June 20 - A Centralized Versus Distributed Managed-Travel Model


By Kevin Mitchell

Founder & Chairman

Business Travel Coalition

There has been some recent discussion in Europe and North America about the efficacy of the globalization of managed-travel programs (http://btcnews.co/1oNYX5k). Business Travel Coalition (BTC) offers additional perspective regarding what can be termed a “centralized” versus a “distributed” model for modern managed-travel programs.

When U.S. airline industry deregulation moved forward in 1978, many large corporations pursued a strategy of consolidating to one national travel agency – that eventually morphed into today’s travel management company (TMC). The goal was to bring some control to an exceedingly complex, if not somewhat dysfunctional airline distribution system.

Since the early 1990s, this national strategy has evolved into “globalizing” with one mega TMC.  A strong case has been made for centralized oversight of a corporation’s worldwide travel activities. However, it is not clear if centralizing to one TMC, for all global services provided, produces justifiable incremental benefits for a large corporate, university or government managed-travel program. Indeed, such a strategy can deprive travel departments of the expertise, relationships and problem-solving resources of best-in-class regional agencies and TMCs around the world.

The promises of nationalization, and then globalization, included quality travel data consolidation, superior customer service and lower airfares via larger TMCs’ purchasing leverage.

Some travel departments, however, have not been satisfied with either the results of national consolidation, or globalization efforts. Today they 1) look to third parties for expert data consolidation, 2) experience uneven global customer service levels from some mega TMCs, and 3) leverage their own purchasing volumes and expertise in negotiating airline and other supplier contracts.

Moreover, local corporate field-office managers are often unimpressed with the benefits of globalization and can be resistant to such programs. They sometimes see beneficial local supplier deals canceled, often feel that cultural business practices from the Home Office are forced upon them, and where problem solving was once a relatively simple process, it can become bureaucratic. It is exceedingly important to the success of a globalized managed-travel program that local managers buy into and actively support such a program.

What true quantifiable value, for example, is there in service standards being determined for a travel agency “affiliate” in Vitoria, Brazil by a mega TMC based in the U.S.? Furthermore, how could a homogenized American approach to travel service standards across various regions of the world and cultures be expected to be workable?

There is a technology-enabled viable alternative to globalization as it is currently conceptualized and practiced. Low cost structures, personalized service for the business traveler, responsiveness to management needs and good technology have always been the hallmarks of regional TMCs within the U.S. and around the world, and what many corporations want.

A single TMC can be tasked with coordinating a global travel management strategy that includes regional travel agencies run by service-oriented entrepreneurs who are 1) expert in local markets, 2) low-cost producers and 3) able to drive superior value for an overall program.

Communications, data parsing, the Internet and other emerging technologies will continue to be the enablers of new ways of solving travel industry problems and driving beneficial change. Travel managers and senior executives considering a global travel program should consider the benefits and drawbacks of both a “centralized” and “distributed model.”

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