Flight Centre’s corporate business
Flight Centre’s corporate business
We recently put the finishing touches on the second instalment of a three-part analysis of Flight Centre (for paid-up member only, sorry). That review focused on the impressive strides the company has made in corporate travel over the past five years. Although we know the corporate business well enough to commit 3,000 words to the matter, it’s a pretty secretive industry and we could still learn a good deal from further interactions with customers, employees and competitors to FCm.
Looking for volunteers
So we’ve set up this post hoping to attract comment from customers and industry insiders. We’re looking in particular for information on what FCm (or any other corporate business) does well and where it might be able to improve. Is there anything unique about the FCm offering that helps explain its recent growth? Or are you associated with other corporate travel companies that do some things better?
We’d also love to hear from corporate customers. Why do you deal with the particular corporate travel company that you do? Why do you deal with a corporate travel company at all?
Feel free to speak anonymously. But if you are connected to the industry it would help us to know in roughly what capacity you’re involved. Many thanks for any contribution you can make to our understanding of the business.
We’ll get the ball rolling with a comment John L made last month on another Bristlemouth post, but one that’s very relevant here:
‘A major part of the FLT business is FCm, which I understand is 40% of the FLT revenue. FCm deal in corporate travel management, and are one of only 3-4 global players. Their competitors in this market (global corporate travel management) are Carlson Wagonlit (CWT), American Express (AMEX), Hogg Robinson (HRG), and to a less extent BCD. A number of players will claim to be global travel management companies (TMC’s) but CWT, AMEX, FCm, HRG really have global wrapped up.
‘Corporate Travel Management for multinational organisations is big business (eg BHP Billiton spend about $200M+ PA, the 4 banks each spend about $70M PA, US based multinationals will spend upwards of $1B on business travel annually). Most, but not all, major corporations have professional internal ‘travel managers’ who manage the relationships and make the deals with TMCs, airlines, hotels etc. The TMC then transacts the booking for the individual travellers. Travel is one of the major spend areas in a business that lends itself specifically to global management.
‘The TMC’s share of all this spend is about 4-5% (the rest is for air, hotels etc, etc).
‘I have worked in the corporate travel management area, working with a number of Australian multinationals at establishing their travel programs, for almost 20 years, so I have a good understanding of the market. FCm is competing on a global basis with some big hitters and although they have a way to go with their offering, they are continuing to expand their business.’
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At the beginning of July this year I received a cold call from Flight Centre asking about my company's corporate travel arrangements. After some questions about our activity they asked about our annual spend and when I advised that our spend was below $10k p/a they thanked me for my time. They weren't rude about it, but obviously that was one of their starting point for new business.
My small business spends 80% of our travel budget domestically (incl. NZ) and 20% on long haul travel. We book the local travel in house - it's easy and cheap for us to do this vs. FCM booking fee, but internationally, FCM can often get better pricing, particularly on multi leg long haul where they can blend airlines and schedules for outstanding results. We then book any low cost short hauls offshore ourselves and we book our own hotels. We find the cost saving in this strategy is worthwhile
Hi, I have extensive experience as a customer with various corporate travel groups over the years and many years with FCm (and its previous encarnations). I changed jobs about 12 mths ago to travel less. For about the previous 20 years I traveled globally about once or twice a month.
From a corporate traveler's stand point why use FCm;
1/ years ago I had a PA to do all my travel but those days are long gone. So complicated and changing (also during a trip) travel can be difficult and time consuming to manage (very time consuming) with flights, hotels, cars, conventions, etc. To give this to FCm is cost effective and easy. However the key is to have someone managing it who is well trained and well connected. Its relativley easy when all goes well but when the wheels fall of you need top notch support. FCm, at least in the past, have mostly competant staff with good training.
2/ FCm seem willing to take on the whole package of suuport and not just cherry pick. I spent (on campany expenses, not personal) about $80k pa just on flights so I can see why they need a customer with a certain volume to make it worth thier while. It would be impossible to provide good service for a spend of $20k pa or less I guess.
3/ for more or less fixed uncomplicated trips I would often book my own hotels as FCm would always get a room in a good hotel but the prices on accomodation was not so good via FCm. But if the trip could change last minute and during always best to use them to get the flexability, access, minimal cancel fees etc. I guess thier buying power dictated the hotels to behave on stupid add on charges.
3/ a few times I found myself in 'challenging' situations in difficult countries. Stolen passport, stolen lugguage, corrupt officials etc, the FCm person looking after my account achieved some amazing things over the years to save my bacon and get me on the road again.
