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Alternatives spice up agency negotiating.

Article Excerpt
There is no magic formula that works for every company when negotiating for travel management services, but many travel buyers use short-term, flexible contracts, force management companies to break down packaged pricing and employ a procurement-driven approach to secure the highest level of service for the lowest price. During the past three years, many new ingredients have been added to the recipe for travel management company negotiations, buyers said. The rise of automation and Internet technology has pushed transaction costs down. Online booking has slashed the number of employees needed to arrange air travel. Traditional travel management companies have sought to highlight service and battle the rise of Internet-based agencies. The changes have meant lower prices for buyers, but also time-consuming negotiations as buyers said it becomes more difficult to compare services.

Travel management company negotiations have become extremely complicated in the past few years, and companies now must consider the value of a multitude of online tools and decide whether to use an onsite or a call center located next door or offshore, said Yasuo Sonoda, travel manager for San Francisco-based tech firm Macromedia. Macromedia's travel management company is American Express.

"You can't just ask for an RFP and then compare four or five different agencies and then pick one. You just can't do that anymore. Nobody is going to give you apples-to-apples contracts, unless you're asking 5,000 questions all at the same time--which nobody can," Sonoda said.

Though transaction cost is still a primary factor in deciding on a travel management company, Sonoda said another key requirement is for an agency to quantify and demonstrate its ability to help the company save money.

"Travel management companies need to focus on feeding in as much data as they can and demonstrating how they're helping the travel manager or procurement manager in reducing costs. If the travel agency can't quantify that, then they're not doing their job," he said.

That flexibility and service should not translate into higher pricing, Sonoda said. With airlines reducing corporate discounts,...