Should you really be negotiating an airline RFP?
4 October 2016
Many travel buyers are preparing to negotiate 12-24 month contracts. But does your organisation need them?
For companies with really complex global programmes, negotiations are well under way. But countless buyers are still trying to decide if they should even attempt putting their flights out to a full airline tender. To help you make the most appropriate choice for your business and its travellers, read our six critical considerations…
1. Spot buying vs route deals
In domestic and regional markets, the growth of low cost carriers has forced bigger airlines to sharpen prices. So do you actually need any route deals? Spot buying could be a perfectly practical option.
Do your travellers attend regular meetings with times that rarely change? They might have very reliable colleagues and customers who don’t cancel or move meetings. If you recognise your business in that scenario, then spot buying restricted fares and long booking horizons could be very fruitful. Your FD will pat you on the back if you have the influence and tools to ensure lowest logical fares are booked. He’ll see resource and cost savings from smart traveller behaviour.
Agencies use their overall buying power to negotiate their own airline deals. The safety net provided by your agency might give you the comfort to walk away from route deals altogether. But spot buying could mean your travellers lose some of the added value benefits associated with route deals.
If the ‘what’s in it for me’ generation opt for personal comfort over your savings targets, lack of lounge access could be enough to keep them going back to the airline brand they know and love. In the case of our own customers, our Traveller First programme can help. Traveller First is a unique programme of added value benefits for business travellers to enhance their travel experience.
If you go with spot buying, weigh up the cost of fares and travel amendments compared with the price of more flexible fares. If your amendments start spiralling, alarms bells should ring out that spot buying isn’t working as it should/could.
2. Current deals and terms
Are deal expiry dates forcing you to renegotiate? If not, put your deals in the context of the regional and global economic environment. If your existing fares and terms are favourable there’s little value in going out to market when airlines may not be willing to play ball. If expiry dates are looming, ask airlines about rolling over the contract, instead of going through full renegotiation.
If your business hasn’t delivered on its promises to suppliers this year, then you should take another look. One of my biggest tips – and probably that of buyers everywhere – is not to over commit during negotiations. As one procurement manager said to me, “over-commitment is the cardinal sin of procurement”. In the context of airline RFPs, it will damage any chance you have of harnessing future supplier relationships which should be built on trust.
3. Travel volume and spend
Has your flight spend increased or decreased? If it’s changed, is it overall or just on specific routes? From the knowledge you have of your business, you should understand whether any changes are just blips or genuine trends. There aren’t any hard and fast rules, but increased spend may be enough to start talking to some airlines, even if you’ve never had enough business to warrant a deal in the past; ‘if you don’t ask, you don’t get’.
4. Geography and network
The more routes you use, the more complex your RFP process can become. Keep things as simple as possible by concentrating on your key routes. Even better, look at your key routes where there are competing airlines. This will focus efforts on routes with material impact and/or real negotiation potential.
Involve your wider company when you’re looking at these main routes. Business leaders and project owners could have knowledge of office closures that could impact those routes in future. An airline programme might not be viable in a few months’ time and that comes back to my tip on not over committing!
Equally, your organisation might be investing in new offices or major projects. That could generate enough spend or bookings to get airlines interested in new or existing routes.
5. Policy and influence
The power to influence people plays a key part in any RFP decision. Your travel policy and how well it’s adhered to is one of your most important tools in making changes. If there are competing airlines on your route(s), can you prove to your existing supplier that you can influence travellers to switch? If you can, you’re on to a winner for contract discussions.
If existing suppliers can’t offer you the best deal to stay and you switch your business onto an alternative supplier, you’d send a very clear message. And, not just to that airline! The wider market place will take notice if you show them you have the muscle to shift market share when it matters.
Working with your business’s key decision makers through the entire RFP process is crucial. Internal support to help you manage change is a critical success factor to any new policy or programme.
6. Resource and knowledge
Understanding the marketplace and RFP processes are important when you’re deciding whether or not to RFP. Some travel buyers I recently spoke with hadn’t considered managing the process after contracts were signed. But it’s just as important as the negotiation itself.
You need to think about what support you need. It’ll be dependent on your team’s level of knowledge and experience, but speaking to your business travel agency should be the first step. They’ll be able to help you gather data and talk to you about sources of specialist help, if you need it.
So, should you RFP or not?
A yes and no comparison table would be helpful here, but it isn’t that simple. We can help get you off the ground, whether you’re new to travel procurement or experienced and in need of an additional specialist help.
Contact your Capita Travel Events representative for more information or view our contact details.
Interested? Let’s have a chat about your company’s travel, meetings and events objectives - from the stuff that keeps you awake at night, to the everyday experiences of your employees! Call us on 0330 390 0340, or submit the details below, with an idea of the times that suit you for a call.