For several decades, Travel Management Companies (TMCs) have built their business model on two income streams – the corporate customer and suppliers. Why? In the early days, the TMC was a distribution channel for the travel supply chain and was paid a commission. When commission reduced TMCs turned to a new business model to survive. Two key fee models became the preferred source of revenue – a Management Fee and Transaction Fee. Essentially, both models are still based largely on the cost of the booking service.
The Travel Industry’s Shift Towards Subscription Models
As client needs evolved to require more comprehensive support, including management information, traveller tracking, 24-hour support and duty of care, the travel agent evolved into a Travel Management Company to offer additional services and solutions to add value to their customers’ travel programme. As complexity has been added to the travel programme, fees have become more complex over the years.
In a world where subscription models have infiltrated everything from streaming services to exclusive memberships, one industry has remained relatively untouched – travel. That is until 2020 when Rennies BCD Travel originally introduced a travel subscriptions fee.
Travel tends to have its ebbs and flows, making it challenging to forecast expenses accurately, and subscription models help to navigate constant change by offering upfront benefits. The subscription fee model simplifies TMC pricing. Reece Oakes, CEO of Rennies BCD Travel South Africa, aptly states, “Subscription models enable consumers to pay a set price for a pre-determined number of flights/ transactions. This fee type is popular due to the predictability of a fixed price.”
Travel subscription services are still finding their footing, and it remains to be seen how well they will be embraced. Rennies BCD Travel, with its history of innovation and adaptability, is well-positioned to navigate this evolving landscape.
Rennies BCD Travel’s Fee Models
Ultimately, one size does not fit all. Some customers want a simple transactional service, while others require a comprehensive suite of services. So, the future must be about creating flexible models with a simple structure for the customer to understand, with costs laid out clearly.
Transaction Fees
This is essentially a pay-as-you-go model. This would suit a medium-sized or enterprise customer who wants to pay only for those services that matter to them and build their bespoke service.
Corporations favour transaction fees as they are allocated directly to budget centres and largely avoid the need for central costs. Depending on volumes, reconciliation can be time-consuming. In instances where individual travellers must allocate charges through an expense tool, it may get tricky to know which charges relate to which trip.
Management Fees
A management fee charges for the cost to service a customer with an element of profit built on top. This is typically a model for enterprise customers with dedicated teams working on their business. This is usually charged quarterly and requires hands-on management to ensure the fee remains equitable to both parties.
Subscription fees
A subscription model can be likened to a cell phone contract, where you pay a fixed cost for your chosen bundle of services. This would suit small to medium-sized customers or ones that don’t currently have a TMC partner. Ensure that what is and is not included in the package is clearly set out.
Ultimately, Rennies BCD Travel offers a range of fee models that can be tailored to meet the specific needs of each client. This flexibility allows clients to choose between pay-per-transaction or bundled transactions, with the latter being particularly popular. For in-house travel managers seeking simplicity, a set management fee is the preferred choice.
Rennies BCD Travel consistently delivers innovative solutions that elevate the client’s travel experience. Their commitment to innovation is evident in their distinction as the first travel management company in South Africa to implement a service fee model and incorporate online booking tools. This has solidified Rennies’ standing as both a trailblazer in travel solutions and a reliable travel partner amidst change, demonstrating an unwavering commitment to progress and customer satisfaction within the travel industry.
