Cover Story: Marine & Offshore Travel Debate

Six crew travel representatives give SMI their views on the latest developments and issues facing the Marine & Offshore travel market. With questions from SMI Editorial Director Sean Moloney, participants included: John Harding, Managing Director, V.Travel; Nikos Gazelidis, Head of Shipping Sales and Managing Director, Greece & Cyprus, ATPI Group; Brian Potter, Managing Director, Clyde Travel Management; Jason Barreto, Managing Director,
G Travel UK;
Dave Thompson, Managing Director, Marine Travel; Tim Davey, President, ISS GMT.

Sean Moloney
The industry practice of getting crew travel companies to enter into what can only be described as Dutch auctions when it comes to quoting for fares, is seen by many in the travel industry as being highly detrimental to shipping companies in the long run. How much of a problem is this and to what extent do you think that it impacts on the relationship that is necessary between client and service provider? Or is it not a real problem at all but just a symptom of a very competitive market?

Brian Potter
The problem for agents is it wastes so much time pointlessly. There is, for many clients, a lack of trust with the agent due to the historical way agents made a living which was commonly through hidden mark ups. Most of the time now, agents, and especially those with transparent agreements in place, are working from an agreed fare so the airfare will be, or should be, largely the same with every marine specialist. While there are exceptions for various reasons, having every fare sent to two or more agents is a dreadful waste of resource for the client, agent and supplier airline. The solution lies in the customer trusting the agent with a transparent agreement in place, and spot checking fares/benchmarking periodically.

John Harding
The issue is not symptomatic, either because of the market being ultra-competitive, or because it is standard procedure, globally, across all markets. Rather, it tends to be regional, perhaps even cultural. We’ve experienced this more in the Middle and Far East, as well as Greece and Cyprus, where the practice can be the norm. The aim for the customer here is to ensure the lowest fare is paid for each transaction. The reality is that the luckiest agent is rewarded when they source the best fare at that specific moment but the customer can lose out on the potential saving that a true partnership can provide, through consistent searching for lower fares and ‘down-selling’ at ticket issue. V.Travel differentiates itself through a collaborative approach to the relationship it has with its clients through pro-active travel management. Taking the cheapest quote does not mean receiving the cheapest fare. Savings are negligible and the travel management companies will eventually have to pass on the cost of additional staff to cater for the additional work.

Nikos Gazelidis
In some parts of the world, such as the Nordic environment, it is considered to be a problem but in other parts such as Asia and Greece it is a reality and has been for many years. Is it effective? No it is not. What they do is decide on one supplier at the time of the booking and see who is the cheapest. It is not efficient and it can also create problems for both the supplier and the client. The airlines see that multiple bookings are made for the same person and suddenly one goes ahead and the others are cancelled. Sooner or later – and some airlines have already started to punish both parties – we will start getting penalties for this. It is about educating the client. It is part of our everyday task to change their mindset and in some cases we will succeed and in others we won’t. This auction will never be eliminated – it is a practice that we have to live with.

Jason Barreto
It is more a symptom that something is wrong in the relationship between the parties, and it is driving the cost up for the travel agencies. There is a cost to all the travel agents when quoting the fares even if they are accepted or rejected. It’s a ‘Catch 22’ situation as the travel agents need to show they really want the client’s business but at the same time is aware that they might get it or not. It is also worth noting that when one agent is quoting so are the others hence this might have an impact on the availability for the fare quote that has been requested. Ultimately, the first agent to book and quote the requested routing should effectively have the best fare, leaving the other one, two or even three agents searching for limited availability.

Dave Thompson
This system of double or treble comparisons has been going on for a number of years now. I am not sure it is detrimental to the shipping company – they are looking for the best price – but they are losing loyalty with their travel partners as it takes a lot of work and time by our consultants, which costs money to put together complex itineraries just to be told to cancel them as the customer got it £1 cheaper – that is disheartening for the consultants, but I do not see the practice changing unless all agents decide not to participate in this process.

