The role of procurement departments has certainly changed over the years, with value, levels of service and duty of care all becoming significant considerations when taking on a new supplier. However, there is one aspect of the procurement process that has stood the test of time and underpins everything that procurement department’s work towards and that’s cost.
I’m often asked to benchmark against existing practices but what is the best way to do this?
Understanding transaction fees and how they relate to your overall spend is a crucial element in selecting a TMC.
Equipping yourself with as much industry knowledge as possible is the best way to get the procurement process off to a good start. If you’re keen to drive online bookings then, by doing research, you should be able to find a realistic online adoption rate expectation. The volume of online bookings your organisation makes will have a direct impact on the fees you pay, as online bookings are usually charged at a much lower rate than offline bookings.
Don’t focus exclusively on offline fees
In recent years there has been a real drive within the business travel industry to increase the amount of bookings made online. With transaction fees for online bookings being typically lower, this has been a great result for travel buyers. However, the same kind of fees should not apply to offline bookings. When it comes to offline assistance, it really is a case of you get what you pay for. It is imperative you work with your TMC to work out how realistic your online adoption rate really is, if you have a lot of multi-sector long haul travel I’d suggest you will be doing more offline than online but if it is simple point to point low cost travel a higher online adoption is probably realistic.
TMCs do not all have access to the same fares and so will not deliver the same online/offline booking ratios. If you really want to know what it would cost to work with each TMC you need to tailor your analysis based on your research and their figures.
Once you’ve done your calculations, based on a tailored online adoption per TMC, you can then work out what percentage of your total travel spend the transaction fees would equate to. The industry average sits at around 5%, so if you’re preferred TMC comes in less than this, with excellent customer service and a great all-encompassing solution as well, then from a cost perspective they are very much worth considering.
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