Price only part of agency groups' negotiations with suppliers

By Kate Rice

Preferred-supplier agreements, many of which are being negotiated right now, have over the years gradually become more nuanced when it comes to the types of value being bartered.

To be sure, the quest for growth is a given, and production numbers are still important: "No one says, 'Yeah, I'll be happy with less,'" observed Alex Sharpe, president and CEO of Signature Travel Group.

And at Ensemble Travel Group, Co-president Libbie Rice, said, "Typically, we are incented to hit certain targets."

But neither is today's negotiating merely about dollars and cents.

"It's not a money grab," Sharpe said. "It's a partnership. It's a balancing act between wanting to perform for your partner and really trying to create an opportunity for success with our members."

Mark Benson,vice president of product development and distribution for FCUSA, which includes Liberty Travel and Gogo Worldwide Vacations, agreed that "it isn't just about financials." Instead, he said, it's about creating a win for the supplier, the agency group and the end consumer.

Performance is a key factor and always a part of the discussions. Suppliers and agency groups negotiate back-end overrides for hitting certain targets and up-front commissions.

Pricing is also key. Suppliers want to increase their yields, and in the end, they determine pricing.

But Rice said that in negotiations, agency groups have valuable intelligence to barter with suppliers. Consortia, for example, can benchmark supplier sales against a broader market and provide a reality check on the sustainability of any price increases a supplier might hope to make.

Negotiations also cover marketing dollars, since it takes marketing to drive sales.

But negotiations also cover intangibles. Benson said it's about delivering an improved customer experience at no extra cost — what Claire Bennett, executive vice president of travel for American Express, termed "the wow factor."

"A lot of supplier discussions are not about price," Bennett said, adding that some negotiating points revolve around ways a supplier can provide help when something goes wrong.

Increasingly, a key negotiating point is ways to provide customers with that "special thing" they're looking for, she said. A classic example of this is American Express Fine Hotels and Resorts, which come packed with additional benefits for American Express customers.

Benson said that over the last four years, he's seen a growing emphasis on intangibles that make the travel experience special or even unique. That trend has helped support Gogo Vacations' My Time, a concierge program that crosses brands and service levels; it can include three-, four- or five-star hotels. Whatever the level, the MyTime hotels are the best in their league, Benson said. The program then builds on that by adding elements such as dedicated check-in, spa credits and other amenities that an agent can offer a client.

It's a program that clearly works for suppliers. Participating hotels see their revenue grow, and FCUSA supports it with marketing by both Gogo and Liberty.

The ability to deliver sales also helps agency groups negotiate. FCUSA is a global company that can provide suppliers with multiple points of sale, meaning it has global clout.

But agency groups don't have to be global giants to negotiate effectively.

Sharpe points out that the Signature consortium has just 200 member agencies, but they are all highly effective producers.

"I really try and push the idea that we're the most efficient partnership," he said, because from a perspective of making sales calls and doing marketing, Signature can provide a supplier with a lot of bang for its buck. It also has one of the most sophisticated customer databases in retail travel, including customers' purchase histories and preferences, which can help deliver business for preferred suppliers.

In addition, Signature works with suppliers to differentiate the products its members sell.

"Our hotel suppliers, in particular, have been really creative in crafting unique experiences for our guests as part of our amenity program," Sharpe said.

Signature negotiates with luxury cruise lines for funding per guest, which it then uses to provide clients with a private car and driver. It offers this in many ports, even when the cost exceeds the funding it gets from the cruise line.

"Of course, our partners really appreciate the investment on our part," Sharpe said. "But more importantly, the investment allows our agents to not only capture a new booking but woo new customers."

Follow Kate Rice on Twitter @krtravelweekly. 

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