Session Introduction

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Session Introduction

• 50 of corporate business about 95 cash
  business still commission-based
• The industry in Nigeria is making baby steps
  towards commission capping
• Several dynamics expected when this happens for
  airlines, for corporates, for the TMCs and all
  other players in the industry
• Session will review this dynamic in some details
  using a corporate as example

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Session Objective

• Review the case for change moving from
  commission to handling-fee type remuneration
• Review the process employed by a corporate in
  implementing this change
• What are the challenges, risk involved in making
  this change?
• WINF statements whats in it for the various
  players benefits of this change
• Strategic next steps for the industry in Nigeria
  wrt to agency remunerations

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Case for Change (1)

• For the Travel Agency
• A need to focus on the customer
• Need to do more than just issue tickets
• Developing professionalism in other aspects of
  Travel
• Travel management services as against
  traditional travel agency service
• Airline as a critical provider to the agency but
  not customers

• For the Airlines
• Need to focus also on real customers
• Need for better breakdown of the airline fare
  structure
• Need to focus on core business
• Re-arrange the cash flow structure in the
  industry, starting with airlines

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Case for Change (2)

• For the Corporates
• Need to have the travel management coy more
  dedicated to the corporates
• Need to re-arrange the cash flow structure he
  who pays the piper dictates the tune
• Need to enjoy travel management services as
  against travel agency services
• Need to understand the airline fare structure
  better
• Need to understand the travel cost structure
  better to help in cost leadership initiatives.
• Need to have fierce competition amongst TMCs to
  help the industry

• For the cash/private customer
• Need to get more out of the travel agency
  anxillary service
• Need for reduced fares save money
• Need to understand the cost structure
• Need to have more competition amongst TMCs to
  make the service offering better

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Process to implement change (1)
Key Requirement 1) Travel Policy to enable TMC
mandate traffic 2) Support from Snr Leadership on
the Need for change

• 1) Pre-RFP (Request for Quote) process
• Define scope very clearly what do you want out
  of the Travel management company beyond just
  remuneration change
• Once clear on scope, have a stakeholder review
  workshop allow the key stakeholders critique
  the draft scope
• Think about a relationship with airlines if you
  dont already have one direct contract with TMCs
  may mean direct contract with the airlines
• How you manage performance of the TMCs insert
  Penalty Incentive clauses, Bi-yearly fare
  audits, Bi-yearly productivity clauses in the
  contract (needs to be agreed in the RFP stage)
• Data becomes a key driver to manage the business
  how do you get data and what kind of data would
  you want from the TMC
• Hold a pre-RFP meeting with selected bidders
• Define your evaluation criteria
  pre-qualification selection criteria, technical
  selection criteria and commercial selection
  criteria (have a clear benchmark handling fee

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Process to implement change (2)
Key Requirement 1) Travel Policy to enable TMC
mandate traffic 2) Support from Snr Leadership on
the Need for change

• 2) RFP (Request for Quote) process
• Issue out RFP to a wide or limited audience
  depending
• on your broad strategy and what you want out
  of the TMC
• Point bidders to key areas like Penalty and
  incentive clauses, fare audits and productivity
  audits
• Allow enough time to receive bids (pre-qual,
  technical and commercial) or where possible use
  online bidding OLB usually leads to better
  pricing
• Where possible receive all sealed bids at once
  I.e now open pre-qual for all, open technical
  bids for those that pass pre-qual open
  commercial bids for those that pass technical
• Communicate feedback to bidders on each stage as
  quickly as possible

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Process to implement change (3)
Key Requirement 1) Travel Policy to enable TMC
mandate traffic 2) Support from Snr Leadership on
the Need for change

• 3) Award and Contract mobilization
• Plan at least 4-6 weeks to implement from date of
  letter
• of intent out to successful TMC
• Ensure new TMC signs Information Confidentiality
  statements as quickly as possible before contract
  start-up date
• Ensure you have the right prices Acid test
  3-5 of average ticket price (Normal) Best of
  best 1-3 of average ticket price
• Review process change with all Travel Officers
  before start-up to ensure understanding
• Have weekly performance reviews (travel officers,
  airlines TMC) and reduce frequency as issues
  thin out after the first month
• Communicate, communicate why the change, what
  customers will see and the WINF the customer

