CTM Touts Certification From Auditing Firm That Spots Fare Markups
The Beat ~ a travel business newsletter 12/01/17
Corporate Travel Management this week became the first travel agency to earn a newly created certification “for transparent airfare pricing” from a startup auditing firm, the Australia-based company announced.
CTM got its FairFare accreditation from Australia-based Airocheck, a joint venture founded this year by travel management consultancy Butler Caroye Asia Pacific and data analytics firm Airline Metrics.
Airocheck’s data analysis software and audit process examine International Air Transport Association Billing and Settlement Plan data alongside TMC booking data and invoice information. By comparing ticketed to billed data, they’re hunting for “hidden” fare markups, which Airocheck co-founder Tony O’Connor characterized as an underexposed practice in corporate travel.
“We are not suggesting that most TMCs systematically apply fare markups, but we think that the practice is common enough for an accreditation program to be of great value to buyers and of value to the TMCs that are able to differentiate themselves with the accreditation,” he said.
If Airocheck’s audit concludes that at least 92 percent of an agency’s bookings are not marked up, its FairFare certification—along with a seal of approval for the TMC to display—demonstrates the agency has been audited by an independent third party and does not “systematically” apply markups.
Also a consultant with Butler Caroye Asia Pacific, O’Connor contends there is little transparency on fare markups in the TMC sphere. Especially in the corporate travel market, marking up airfares on top of TMC service fees “runs counter to clients’ expectations of good practice in their interests,” Airocheck stated in promotional materials.
“In practically every TMC tender, I see some really low-line financial offers,” O’Connor said. “They must be below cost.” That means these agencies bid with a low transaction fee but make their money in markups.
“Some TMCs here, especially the globals, get upset by the fact that competitors come in with super low fees, often win the business and they’re subsidizing it with hidden markups,” O’Connor said.
Markups applied to economy fares could be hundreds of dollars. They could go many multiples above that for premium fares, adding up to 30 percent to the cost of a ticket, said O’Connor.
CTM is the first to announce its own certification from Airocheck, but the audit firm said a half dozen other TMCs are engaged with them. CTM’s own certification applies only to the Australian point of sale, but Airocheck certification is available in others, too, including the U.S.
Marking up is not illegal in Australia (or the U.S. for that matter). In fact, it’s pretty common in the retail travel agency sector.
As a consultant focused on the Australian corporate market, O’Connor has urged his clients to include anti-markup provisions in contracts with TMCs. Even so, it is not addressed in most agreements he has seen, especially those penned by TMCs. Some companies “don’t even have a contact with the TMC, especially in the small market.” This provides even fewer protections.
O’Connor declined to name agencies that play heavily in the markup game.
What About The U.S.?
It’s unclear to what extent markups play a role in the U.S. corporate market.
Markups could be precluded in corporate contracts or, separately, individual airlines could prohibit ARC-accredited agents from marking up. Still, industry lawyer Mark Pestronk said of the U.S. market: “There is absolutely no legal or regulatory guidance about either marking up or discounting. Both are perfectly legal.”
The Airocheck Process
A certification is only as good as the process underpinning it.
O’Connor insists Airocheck’s is a rigorous and thorough investigation into an agency’s faring and billing practices.
For its audit, Airocheck asks the TMC, which incurs the cost of the audit, to authorize IATA BSP data for specific IATA numbers in relevant markets. It also is capable of handling ARC data for U.S. transactions, O’Connor said.
Airocheck also requests a significant sample size of client invoices and “all raw booking data for the last four months in Excel” from the TMC, according to a presentation for TMCs. These include ticket numbers, booking dates, travel dates, origins and destinations, booking locations, taxes, fare breakdowns and so on. Personally identifiable information is not necessary, O’Connor said.
Then, it’s off for review, making use of Airline Metrics’ “proprietary” software and a couple of Certified Public Accountants.
Each FairFare accreditation is valid for 12 months. TMCs get a certification seal to post on their site and a certificate disclosing the IATA numbers audited, markets covered and certification date.
Airocheck charges TMCs a fee regardless of the outcome. “You cannot buy accreditation,” O’Connor insisted. “You have to pass.” He did not disclose pricing.
~ Jay Boehmer