason will flash up on the screen. So far so good but there is more to come in ‘Toilets 2’ the sequel!