The MacNair Travel Leadership Blog

The Challenges of Supplier-Direct Booking for Managed Travel Programs

Posted by Mike MacNair on Jan 5, 2017 12:00:00 PM

The Challenges of Supplier-Direct Booking for Managed Travel ProgramsMotivation for travelers to book direct with suppliers is on the rise, creating unique challenges for managed travel programs. Travel suppliers, especially hotels, are making a concerted effort to cut out middlemen by re-launching loyalty programs and adding incentives to entice business travelers to book directly with them – thus bypassing corporate travel policy.

With non-compliant bookings, the tangible benefits of corporate travel policies and programs are diminished. When travelers do not use preferred suppliers, or take advantage of negotiated rates and perks by using the company’s approved online booking tool (OBT), the company loses its ability to leverage volume for future negotiations towards discounted rates.

Not only are organizations hamstrung in negotiations, but supplier-direct booking also impacts the ability of travel managers to track down, locate and contact their travelers in the event of an emergency. As a result, travel managers must re-think policies and discover new ways to account for travelers who bypass approved booking methods.

New Study Says Book Direct Is Here to Stay

According to a recent report by Global Business Travel Association and Concur Travel, based on survey findings from 84 U.S. travel managers, direct booking’s self-service approach threatens benefits associated with managed travel programs, including spending visibility, control, duty of care and cost savings. It was reported that:

  • 40% of business travelers regularly book directly with suppliers.
  • More suppliers are offering incentives to book direct and mobile technology facilitates the process.
  • 60% of travel managers who took part in the study said their policy sometimes allowed direct bookings.
  • 4% of travel managers said travelers were always allowed to book directly with a hotel, airline, or other supplier rather than use a company-approved travel agent or online booking tool.
  • 68% of travel managers agreed or strongly agreed that traditional corporate travel management tools are not able to locate travelers in a crisis if they booked directly with a supplier.

While supplier-direct bookings comprise a minority of corporate travel bookings, those numbers are expected to rise in 2017. In 2015, the global business travel industry was estimated to be worth $1.3 trillion. Hotels and airlines will continue to get more creative and aggressive by offering incentives and perks to business travelers in an effort to cut out the middleman.

What Is Driving The Trend?

There are many factors driving this emerging trend: flexible-spending, Millennials’ (comprising the largest portion of the U.S. workforce), travel preferences, strong incentives by hotel chains and airlines to book direct, and the forever changing impact of mobile technology – the travel industry is primed for transformation. Some key reasons for the increase in direct booking include:

Millennial booking behavior: If their company is using outdated, non-mobile booking tools, Millennial business travelers whom are looking for a more self-service approach to booking, turn to supplier-direct booking options that offer mobile technology for seamless transactions on the go.

Aggressive incentives by suppliers: Multi-national hotels and airlines (such as Hilton, Marriott and Lufthansa) encourage travelers to book directly on their sites with perks like: discounted rates; free Wi-Fi, parking, breakfast and event tickets, mobile check-in, value-added packages, booking add-ons and reward programs.

Internet Attraction: In addition to providing easy-to-access and easy-to-use mobile apps, suppliers are harnessing the power of social media channels to promote special offers, engaging content and sharing blog posts, photos and videos.

What Is At Risk?

When rogue travelers book directly with suppliers and outside of the corporate booking tool, travel and finance managers are unable to fully realize the benefits of a managed travel program.

Some of the challenges and risks associated with book direct include:

Negotiated benefits diminish: When travelers book directly with a supplier, they may miss out on discounted corporate rates and end up paying more than they should. The more travelers booking with preferred suppliers, the better corporate rates travel managers can negotiate for the organization by leveraging travel volume.

Data integrity deteriorates: When booking outside the corporate travel system, travel data is not captured, making it difficult to view travelers’ transactions, spending trends and buying behavior for reporting, personnel management and budget planning purposes.

Policy enforcement weakens: Supplier-direct booking goes outside the organization's policies and procedures and encourages non-compliance. Booking through a company-approved travel system allows a business to apply and enforce travel policies that are tied to its strategic goals and corporate culture.

Duty of care suffers: When travelers make supplier-direct travel arrangements, duty of care suffers. Managers no longer know when and where travelers are at all times, making it difficult to support them in event of an emergency.

The aggressive marketing strategies currently used by suppliers to promote direct bookings, will only intensify the already significant issue of invisible spend by rogue travelers. The rise of supplier-direct bookings has created unexpected challenges for many managed travel programs.

With an increase in non-compliant bookings, the benefits of corporate travel policies and programs are being diminished. Corporations must look very closely at current travel policy strategies to ensure that the integrity of their negotiated rate programs are not put in jeopardy by travelers who booked directly on supplier sites. It’s also important for finance managers to determine where and how to capture supplier-direct booking data when travel falls outside of an integrated travel and ERP system.

If you are a travel or finance manager who has experienced some of these challenges with your organization’s travel program, you are not alone. As supplier-direct booking incentives will be on the rise in the years ahead, an experienced TMC can help you navigate the path to increasing policy compliance among your travelers.

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Topics: Supplier Direct Booking, Compliance, travel policy, TMc, Travel Management Company, Managed Travel