4/ the company I worked for is a big multinational with strick travel policy but FCm know where thier bread is buttered and would stick to the policy as directed but would help me personally get the best out the system in terms of loyalty programs, upgrades, etc. This did not breach policy but helped me. It is no priverledge or perk travelling so much for your job, it hurts physically when you get older, every second night on a plane for 12 hours plus, go to work in chalenging situations off the plane no sleep till the long work day is done (can I hear violin strings!)
Let me know if you want to know more. I own FCM stock since the last 10 - 12 years.
Peter
Your part 2 article on Flight Centre corporate division was excellent – congratulations on a well researched and presented piece.
After reading your invitation for contribution from customers, corporate clients etc, could not help myself. I am the John L who contributed the previous post which you re-posted for this blog.
As mentioned last time, I have worked as a travel manager with a number of multinations including BHP Billiton. I recently completed a long term contract assignment with a major Australian bank implementing their global travel program.
What does a travel manager do within a large corporation? Travel (T&E – travel and entertainment) spend within most large corporations is normally the 2nd or 3rd largest discretionary spend. Since the 1980’s US & European multinationals have been directly managing their travel spend and in Australia and Asia we started to see the light in the early 90’s and many corporation started to manage their travel spend in a serious way. Surprisingly there are still many large corporations who have no idea and spend many millions on travel without controls or policy. Medium sized corporations are now also getting on board and looking to manage their travel spend but there is still a lot of naivety about the complexities of business travel out there.
A corporate travel manager’s role is primarily to manage the relationship with all the various suppliers, TMC, airlines, hotels, car rental, corporate card and technology suppliers (expense management, booking tool suppliers). Much of the work in any program is establishment of the deals with the various suppliers normally through tender selection, negotiating attractive contracts and ensuring the corporate traveler within the corporation has access to the best technology to book and the best services for their actual travel. Airlines will represent about 60% of the total spend of any program, hotels 20-30%, car rental about 3-10%. The TMC cost is normally less than 5% of the total travel spend, but their costs often receives a disproportionate amount of attention. Obviously airlines & hotels, and to a lesser degree car rental companies, will be most obliging when a company is willing to negotiate direct and commit a good proportion of their travel to a particular carrier or hotel. This is where the travel manager is most effective in establishing and managing these deals and directing the TMC where to book, i.e. with preferred suppliers.
The TMC (e.g. FMc) is not just a booker, even when the company has a good preferred supplier program. The TMC provides other important roles in reporting and providing valuable MIS to the corporation to allow the internal travel manager to manage the program, report on spend and activity for business and budgetary management purposes, provide data for the ongoing review and re-negotiation of the various travel deals. Also of vital importance in today’s environment is the traveler whereabouts reporting. With duty of care requirements a corporation must know where their employees have been booked to travel and where they are staying. For example a company may have a staff member staying at the Marriott in Jakarta, a bomb goes off on a Sunday morning, the travel and hotel was booked over the internet so there is no record of the journey – sure the boss and the PA know he is in Jakarta, but they don’t get to hear about the bombing until the next day, plus not sure where he is staying. Traveler whereabouts reporting now provided by good TMC’s and some 3rd party organizations monitors were travelers are and when any situation or emergency arises the issue is immediately highlighted to the company nominated representative (24/7), normally within 15-30 minutes.
The corporate cowboys who book outside the nominated TMC and policy not only cost the company money but put themselves and the corporation at risk. The normal motivation for going outside company policy or preferred supplier is to maximse personal reward points (frequest flyer, hotel loyalty programs etc).
Business travel, while being one of the larger discretionary spend areas, is also the most emotional. As Peter says, business travel is not fun for those who have to do it all the time. Corporation with large travel spend can initiate programs to manage that spend and get best value. Small companies that may spend under say $100,000 per year will take their chances and get the best deals off the internet or through retail outlets. But when you get medium sized companies with travel spend $100K, up to say $5M or $10M there is real opportunity and need to appoint a TMC (like FCm) or one of the many corporate agencies well suited to handle the smaller accounts. I now consult to small, medium and large organizations on business travel. Our company (Epago Group) specialize in helping those companies with small to medium travel spend, who don’t have the internal expertise to manage a travel program, to take advantage of leveraged deals with travel suppliers and to appoint a suitable TMC to match their company requirements.
We spend around $15k annually on travel and use Flight Centre for bookings. We think they do a great job.
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