Class 2 - Pre-Qualification of travel agencies

I am very familiar with the practice. This can work when the buyer considers the category to be ‘leverage’ or ‘non critical’ using the ‘Kraljic’ matrix. This would mean that the buyer doesn’t spend too much on travel, and they consider there to be multiple capable suppliers who are happy to ‘fight’ for the business on a transaction by transaction basis.

This can be a low effort way of ensuring competitive pricing so can be successful. However…

On the negative side, it makes it very difficult to build any sophistication into your service (for example safety reporting or linking HR systems to make the booking process efficient). It also assumes that both your TMC category and airline category is ‘Leverage’, ie there are multiple suppliers. If the airline tickets themselves you are sourcing does not have multiple options then one big negative in that it potentially drives your airline and hotel pricing UP.

This is because airlines and hotels deploy complex yield management techniques and algorithms when pricing seats and rooms. If you have (artificially) created the impression that three people are trying to secure seats on a flight when it is in fact just one request (and lets assume there is only one very busy flight a day), you are actually causing the airline to increase the flight price as they think the demand is three times higher than it actually is.

So in conclusion, I would only deploy this tactic when…

1) there are multiple capable TMC suppliers who are happy to only service my business on this basis

2) I don’t require any sophistication such as detailed reporting or bespoke services

3) Im buying tickets with airlines and hotels which are themselves leverage category (ie multiple options)

I hope this helps.