Global Travel Programmes – Delivering?

It has been quite a few years now since the advent of globalisation, or should I say attempted globalisation, became the trend. TMCs amalgamated, acquired and re-launched just so they could offer a solution that crossed all geographical boundaries.
Maybe now is the time to asses whether the global travel programme strategy delivered what it should have and if all the stakeholders got what they wanted or perhaps, in some cases, feared. It is a huge subject which won’t be fully covered by my few paragraphs but I really do think it worth some scrutiny and debate as many companies are still considering taking this route.

Was it worth telling so many overseas offices to leave their existing suppliers and TMCs for the much expected global good of the company? Did those companies really gain global benefits and what price did it cost in terms of disruption, relationships and country budgets? Frankly, was it worth the hassle and, if so, can that worth be truly quantified to everyone’s satisfaction. Is there a case for scrapping the concept or is the dream of global control, buying power and service worth continuing with? Here are my initial observations both for and against.

I would argue that from a straightforward procurement perspective the case for globalisation is very weak. This is simply because, like many corporations almost all airline suppliers do not operate the same way and are almost quaintly traditional in their thinking. If you squeeze airlines they will admit that each country has their own cost centre and even head offices have to ‘sell’ a global deal to them. In almost all cases individual global locations can veto deals on the basis that it will create low fare precedents for insufficient regional benefits. Why should my country give a silly deal that will hurt my pricing strategy and bottom line even if it does benefit offices in another continent? This will only be solved by cross subsidisation or immoveable directives.

Interestingly enough TMCs have responded to the challenge much better and have found differing internal ways to solve the problem. They too have a different range of challenges particularly in the areas of common fees, fares, services and product ranges. Different markets have varying capabilities of GDS, M.I, market sophistication and standards and to expect the same services to be available in London as in Laos is simply unlikely and possibly unwelcome.

From a corporate perspective I think there is the same age-old issue between buying a commodity and a diverse service. This one really has to get cracked and I can count those that have succeeded on one hand, with a finger or two to spare. Everyone needs to agree the expected benefits, communicate them and benchmark results. Easier said than done as corporate head offices spending most time looking at what should be the compelling concept rather than the nitty gritty deliverability and cost both financial and practical.

In summary, if it is all about negotiating power I have severe doubts. If it is about measurement of what everyone is doing then O.K. but it may not be popular. If it is about provision of global support at times of crisis like war or volcanic ash then it is worth its weight in gold. Finally, if it is positioning for a future time when suppliers buy into the programme and global subsidiaries do what they are told (for whatever reason) then go for it now.

p.s. I define a global programme as one which covers a corporation in all their operating countries. This is entirely different to a Strategic programme which only covers two/three of an organisation’s main or driver markets. If you look at most companies you will find 80% plus of their travel comes from these two or three areas. I wonder sometimes why some find a need to spend time on the hugely fragmented 20%.

Strategic deals work well, especially between UISA/Europe and I have seen sizeable gains made by savvy organisations. Most airlines can cope with giving deals where there are good new business prospects at both ends of a route.

Asia's Nervousness

For much of Asia, the last few months have been a bit nerve wrecking. While the dominos have been tumbling in US and Europe, Asians have been sitting nervously. The consensus was that this was the biggest global contagion since the 1929 Depression.

For almost everyone in Asia 30 years and above, we are sitting tight. Though the economic conditions in Asia are still relatively vibrant, at the back of our minds we cannot shake off the memories of 1997-2002 Asian financial implosion. No one dared to come out and say that Asia is different this time around.

Surely any substantive weakness in US and Europe will have its effects on most Asian economies. We have felt the tremors, but are still wary of a potential sledgehammer in the near future. Will it be coming down soon?

At the back of our minds, the balance sheet of most Asian economies have improved significantly since the 97 crisis. Is that sufficiently strong enough to weather the storm? Many Asian countries have the US as a major trading partner, surely that counts for something.

There are a few things which have evolved over the last 5 years. One, China's emergence as an economic power. Two, Asia's intra-trade have also grown substantially. Three, the US weakness is actually impacting less on the broader US economy and larely contained in property and financials.

The third point is very important. Many American companies are still seeing OK fundamentals because of globalisation (outsourcing) that has been taking place over the last 10 years, in particular over the last 5 years which has been at breakneck speed. Globalisation involves an increasing dependence on foreign markets. The outsourcing movement has also move a substantive part of manufacturing operations and processes in emerging countries.

There are many who incorrectly criticise China's stupendous trade surpluses. However, some 60%-70% of all China exports are actually manufactured by foreign companies and joint ventures operating in China back to other markets. They are not primarily China's own real exports that are home grown. China as a growing country have parlayed the buzzing economic activity to building infrastructure, thus its voracious appetite for commodities. China is at a stage where it can still ramp up infrastructure to sustain the economic growth.

Thus the ill effects on the broader American economy is not as bad as it appears. Most emerging markets, though affected, are not that dependent on America funding. Emerging markets' banks are relatively unscathed. While some weakness will be evident, it should not be paralysingly so.

Asians are scared to even dare mention that they are OK as they know how things were just a few years back. While its prudent to be cautious, we need not scare ourselves silly.

p/s photo: Dhini Amirnati Maulana