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Travel Management Companies 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 (Global Business Travel Association) webinar and by Now Media’s, Travel and Meetings Buyer.
Wally Gaynor, Club Travel Corporate MD, weighs in on this:
As an ethical transparent TMC believing in long term relationships and win-win solutions, I am happy that this topic, which ASATA (Association of South Africa Travel Agents) and the industry at large is 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 represents 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 which 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 charge extra by marking up airfares, they are 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 a 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 (airfare & 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 R1500 per ticket.
This practice was started in South Africa by a large multinational high street leisure agency which now also services the corporate travel market. Their consultants get a share in the 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 have implemented a system to automatically mark up and do exactly the same as their 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, one which they may or may not be told about, is a percentage of your inflated travel spend, is used to offer the corporate client’s employees points, which they can use for their personal travel, which often leads to those employee’s 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 travel spend savings.