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Embrace
the Change
Don't stand still too long or you'll get
carried away by the continual change in the travel industry.
The introduction of another "low-cost" carrier,
the growing significance of Virgin Blue, a national
carrier in cost-save mode, coupled with a number of
unpredictable world events in recent years, and it has
you wondering what will happen next.
There is one constant though - suppliers
will continually look for ways of reducing costs, particularly
distribution costs. Suppliers will look to reduce the
cost of existing channels, look for alternative and
cheaper distribution channels, and of course, encourage
customers to deal direct.
The move to reduce distribution costs
is certainly not new and in overseas markets we have
seen the move to commission-free environments. The USA
has a "zero" commission environment and, closer
to home, Singapore Airlines and Air New Zealand have
driven down commissions in their home markets.
Interestingly, in the USA where airlines
have eliminated commissions to reduce distribution costs,
75% of all airline tickets are still issued by travel
agents, and many of the major airlines still remain
unprofitable. It seems the TMCs who offer impartiality,
variety, choice and experience advice are winning out
over suppliers who are determined to win direct
control of corporate customers and bind them to one
brand.
TMCs are more aggressively offering their
corporate and consumer customers best-fare-of-the-day
solutions. Best fares along with secure interactive
booking tools, detailed management information
and consultation and advice on improving travel policy
and processes are making TMCs much more attractive to
travel managers and CFOs.
For some time now, Australia has been
moving towards a fee-based environment and we anticipate
this trend will continue. More and more companies and organisations
are under pressure to control their travel spend, savings
in time and money, and the flexibility to increase and
decrease travel in their organisation quite rapidly.
To meet customer demands, TMCs are offering
transparency. More often TMCs are charging fees
based on the value they provide, and airline commissions
are being handed back to the customers.
As the trend towards a commission-free
environment gains momentum, the travel purchaser will
more clearly be able to see the nett transactional value
at the point of sale. This will alleviate complex
back-end reconciliation of commission pass-backs and
airline incentive payments.
For some time the Australian market has
been moving closer to a zero-commission environment.
We have seen an increase in corporate "private
fares", an ever increasing utilisation of "nett"
international fares, and some suppliers are selecting
to distribute exclusive direct internet products.
Globally, the airline industry has moved
towards utilising the Internet to distribute airline
tickets, there has been an increase of "no
frills" airlines across Europe, Asia, and
Australia, and suppliers have cut commissions or introduced
processes that have ultimately led to wiping them out.
So what does a move to zero - commission environment
mean for the buyer?
- It provides greater financial transparency with
your TMC
- Potentially back-end commission payments may reduce
or even disappear.
- A heightened focus on "best" or "lowest"
fare.
- An increase towards online self-booking tools to
minimise transaction fees.
- TMC's articulating and providing measurable value
in line with the fee structure negotiated.
TMC's need to embrace the change. We must continue
to develop and improve our technology and provide our
travellers with more choice and more valuable information
when they make their travel decisions. We need
to reduce costs, continue to provide transparent remuneration
models, and provide efficient service delivery platforms
- from interactive to dedicated personalised individual
attention.
But most importantly, TMCs must provide choice, impartial
judgement on "best" option, and value, value
and more value.
Copyright
Rob Dell ATMC President 2006. All rights reserved
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