The TMC Subscription Model – A Business Model for a New Age?

Advantage Travel Partnership Webinar - The Subscription Model - The TMC Business Model for a new Age

On September 22nd 2020, the Advantage Travel Partnership hosted a webinar in partnership with MIDOCO GmbH on the subject of the subscription model for TMCs. Regardless of the pandemic, the TMC pricing structures have been in discussion for some time. The core concept of the subscription model is to allow customers to buy into the entire TMCs value proposition . An ITM survey shows that 60 % of travel buyers are open to review their pricing structures.¹

View the session recording here:

Moderator and Panellists

Moderator

Steve Dunne, CEO Digital Drums

Panellists

Bex Deadman MD of Blue Cube Travel is one of the first to break new ground installing a subscription model in a TMCs pricing structure.

Matt Griffin CPO of TRAXO that specialises in itinerary intelligence and travel data aggregation to organise and unlock all travel data

David Chappel is Country Director UK at MIDOCO that provides travel Mid-office software with the mission to create a data backbone for travel organisations that want to benefit from multiple content channels and integrate these efficiently into their technological landscapes.

Simon Potter Group Procurement & QHSSE Officer at Inchcape Shipping Services provides market and port intelligence allowing their customers to focus on their core business and make informed decisions.

What is the subscription model?

The evolution from the transaction-based to subscription-based view has been going on for some years. The subscription model allows TMC clients to subscribe to a set of services based for monthly, quarterly, annual fees based on modules or other elements. The value proposition and service of TMCs have changed due to new technological developments, regulatory requirements and other factors that have come about in the evolution of how people consume travel services. Compared to the booking only as it was decades ago, the subscription model pays attention to the broad service portfolio of a TMC. TMCs are doing a lot more than just booking travel.

Key takeaways from the session

• There is a future for the subscription model. It may not be suitable for everybody, but due to the changing travel distribution environment, its crucial to offer alternative models.
• The future pricing structure will most like be a hybrid model of transaction and subscription.
• It's a refreshing change. The subscription model supports to have bookings managed in one environment and reduce fees that arise from booking in third party systems as they are easy to book for the traveller.
• The sales pitch isn't easy at this point as its difficult to convince somebody to pay for something that isn't happening in a way it did pre COVID. Nonetheless, the TMC still has the responsibility for the customer data and related services, whether travelling or not.
• The subscription model supports the 360-degree view and the 100 % tracking of spend on travel in a company. It puts the buyer in the driver's seat.
• The subscription model allows a focus on off-channel bookings as it strengthens the relationship with a focus on true total spend, including all bookings taking place outside the TMCs environment.
• You need a hub to receive and manage all the data from multiple content sources. For the subscription model, it is vital to track all the ways customers consume travel. They need to be collated and go through the finance process. This enables a TMCs to take conclusions to feedback to clients.
• Whether the subscription model works or not depends on the client and the relationship towards the TMC. If you see more than just the booking, the model might work.

Questions during the session

Is a subscription fee not a more significant challenge for cost allocation?

Technological view:

• We give the possibility to look at how a customer is spending within the TMC or other channels. It's not a technological challenge more philosophical.
• The value proposition has become more diversified. Booking, report, feedback, regulatory topics, ….
• The value is in the management of the booking, not in the booking itself.
• Booking today is easy. The goal is to manage travel end to end with all the components of the trip. Customers need the environment to look at the life cycle of a trip. Some TMCs evolve in that direction. Which is good because multi-source content is the reality.
• Not a challenge, but you probably need to measure the business relationship in a new way. It is not more significant than the transaction fee view. It even may clean up unclear aspects, like back-office parts of the business.

TMC view:

• It's challenging, but not a response to the pandemic. If the architecture is built around the one booking source, that makes it an even more significant challenge.
• It took two years to make it work.
• TMCs have become an aggregator of content. It's easy for Travellers to book on their trips. This possibility has been there for twenty years, and travellers use it. TMCs need to embrace that and include it into their service portfolio. Challenges lie in analytics and data because that tells the corporate what's happening. This is crucial to show the value of a subscription model.
• Change needs to happen.
• Blue Cube wants to deliver excellent customer service. It is difficult to justify a subscription model if there isn't a good service. How do you measure good service? Pandemic has shown that companies need TMCs. Their assistance was highly appreciated. The subscription model is a mix of different measurements, depending on what the client needs. BC is smaller, and therefore the service proposition can be more bespoke. The subscription model needs to align with client needs.

Corporate view:

• The subscription fee has removed the challenge from the traveller of fee on individual bookings
• This has a line of positive returns. It raises programme adoption, which increases programme compliance.
• The subcription model improves reporting of total travel spend and therefore buying leverage.
• Moreover, it improves the corporate responsibility of Duty of Care through better data to risk programmes like iSOS
• It differentiates the TMC in the bid process to a significant, winning degree.
• Finally, it causes corporates to rethink the pricing strategy in other areas of its business.

How has the relevance of NDC developed?

Needs to be there for a TMC to be able to offer everything. Price is still going to be there as an argument. NDC idea might help to streamline internal costs which is necessary for the subscription model to work.

Do NDC and other content moving away from GDS support the subscription model more or less?

Multiple contents are the future. Knowing your commercials is crucial to make it work though. It depends on whether your commercials show that moving down that road applies to you. If you have started going down that road, it should be easier to use a subscription model because you offer a broader service portfolio.

Does a subscription model impact the travel policy?

For a corporate, it is more straight forward as it is easier to justify travel cost, which is lower. It changes travel policies because you can make travellers book through the TMC program which has a lower cost related hurdle.

Final statements

Important considerations and benefits of the subscription model?

TMC view:

• The willingness in the corporate world to move forward is important. If you only see the transaction, then you will struggle. Bring in all stakeholders (executives, technology, travellers, finance, …), and the benefit will become visible.

Technological view:

• System capability, internal cost and system efficiency are crucial. Then you will be in good shape to offer the subscription model as part of your pricing structure.
• Be willing to understand travellers needs and to change policies. You need to deliver as much information as you can. Analytics are essential.

Poll

The poll conducted during the webinar showed the 52 % out of 130 attendees would consider introducing the subscription model in theirTMC.

¹ Source: https://www.thebusinesstravelmag.com/index.php/news-pages/articles/itm-unveils-buyer-survey-results