Friday, May 20, 2011

Traveling Under Contract

In the travel industry service providers have this mysterious arm of employees called sales managers. Or Account Executives. Or something along those lines to give the grueling and cruel position some sense of power and respectability. Like the ubiquitous "Fuller Brush Man" they beat the bushes of corporate America hustling for the attentions and business of other corporations in what can be summed up as some of the most cut throat day trading left on the planet.

The corporate volume agreement is a key tool used to guarantee a revenue stream from a major customer in to the service provider, be it airline, rental car company or hotel. Travel providers operating on microscopic profit margins need every penny they can get. Corporations with far flung operations want as much of a break in travel costs as they can get. Now comes the fun...can they get a better discount from United or America, from Sheraton or Hyatt, from Avis or Hertz? McDonald's?

Most restaurants do not generally have a sales force beyond their marketing division which deals in print advertising and television commercials. After that their reputation, location and whether or not they accept the corporate card of choice are usually all they need to get people off the streets and in to their dining rooms. Hotels have rooms to fill and they measure their performance in terms such as "room/nights," or how many nights each room of a given property can generate. A one-night stay? Meh. Too much work. A group of 30 for ten nights each? Now you're talking! More of those, please, and how about some help with all those meeting rooms?

Rental car companies have huge fleets of cars in all sizes to keep on the roads and the longer the rentals the better for them. They have to move the car, often as a loss-leader to get to the margin boosting add-ons like collision damage waivers, GPS and category upgrades.

Same with airlines only amplified to an unimaginable degree. They have thousands of empty seats to fill, any one of which might be available for sale from one to six times a day depending on how often that particular aircraft takes off and lands within a 24 hour window. Add in other variables like market competition, day of the week and time of the year and that seat can have literally dozens of possible fares attached to it. Do you go after Grandma or General Electric?

Buy more, get more, basically, and other "toys" can come with those contracts, too, like free nights and cars, upgraded cars, rooms and seats in First Class. Airlines will even "match" membership status across frequent flyer programs. Other incentives can include memberships to the airline club lounges or even their particular brand of "Special Services" which amounts to individualized airport concierge service at the largest (and most notorious) hubs and key markets.

Today everybody pretends that their agreement is exclusive and that penalties will be invoked if the corporation double-dips with other service retailers in key markets. Doesn't happen. The corporate account often has multiple contracts designed for different things that covers the spread of their travel and lets them hit their travel targets across the board. No airline in their right mind will kill the goose so they can have all of the golden eggs. In markets like Chicago, New York, Boston and Los Angeles, it's sign here, then here, handshake, here's your bag of treats and thanks for buying exclusively with us!

Wink wink, nudge nudge.

Gotta go.

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