Tim Davey
It’s highly detrimental. Our relationships should be built on trust and the solution instead is that clients should regularly benchmark to ensure the pricing is fair, but ticket tendering leads to higher pricing all around due to churning and duplicate bookings. If a client is bound by their own internal policies to maintain more than one supplier, not only for travel – we cannot do anything about this other than educate the client that travel should not be treated as a normal commodity. However, we have seen certain clients work with three or more agencies. This can push prices up with everyone blocking space at the same time. There is part of the argument from shipping companies that by doing this it keeps us a lot keener to work harder for the sale but ticket tendering negates the benefit. There is the detrimental aspect also to be considered to the airlines – the more agencies they distribute marine rates to the more the problem continues to grow.

Sean Moloney
How are the fare-buying strategies of the maritime and marine sectors changing as companies strive to save money? Is there a danger that the drive to go for more published rates could, in fact, permanently damage the continued use of the marine fare product? What are the challenges and opportunities here?

John Harding
More and more customers are taking advantage of spot, local market fares and low cost carriers to reduce their travel spend. Some shipping companies have even gone to the lengths of changing crew contracts to reflect this by removing a minimum (40kg) baggage allowance. At V.Travel we have adapted this climate to ensure we are offering the most economical – not necessarily the cheapest – fare for each request. The risk here is that carriers may see such a decline in their marine product, that they consider removing them completely – or at the very least, returning to a scenario where they are only distributed to a few specialist sales agents like V.Travel whose volumes assure its continued value. Such a move would likely marginalise some of the smaller agencies and leave them in a position where they are forced to sell at a ‘less competitive’ rate. Likewise, some customers may see overall costs rise due to a lack of flexibility in arrangements.

Jason Barreto
We see a lot of inter-regional buying of published fares as low cost carriers and legacy carriers offer cheaper fares versus marine prices. On long-haul international flights, we see that marine fares are far more cost-effective with their flexibility, extra baggage allowance and multiple booking classes. I believe airlines need to continue to distribute marine and offshore fares but they should be a lot more proactive to their pricing, offering special promotional marine fares on flights/routes where availability is soft. Airlines have some of the most sophisticated revenue management systems that can forecast booking profiles on flights on days. Therefore, they have the ability to be more dynamic in their pricing structure. From the travel agency viewpoint, we should offer the client a variety of fare options (smart buying) and find the ‘best fit’ for each customer fare request.

Dave Thompson
Customers are already asking for various quotes using various fare types so we usually have to give a marine, published and, where applicable, a no frills carrier quote and explain all the baggage restrictions and penalties. It is becoming very time-consuming putting these together for one quote and this has a huge impact on our service levels and also our costs, as requests can take twice as long to deal with. But, overall, most companies still go for the marine fare product and I don’t see this changing a lot.

Tim Davey
Clients tend to understand the risk/reward of published fares. The flexibility and extra baggage will continue to be an attractive feature. Plus, there is no way to stop clients from purchasing published fares. We see more use of the nett marine product than published fares especially on long haul – primarily as stated for the flexibility when it comes to changes/refunds – and the one-way nature of same.

Nikos Gazelidis
The client obviously is in a very difficult situation as they strive to reduce overheads. Travel is one of the three biggest overheads so they want to cut costs as much as possible. A cheaper published fare or a low cost airline fare on a point to point, short to medium route can always be appealing, as long as they can take a calculated risk due to restrictions. This is short-term thinking, however if they are sure the trip is not going to change then they can take the risk with no implications. In most cases, fully flexible marine fares will continue to be offered by airlines as they will remain to be the preferred fare for the majority of shipping companies who are involved in ocean-going routes.

Brian Potter
The marine product is in danger. There is a definite increase in shipping companies going for the lowest fare (taking into consideration the baggage allowance and extra charges involved) and often using low cost airlines. The fact is the marine fare flexibility to change and refund remains key to many but if the use of marine contracts reduces, airlines will undoubtedly question the benefits to them. Airlines want to make a better return on ancillaries, and I suspect baggage costs for marine travellers will become a target. For agents, I don’t see any additional opportunities by not having a marine product as the fee is likelyto be the same regardless of ticket type, but the danger for ‘marine specialist agents’ is the dilution of business to larger non-marine corporates who don’t need marine contracts to service this type of business.