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Challenges Risks involved

• Readiness of the market place TMC Airlines
• Resolve of the corporate to outsource Travel
  usually some resistance at middle-level
  leadership
• Availability of Global TMCs in the market place
• Asking TMCs to do more for less
• Available infrastructure to support the industry
  cost will NOT go down if this does not improve
• Government support (as per favourable policy)
  available for the travel industry
• Involvement of the hotels hospitality in the
  process (displaying inventory in GDS) to deliver
  end-to-end service
• Resolve by all stakeholders (Government, TMCs,
  Corporates, Airlines, Hotels) to take costs out
  of the system and deliver better service to
  travellers

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WINF statements Benefits of Change (1)

• For the Corporates
• TMC more dedicated to the corporates perhaps
  due payment flow structure
• Corporates with handling fee remuneration enjoy
  more broader service as against commission-based
  payment
• The airline fare structure is more understandable
  with the net-net fare structure less confusion
• Direct savings of up to F125.00 for every ticket
  issued (225 vs 100) for a 2,500 averate ticket
  price scenaria
• Better cost leadership for the corporates
  involved
• Research shows better airline deal management
  when remuneration is flat fee structure per
  ticket

• For the cash/private customer
• More dedicated service including better value
• Reduced price total ticket price down typically
  by 100.00
• Airline fare structure clearer
• More creative service offering from the travel
  management coy to attract the business

Commission-Capping A Corporate Buyers
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WINF statements Benefits of Change (1)

• For the Corporates
• TMC more dedicated to the corporates perhaps
  due payment flow structure
• Corporates with handling fee remuneration enjoy
  more broader service as against commission-based
  payment
• The airline fare structure is more understandable
  with the net-net fare structure less confusion
• Direct savings of up to F125.00 for every ticket
  issued (225 vs 100) for a 2,500 averate ticket
  price scenaria
• Better cost leadership for the corporates
  involved
• Research shows better airline deal management
  when remuneration is flat fee structure per
  ticket

• For the cash/private customer
• More dedicated service including better value
• Reduced price total ticket price down typically
  by 100.00
• Airline fare structure clearer
• More creative service offering from the travel
  management coy to attract the business

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WINF statements Benefits of Change (2)

• For the TMC
• Better understanding of clients business
  particularly for corporates
• Better creativity TMCs will have to create a
  uniqueness of service offering to stay in
  business
• More professionalism in the TMC world most of
  the mushroom agency promoted by airline staff
  will disappear
• More professionalism for TMC staff
• Provision of a service that covers end-to-end
  travel cycle carhotel booking, immigration,
  travel consultancy etc etc
• Less waste in the system
• More opportunities for mergers acquisition by
  the more established TMC

• For the Airlines
• Better focus on core business
• Perhaps more productivity out of desk airline
  staff
• Repeat business that comes from better
  understanding of fare structure by customers
• Reduction in DOS (Debt Outstanding) for
  airlines
• More business for the airlines coming from more
  creativity in the TMC world.

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Strategic next steps for the Industry in Nigeria

• Implementation of the Bank Settlement Plan
  (BSP) as quickly as possible to bring better cash
  flow into the industry
• Government policy to support development of
  Travel Tourism tax incentives for investors
  more participation in the world travel market
  (perhaps Nigerian Travel Market)
• More creativity by Government regulators adopt
  a tourism spot by corporates (plus incentives)
  Better structures to support tourism reduction
  of crimes, solving the energy problem etc
• Airlines TMC to create a lobby group to lead
  change- Project APENA in Europe as an example
• Hotels, to on a mandatory basis, manage inventory
  on the Global Distribution System (GDS)
  end-to-end service
• TMC Airlines to be prepared for the handling
  fee wave it is sure coming!
• Lets set clear bottom line development target
  for the travel industry e.g travel spend to
  increase by 50 come 2010 Fully developed
  tourism spot to increase by 60 come 2010 etc

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In conclusion

• Implementation of commission capping is one of
  many steps to transform the travel industry
  whilst its the start other elements like BSP
  Government involvement etc needs to happen
• The potential in the Travel industry in Nigeria
  is so so big suggestion by experts is turnover
  in the industry could easily reach USD5bln a year
• Involvement by all key players Airlines, TMC,
  Corporates, Hotels Government will deliver huge
  transformation in so short a time
• Overriding commitment has to be to Project
  Nigeria putting money into the industry in
  Nigeria
• The time to start is NOW!

Commission-Capping A Corporate Buyers
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