The future of Nego Fares and … Policarpio Díaz

[I dedicate this post to Poli, our spanish broken boxer that cannot stop getting into fights … somebody stabbed him a few days ago]

I think there are business relationships that are losing the sense they were born with. I have over 15 years experience in the industry B2B corporate travel, and have seen a radical change in the relationship with suppliers at this time in regard to special agreements negotiated, but I think today we are not where we should be.

Some years ago the measure of the “effectiveness” of the program was the volume (traffic) spend that was using nego fares, instead of focusing on ATP benchmarkings ADR air or hotel or rent a car.

The advent of internet, and fares transparency (that I called “perfect market” in one of my earlier posts) has completely changed the shot. Although vendors continue to push the volume traded, something is changing … in any case, before proceeding I must differentiate air from the other two categories (hotels and rent a car), as the sectors of “land” have a level of competitiveness very different. In fact perhaps the Rent a Car are those who are more serious about the negos, although today less than yesterday (in Spain).

With Yield Management systems very advanced for public rates, I’m still surprise why the suppliers, even those that have a dominant position (i.e. train companies), do not establish programs that prevail in a fair performance of a client. It is not a surprise to anyone saying that the negotiated rates have become a ceiling, and the TMCs are instructed to look for the best price, and use the nego fares when is the best (worst for the airline) option. But the question is simple, if I use those negos only when there is no other choice … so why give a discount?

I think this has to change. Some customers ask for a volume discount, but I think in this sector is not entirely fair, because if you always buy the cheapest available fare “no thrills” and not consider the airline’s product, the logic of the provider is “if you buy to me only becouse of the rate, you use the best available rate  and that’s it”. If, however, the company values ​​the product and want to make a preferred program and have a better product in different ways, then you should look for a model and price that will compensate both parties.

The future

I see three scenarios:

1) Business as usual, unreasonable for suppliers, but interesting for the customer, but may not be the best option, even for the customers.

2) Some customers will migrate to unmanaged models (ie models that will approach the B2C model, pivoting the responsibility of the travel policy / company / travel agency  to travel policy / traveler.

3) Some will enter into a new supplier relationship models, they will find a win-win model with a tradeoff  between price/service and traffic, and providers will have greater certainty that only those tha gives preferential treatment receive a real discount. I see different  key aspects:

a) It would be appropriate to have an automated discount model  that according to the actual Mk Share  performance  establish a dynamic discount. A company could give a very good agreement for a medium sized company that gives entire volume … in a certain class. Suppliers could provide aggressive rates, in exchange for Mk Share. But with the cards face up. I give 50%, but you give me all the traffic. That’s a win-win agreement.

b) The OBTS [Online Booking Tools] should be parameterized to fulfill these agreements,  limiting the content and the kind of fare.

c) Providers should be very transparent and rigid in this approach,  removing the agreement automatically of the customers that are not serious with them.

d) Mk Targets Shares will be key.  I think that is what the industry needs to professionalize the Turkish bazaar where negotiations have become. Arrangements with Global Agreements will be good as long as they bring a real value, which does not happens allways.

For all this, the TMCs should have a very consultative role in data management, and very transparent with suppliers and customers. Today all of them have the data, it is difficult to deal with intelligence information, integrated with the vendor for the customer’s benefit.

I hope I have served … ah, Poli (the boxer) was a hook … pun intended!


One response to “The future of Nego Fares and … Policarpio Díaz

  1. Pingback: El futuro de las Nego Fares y Policarpio Díaz | business travel spain

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