COVID-19 has highlighted the problem with transaction fees. The pandemic has also made clear that there’s a better system — both for businesses and travel management companies.
Businesses of all sizes employ travel management companies (TMCs), like JTB Business Travel, to help book trips and otherwise manage travel programs. These services aren’t free of course, and TMCs have traditionally used transaction fees to charge their customers.
While transaction fees have been the industry standard for years now, they are not the future of business travel. These fees come with a host of issues both for businesses and the TMCs with whom they work. Thankfully, there’s a different way to approach things that’s far more beneficial to both parties than traditional transaction-based pricing.
Transaction Fees: An Outdated Concept
At the end of the 20th century, transaction fees slowly replaced supplier commissions as the preferred pricing model for TMCs. TMCs liked these fees because they allowed for a strong revenue stream during times of high-volume travel and the ability to charge a fixed rate during times of low-volume travel.
Of course, businesses began channeling somewhere between 3–5% of their overall travel spend to transaction fees. These businesses would strive to avoid these fees in any way possible, and individual Travelers would do the same thing — avoid using TMC services so that they could also avoid fees.
Needless to say, this did not create strong relationships between businesses and the TMCs serving them.
Not only did transaction fees become a significant expense, but transaction fee avoidance meant that many Travelers would book out of policy — making it more difficult for businesses to track and manage their travel spend.
And then, in early 2020, COVID-19 arrived.
The pandemic only highlighted the flaws in a transaction-fee pricing model. TMCs experienced high demand for services as Business Travelers adjusted travel itineraries and cancelled trips altogether. But, because the pandemic-related demand focused on existing trips rather than new bookings, TMCs were doing more work while generating very little revenue.
Creating a Professional Services Relationship
Transaction fees leave businesses viewing TMCs as the bad guys, and they leave TMCs without revenue during certain crisis situations — like a pandemic.
But there’s a better way to do things — a way that’s better for both parties.
Forward-thinking companies like JTB Business Travel have moved to a fixed-fee pricing model that creates more of a professional services relationship. No longer are cost, revenue and value, driven by transactions and touchpoints. Rather, TMCs become trusted advisors who can help at any point in the travel process — before, during and after a trip. Otsuka America Pharmaceutical, a JTB Business Travel client, is just one of many companies discovering and benefiting from this new approach.
“That structure alone has helped us navigate [the pandemic] a lot better,” said Otsuka’s Danielle Amoroso in a recent Business Travel News article. “It also allows JTB to be able to keep our original staffing in place, so as soon as we were ready to bring the hotel pilot onboard, JTB had the staff ready to go.”
JTB Business Travel’s shift away from transaction fees started well before the pandemic arrived, and it’s proven a success for both the travel management company and the businesses it serves. By the end of 2020, JTB Business Travel expects to have moved all of its clients away from transaction fees.
The Benefits of Eliminating Transaction Fees
What are the benefits of eliminating transaction fees? Doing away with these types of fees means the following results:
- Savings: Rather than dedicating 3–5% of overall spend to transaction fees, businesses pay a predictable amount for high-quality service from a TMC before, during and after trips.
- Compliance: Employees are more likely to book and operate within travel policies when there are no transaction fees to worry about.
- Data: Because employees are more likely to comply with travel policies, businesses have richer and more reliable data to use in tracking travel performance.
Moving away from transaction fees unlocks these benefits and more for companies that often ask team members to travel. Save money, better track travel performance, and discover a higher level of service by choosing a fixed-fee pricing structure.
Experience Zero Transaction Fees With JTB Business Travel
JTB Business Travel allows its customers to Experience Zero, a more progressive approach to business travel that means a happier, more productive relationship.
Offering comprehensive business travel services, JTB Business Travel can assist clients and their Travelers before, during and after trips. Behind every recommendation and service provided is a common-sense approach to business travel.