Although benchmarking can be an important factor in most procurement processes, the usual techniques used can often lead to inaccurate results when it comes to evaluating Travel Management Companies (TMCs).
For ordinary items that are not sensitive to a variety of external factors, such as paper, you can easily solicit a quote from suppliers and create a shortlist based on the best prices received. Going forward, you can expect the quoted prices to stay reasonably the same, and you might even contract them to.
However, when it comes to travel, it’s not that simple. Prices are highly dynamic, dependent on a variety of external factors, and subject to change almost by the minute. Additionally, there is no guarantee that you’ll even be able to purchase the quoted fares from a benchmarking exercise in the future. Some TMCs participating in these exercises will even go as far as reserving airplane seats, hotel rooms, and rental cars in large blocks to ensure that they have the lowest prices, in turn, driving the other participating TMCs’ prices sky-high.
So, how are you supposed to work around these issues?
It’s important to understand that having great prices is only half the story – your biggest cost savings will be attributable to changes in buying behavior. With that in mind, you should focus on those suppliers that have the best strategies to drive behavioral change, and the power to actually deliver on that promise (ie. the capability to enforce your travel policy).
Next, take a look at the sources that TMCs are getting their content from and make sure that all mainstream online booking websites are being searched in addition to the traditional Global Distribution Systems.
And there you have it! Follow these suggestions and you’ll be one-step closer to partnering with the right TMC! Stay tuned for Chapter 6, where we explore the best ways to conduct supplier presentation days.