Sean Moloney
Travel companies are facing significant pressure on margins with service expectations rising against a backdrop of lower returns. What are the implications of this continuing and what can travel providers do to better the situation?

Brian Potter
Travel providers must keep looking at and reviewing what additional benefits they bring and how they charge for them. Supplying the air ticket is almost becoming secondary to the level of technology we provide for reporting, accounting, and duty of care tools. There is no doubt that clients should have everything going through one central point such as a marine specialist agent as everything is captured – vital with terrorism, weather issues, strikes etc. Clients are expecting more and more all the time and the only winners will be that old cliché, ‘those who provide an excellent service’.

John Harding
It’s a problem that is endemic in the travel industry as a whole. Our margins are being squeezed in all markets but especially the Marine & Offshore industry despite the need for a constantly improving delivery of service through investment in resources and technology. The key is to offer value and uniqueness, working with the customer to provide the tangible benefits of a well-established travel management company that has the tools and services already in place. There are still companies who will pay for value, who in the long run benefit from a collaborative approach.

Dave Thompson
Margins for marine agents have certainly dropped over the past few years, as customers are becoming more demanding in the quote process and price. This has to level out at some stage as margins just cannot keep falling without it having an effect on the marine travel industry as a whole. The merger between Griffin and ATPI is a classic example of reduced margins and cost control. I can only see more acquisitions in the coming months as margins continue to fall. What is also hitting the UK market now is payment terms of customers – more and more are insisting on 60 days payment because that is the norm in other marine markets. We all know the travel industry is different and we have no control over payment dates to IATA but larger marine related customers don’t seem bothered about how this affects their travel suppliers.

Jason Barreto
Travel companies must prove their value and service and continually look at internal processes and assist the client with their own in-house processes when it comes to requesting travel. Yes, this does have an impact on the margins and service demands from the client but this challenge will always be there. Travel agencies need to focus more on developing or bringing in systems that will automate, integrate and evaluate the entire buying/selling process. Connecting the travel agency systems with that of clients is a key development area as well as considering data analytics to ascertain client purchasing patterns.

Nikos Gazelidis
We continue to feel the pressure by clients for more demands for lower fees. At the same time we need to survive and maintain our profitability to survive into the long term. There are a few alternatives and there are some solutions. One is to manage to reduce our operating cost by migrating servicing to a lower cost environment, without compromising the service provision. Secondly, we now focus on optimising the crew-change cycle process. ATPI have now embarked on offering a full experience of the crew change process including the port agency services. Not by ourselves, but by aligning ourselves with very reputable port agency networks we are able to offer a one-stop shop including the co-ordination of the process.

Tim Davey
Agencies must continue to stress service versus simply selling a commodity. Profiles, reporting, traveller tracking, 24/7 are all features clients will pay for. Making clients aware of what they are getting for their fees and what they are essentially getting for nothing is something that needs to be promoted.

Sean Moloney
IATA wants to move away from a Global Distribution System in favour of a Neutral Distribution Capability (NDC) system. What are your thoughts?

Brian Potter
This statement is not correct – IATA wants all airlines to use a common way of loading their information (NDC) so it can be made available through systems other than GDS. The NDC development has come a long way and generally agents and GDS are onboard with it – BA in particular has been very open about it and the opportunities it could bring. There is so much more it needs to do, though it is a long way off being something that could do away with GDS. Multi airline trips are the most obvious example where a GDS is realistically the only system that can be used. We can expect to see some movement in GDS agreements in the next year or two with airlines and agents – the model will change and the technology will change, and agents can hopefully be part of the change and continue to demonstrate the worth.

Dave Thompson
I don’t see this happening in the very near future. GDSs are putting in place three contracts to agents for their selling platforms. We’ve seen the LH group solution in operation for a year or so, but have not seen anyone really follow suit. It’s wait and see but in the meantime the GDSs seem to be much more proactive with agents.

