ADAM KNIGHTS: Finding the truth when benchmarking airfares
One-off exercises to compare fares can be easily manipulated. Dig deeper to get the real picture
We have all been through review processes before – after completing the RFP and the presentations there is then the mandatory fare benchmarking exercise. This takes many forms and varies in the degree of scrutiny involved. However, the aim of the exercise is to separate the short-listed suppliers based on “actual” performance.
It is an understandable and, in many ways, a logical final check. The short-listed suppliers have talked about how they will save you money, how the fees only make up 3-5% of the total costs, that the travel is where the savings are truly made, how their technology is “unique” and therefore better suited to the savings goals you have. Ok, so let’s get that proved and the contract can be awarded.
Current parameters allow for manipulation
At this point the suppliers normally get an email telling them they will get a list of itineraries to quote on. The process has become more scripted over the years as customers try and engineer a level playing field. The following fundamentals will be recognised here.
- Itinerary requests all sent at same time
- Suppliers asked to screen print the “quoted” itineraries
- Suppliers told to quote alternative options
Then there are the really smart ones:
- Suppliers told that they will be asked to issue one ticket as if it is for a real traveller
- Suppliers told that they need to show the net fare contract (if it is a NET ticket) they issued it on
The point about the second set of parameters is that there is an ever increasing tendency to manipulate the exercise. In truth, most agents in any major shortlist should have the same level of NET fares. They should also be able to ticket something overseas and access another country’s inventory if it’s required and where airline regulations allow. They will put their absolute best agents on the exercise and have multiple fare specialists checking the completed itineraries right up until the deadline. Yet despite all of this, there are often significant differences.
Just imagine as a travel management company (TMC) you had completed an exercise for a large customer in a re-tender. You’ve completed all the things required and had the added benefit that the fares were sold at NET contractually so the debate about marking up or not (when you are allowed to) wasn’t relevant. You also have the fares technology to check overseas at the touch of a button and, fortunately, availability was pretty good on all the itineraries so it seems that everyone is looking at similar content. Yet you failed the exercise by a significant margin. In these circumstances, you can only hope that the buyer will question the validity of the exercise with the consulting firm and question how suppliers can be so different.
Why is there such a difference?
There can only be two explanations for this. Either the better supplier has something unique (because you would expect every supplier to do all the aforementioned things) or the supplier is manipulating the exercise. The opportunities to do this are all known. These range from quoting the lowest published fare regardless of availability to taking a risk that you will be asked to ticket something and selling the ticket at less than cost. There are also the downright misrepresentative options of editing the screen print to show something available that isn’t. This is why travel managers continue to refine the fare exercises with ever more parameters and proof-points designed to give a level playing field.
I don’t believe these assignments will ever be a representative guarantee of performance. They are one-off exercises which will either prove everyone at parity or, worse, enable an unscrupulous supplier to manipulate the event. As in all areas of business (and life) the cheapest often has plenty of hidden add-ons you just haven’t found yet.
These exercises are normally the domain of general consulting firms that don’t specialise in travel. The specialist travel management consulting firms rarely ask for these as they understand the complexity and challenges of the industry.
Useful benchmarking tasks to set suppliers
My recommendation is simple. Make the assumption that all suppliers of any merit should be able to achieve relative parity.
- Get them to prove they do the things they say they will do consistently. Ask them to show you the actual technique they use to search availability in overseas markets and how they ticket and change those bookings out of hours once booked. This should give a very quick feel of exactly how easy it is and therefore whether it will actually be done more often than just the benchmark exercise.
- Ask them to show you how your online bookings over a certain value drop on a separate queue for checking. Remember, those no touch bookings are called ‘no touch’ for a reason. Those very low online fees that agencies offer and consulting firms demand are predicated on ‘touchless’ bookings. Ask the agency to show you the system they use to queue such bookings. The chances are these never get queued because they are ‘touchless’. If you have high online adoption and the agency has demonstrated a fare saving in the benchmark exercise, then this needs to be proven if booked online.
- Get them to show you how they actually check content in multiple markets and take advantage of it (remember, being able to do something and actually doing it are very different). Unless a TMC has a single Global Distribution System (GDS) like Travelport/Sabre/Amadeus etc. available worldwide then it is impossible for your home market TMC to check the availability in their other offices or those of their partners. There is nothing stopping an email or telephone call to their other offices but how often will that happen after the one-off benchmark exercise is undertaken?
- Request examples of the savings they make for existing customers using their specialist techniques and ask those customers to validate them for you. This is probably one of the most important points as to record savings using overseas ticketing techniques is not easy. It requires a decent benchmark to be used to make it more relevant (eg the full fare as a benchmark is almost worthless).
It is far better to use the fare quote ‘best buy’ for that itinerary as the benchmark as that is the lowest applicable fare for the booking that is held. Once the benchmark is agreed the agency needs to have carefully thought how to record this particular ticketing technique to make it relevant. If you are told that it just falls under “agency discount” then it is likely that this particular ticketing method isn’t actually used.
Don’t risk the stable programme you have with any existing supplier for the promise of big savings based on a single fare event that is easily manipulated. A one-off exercise is no substitute for getting under the skin of a business. Go and sit with their teams, see examples and understand fully how the examples you are quoted truly came to fruition.
Alternatively, you could ask the consulting firm to agree to a risk-reward clause which will underwrite the fares exercise they have recommended with a rebate on their fees for non-performance. Or you could withhold their fees or bonus until the savings have been achieved, not a popular option but it will certainly sharpen up the whole process.
This article was first published on Business Travel iQ.