Subscription-based corporate travel management is a growing trend globally as TMCs look for ways to remove their financial dependence on the industry’s traditional pay-per-transaction model.
In October last year, Tourvest Travel Services COO, Claude Vankeirsbilck, flagged the need for new thinking on TMC remuneration (watch the discussion here). At the time, Vankeirsbilck said the pandemic had shown the “frailties” of transactional models. “The pandemic devastated our industry and made us think, what is life going to look like post-pandemic? What is the commercial model going forward?”
TMCs that have gone down this road have said bundling resources and charging customers a set rate can make budgeting easier, while customers still have access to excellent, professional services and expertise, even while there may be fewer consulting staff.
Of course, it takes buy-in from customers to get new payment models off the ground. TMCs have had to be clear on the win-win benefits for both themselves and their customers.
Rennies BCD Travel added a subscription travel service, Travel as a Service (TaaS), in October 2020. General Manager of Rennies BCD, Lynn Howarth, said the aim was to maintain service levels in a way that was sustainable for the brand and had benefits for both customers and TMCs.
Howarth said when business started up again late last year, Rennies BCD had ensured optimal service levels with an opportunity for clients to embrace a new service model as well.
“It was one of the areas of the business that we looked at urgently. Customers were looking for quality service and advisers who were going to give them so much information, but there was not enough demand to sustain the business. This model is a win-win for both ourselves and the client. It definitely works for the client, and for us.”
Rennies still offers traditional management-fee accounts for some clients as well as running transaction fees and billing systems for others, and individual consultants may handle different types of client accounts. However, the brand believes there is good potential for subscription models aimed at small businesses and start-ups that want to travel but have limited budgets.
“It offers us an opportunity to provide the high levels of service that customers demand, in a sustainable manner. It is quite early to tell what the financial benefits will be,” said Howarth.
“We have always been a flagship brand, but this was the perfect opportunity to reimagine our business and we have come up with some really good solutions.”
Can it work for leisure?
It’s not only TMCs that have spent lockdown reviewing their systems. According to a recent story published by TravelMarketReport, an agency owner in the US, Ralph Iantosca, restructured his “already-successful independent travel agency” as a subscription-based service, with annual fees starting at US$3 500 (R52 000) a year, taking his inspiration from a concierge medical practice business.
Iantosca cherry-picked a high-end client list from his existing customer base. The business now charges US$5 000 (R74 000) per year and brings in approximately US$250 000 (R3.7m) annually, before commissions, claimed Iantosca.
However, industry consultant and former CEO of Asata and Head of Travelport Southern Africa, Robyn Christie, said it would probably take reliable data to replicate that kind of success.
A subscription service would probably be better suited to a larger business with access to that type of technology, said Christie. “You have to have data. You need to know who those clients are. I would be cautious if I were a smaller agent.”
Similarly, Mladen Lukic, GM of Travel Counsellors South Africa, said a subscription travel service was not something new and it worked for some customers but not others.
Echoing Vankeirsbilck, Lukic said market forces had traditionally driven product changes in the industry, and that the long-term side effects of the pandemic would force many businesses to review their revenue streams still. Ultimately, he stressed, customers decided what they were prepared to pay for.
Travel Counsellors was not opposed to a TC going the route of Iantosca and offering subscription travel services.
However, Lukic said TCs’ value proposition was based on managing outcomes and personalisation. “You can’t build a subscription model for that.”