John Harding
I don’t think anyone would disagree that the current processes and existing GDSs on offer are in need of an overhaul. There are good reasons these systems have been so reliable for so long. In the last 30 years there has been little change because the systems were fit for purpose and although we have seen a migration in certain markets to online solutions with clever profiling of a specific traveller’s needs, there has been no alternative to the efficiency, reliability and content that the GDS companies have brought to the travel industry and its clients. V.Travel fully supports IATA with its NDC project and awaits, with anticipation, how the model will work to the required level, allowing for a more informed choice of airlines’ products and services, while ensuring there will be no increase in costs to the end customer, through inefficiency and disruption to the supply chain.

Tim Davey
I can’t see IATA successfully competing with the GDS and winning that battle. They will effectively just be creating a new GDS. TMCs with strong e-commerce offerings will benefit more from the NDC as it is a standard means to exchange information between the airline and agency – and will probably give them more options to have direct connects, more content etc and therefore circumventing a surcharge which in turn gives them a better negotiating position with certain airlines. I see the GDS value remaining but being supplemented by the NDC to deliver even more content and simpler front end tools like selling ancillary services.

Nikos Gazelidis
The aim of this NDC is to create a personalised shopping experience in order for the airlines to be able to sell more things – more than the ticket. They wanted to create a profile of every person in a way, based on his profile around his previous habits and preferences, to offer them a more personalised service. This is wishful thinking. Until now, they haven’t really managed that and some third party companies have started to offer it, however, a number of airlines are reluctant to introduce it. On the other hand, the GDS obviously don’t want to lose their role of intermediary distributor and they have started offering extra itemised services, but they have not yet reached NDC’s aim.

Jason Barreto
This is a big question and one that is quite difficult to answer as our involvement with NDC is limited. The GDS are obviously aware of NDC and I believe they are reacting to this and making big technical enhancement to their product line.

Sean Moloney
Finally, has the time come for the marine travel sector to have its own trade association? What are the pros and cons of this happening?

John Harding
V.Travel would be more than happy to support the foundation of a trade association, specific to the Marine & Offshore travel sector.  It has been discussed before and the numerous potential benefits it could bring to our clients can only be positive. The concept requires further investigation with the setting up of a steering committee tasked with setting of criteria for membership, potential of lobbying governments and industry bodies and laying down the foundation of a robust and beneficial trade association for what is a vital sector to the travel industry.

Nikos Gazelidis
It is a great idea and ATPI will support an industry-specific association, as we have more things to gain than just being on our own. Collectively we can share information and address important issues we face every day, namely, airline-related fraud, etc.

Brian Potter
This has been spoken of on and off for many years and never quite happened. We agents do speak and share common problems but not in an official or wider way that could help quicken the process of change. There must be benefits to sharing our experiences but on the cons side is, who pays for the meeting room and travel, who chairs and creates the agenda, minutes and actions? This would have to be voluntary and probably with the limited time and resource most of us have, it will sadly not happen. We, at Clyde, would take part if there were enough relevant issues to discuss and goals in place.

Dave Thompson
Two years ago, we had an off the record discussion about this and everyone round the table said it would be a good idea. I contacted everyone at that meeting and suggested we could get together to discuss it further, but I only had one reply and one vague interest. I believe a united voice in the marine market would be a great benefit to all, as we would be able to put some standards in place and get airlines to have some uniformity in filing of fares and distribution processes. I understand the reluctance of some agents, that by standardising processes would make it easier to let more agents into the market place for little effort – it’s a limited market as it is and too many more agents would shrink the market – but in the long-term, I think it would be good for the industry.

Tim Davey
I believe, yes. Lobbying power with the airlines and IATA would be helpful perhaps rather than a separate association maybe as a sub division of something like the GBTA/GTMC/PTAA etc.

Jason Barreto
I don’t think the marine travel sector is big or wide enough to warrant its own trade association, at least not for this moment.