Letter to the editor: Is your TMC pulling the wool over your eyes?
23 Oct 2018 - by -
Wally Gaynor, Club Travel Corporate md shares his views on the truth behind low TMC fees following a Travel and Meetings Buyer report on September 30.
Travel Management Companies (TMCs) have long been the centre of controversy when it comes to variable rates and service fees charged. It only takes one TMC to find a loophole, override travel policies and hide their fees to tarnish the reputation of all in the industry, and although this practice is mostly ignored, it has recently been brought to light in a GBTA webinar and a recent Travel & Meetings Buyer article.
As an ethical, transparent TMC believing in long-term relationships and win-win solutions, I am happy that this topic, which Asata and the industry at large are aware of, has been highlighted at last. Corporate clients’ procurement divisions are partly to blame because of a fixation on obtaining the lowest agency fees, which usually represent about 5% of the client’s spend, while ignoring the 95% where the real saving can be made, on the airfares, hotels, car hire and other services that are being booked.
So how can a client protect themselves and spot whether an unethical TMC is taking advantage? Firstly, if a TMC wins an account on tender with set pricing and fees that are agreed to, but then charges extra by marking up airfares, it is committing tender fraud, which is illegal.
Apart from this, there are other tell-tale signs too. If a TMC offers a 30-day account rather than a lodged credit card, beware! South Africa is one of the few countries where, if you buy an airline ticket from either a travel agent, be they a traditional TMC, or online agent, the airline is the credit card merchant in the transaction. What this means is that if you purchase a ticket using a credit card, your card statement should show the airline name, along with the cost of the ticket (airfares and taxes) separate from the agent or TMC’s name and their fee, which shows as a different line item. This is significant, because if you see the entire ticket amount, with the TMC’s name, they are swiping your card and paying the merchant fee normally paid by the airline of between 2,5% and 5,5% simply because they are marking up your airfare so much that they can afford to do so. We have seen mark-ups on regional bookings of over R1 500 per ticket.
This practice was started in South Africa by a large travel agency group. Their consultants get a share in huge mark-ups charged and, in the event of a query, the fare is quickly reduced. Should the client then query why the original inflated amount was quoted, it is all put down to a simple mistake or an overzealous, commission-hungry travel consultant, even though it is actually the company’s business model.
Sadly, the practice has been adopted by many other TMCs, in a case of ‘if we can’t beat them, join them’. One of the other large local TMCs has implemented a system to automatically mark up and do exactly the same as its unethical overseas competitors. One of the ways these TMCs are blindsiding their clients is by offering them a 30-day account, ‘free’ airport lounge access and lots of other perks, but one that they may or may not be told about is that a percentage of their inflated travel spend is used to offer the corporate clients employees’ points, which they can use for personal travel, which often leads to those employees protecting and supporting the unethical TMC. They say there is no such thing as a free lunch, but in this case, the corporate client is paying a huge amount for that ‘free’ lunch.
In short, if your TMC is not breaking your charges down and being transparent in terms of exactly what you are being charged for, you have every right to query this, and should! Also understand that ridiculously low fees are exactly what they seem… too good to be true. Corporate clients should insist on paying reasonable TMC service fees and that service should then prove its value by the actual spend savings.