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Thursday, 25 March 2010

The 2010 Budget: the impact for TMCs

Today’s newspapers are full of stories entitled “How YOU will be affected”. The annual round-up of how smoking and drinking single mothers, car-driving families with 2.2 children and pensioners will be affected by the Budget is as traditional as the appearance of the battered red briefcase outside 11 Downing Street.

But how will TMCs be affected by Chancellor Darling’s pre-General Election Budget?
For small TMCs, there are some extra benefits. The government is extending its Time to Pay initiative, which allows businesses to spread their tax payments over an agreed timetable.

Businesses will also enjoy a temporary increase in the level of small business rate relief. Small TMCs occupying properties with rateable values up to £6,000 will pay no business rates for one year from October while those benefiting from the rate relief taper (rateable values up to £12,000) will receive significant reductions.

One thing that was widely expected was an increase in the rate of VAT to 20%. Coming just after the return to 17.5% from the reduced rate of 15% on 1 January, perhaps this was unpalatable for the Chancellor when the election is just weeks away.
Travel management companies that have a significant number of clients in the public sector – a sector worth around £5 billion by some accounts – will have taken note of the Budget’s focus on costs.

It said that the Government had identified more than £11 billion that could be saved every year from 2012-13. High up on the list of ways to deliver these savings is the concept of “collaborative procurement”, a phrase scattered liberally throughout the full text of the Budget, made available just after the Chancellor sat down.
This means even greater efforts by Buying Solutions, the executive agency that looks after public sector procurement, in the area of travel. It will soon announce the winners of a vast £3bn tender to look after the travel requirements of everyone from central government down to local authorities.

There were no changes announced on air passenger duty. APD moved to a geographical footing base don the distance to the capital of the country where travelers are heading in November. Next November’s further increases are set to go ahead too. Looking at the small print, the Budget predicts that the unloved tax will raise £2.4 billion for Government coffers in 2010-11, up half a billion pounds on this year. To put that in context, that’s more than is raised by inheritance tax and almost as much as amount by the duty on whiskey and other spirits. Trebles all round!

Monday, 22 March 2010

Hotel bill extras: do you know what's being charged?

An interesting news item has emerged from across the Pond. In the state of Minnesota, a bill that would have prevented state employees from staying in hotels that offered pay-per-view adult films that included degradation or violence has been kicked into touch.

While we are making no judgments here at Conferma on the rights or wrongs of this decision, it raises an interesting point. How do travel managers ensure that what their company’s business travellers charge to their hotel bills is both acceptable and within the corporate policy?

In-room movies are big business – thought to generate several billions of dollars a year – and while many business travellers are probably relating to George Clooney in the business traveller film Up in the Air, many others are watching adult movies.

It’s not just about adult movies either. It could be any additional charge that a traveller puts on their room, be it the cost of using the minibar or doing their monthly laundry using the hotel’s in-house service.

This is where using the Conferma Settlement Plan (CSP) comes into the picture. By ensuring that every hotel payment is reconciled with its related booking, companies can check to see that the actual spend equals what was booked. Deviations from policy can be quickly identified.

As you may have seen last week, the availability of CSP is set to become wider too. We have just announced a partnership to offer travel management companies and hotel booking agencies using travel payment provider AirPlus the ability to do hotel direct billing.

The AirPlus Conferma Hotel Settlement Solution will be available to AirPlus’ UK customers from the end of April.

Wednesday, 17 March 2010

Hotel billback: the HMRC agreement

Hotel billback, where the payment of a business traveller’s bill is handled by a travel management company or hotel booking agency, has been overshadowed by changes to VAT legislation which could have seen corporate buyers facing sharply increased bills from 1 January. That was the date when new European VAT legislation came into force which meant that TMCs and HBAs could have been required to pass on VAT to their corporate clients, which they would subsequently be unable to claim back.

Representatives of the Hotel Booking Agencies Association (HBAA) and the Guild of Travel Management Companies (GTMC) have been lobbying HM Revenue and Customs to find a solution and an agreement was recently reached. The HBAA, for example, worked hard to make sure that whatever solution was reached should not be too onerous on corporate clients.

As a result of the agreement, billback suppliers now have to state explicitly they are working as an agent on behalf of the corporate client. TMCs and HBAs will no longer recover input VAT and charge output VAT and instead will charge a disbursement to the corporate client who will be able to recover the input VAT shown.
The agreement with the Revenue also calls for TMCs and HBAs to “identify on their invoices the hotel guest, their employer and ideally each will carry a unique reference number” (bold type ours).

Here’s where we at Conferma are able to help. Our revolutionary billback product Conferma Settlement Plan assigns a unique number to each billback booking – a virtual corporate card number - until the payment is reconciled.

Changes to tax and VAT legislation are never easy but the outcome has generally been positive. The changes will add some administrative burden to the TMC or HBA’s billback process and this may result in higher fees. However, they are unlikely to be anything like the 17.5% hike that having to pay the VAT would have meant.

Monday, 8 March 2010

The search for good hotel rates

Finding a good deal for a hotel room seems easy. You speak to a travel consultant on the phone and tell them when and where you want to go and seconds later they come back with a selection of properties and prices. Alternatively, you fire up your favourite travel search website, plug in your details and moments later you have a range to choose from.

Yet these two fast processes show little of the enormous amounts of technology that sit behind the consultant and the travel website.

There are hundreds of thousands of places to stay in the world, ranging from tiny bed and breakfasts to vast, modern hotels with thousands of rooms that are part of a global chain.

When you do a search, either using a travel agency or a website, the details of all of those hotels have to be searched in an instant and the rooms they have available and the rates they will charge returned to you to make your choice.

For a hotel chain, that is relatively easy. Each hotel in the chain has a property management system containing the availability and rates connected to one or more of the global distribution systems (GDSs).
For a small, individually owned hotel, things are tougher. They usually have a database showing available rooms while the rates change rarely, because they do not have the technical sophistication to adjust rates dynamically according to demand. Sometimes these databases are connected to the internet via a so-called switch company, enabling people around the world to peer inside that database of availability.
The secret of finding a good hotel rate is having access to the widest range of all these types of hotel. Conferma’s Hotel Booker, for example, has access to 150,000 hotel properties worldwide, covering all sizes and shapes of property.

But how can all of that data be crunched so quickly, to give you a rate within seconds? If the hotel is on a GDS, getting a rate quickly is not a problem. Yet that covers only a small proportion of available hotels and even then there may be problems accessing a hotel chain’s property management system fast enough.
The answer involves some clever technology similar to that used by Google when you search for something on the web. Google does not search the entire internet in real time when you enter a search term. Instead, it relies on a snapshot of the internet it has made itself prior to you doing your search.

In the same way, the hotel rate you are quoted on an internet site is not necessarily what you will end up paying because the rate is a snapshot.

As a result, the rates you see show a fine balance fast search and accuracy. Tools like Conferma’s Hotel Booker, however, go further than taking a single snapshot of rates. Instead, it creates a guide rate that is the average of recent booked rates. No guide rate is allowed to get more than 14 days old and as a result it is amazingly accurate. On average, the guide rate is 97% of the ultimate booked rate. What that means is that there is a much smaller trade-off between accuracy and speed. What you see really is (or very nearly is) what you get.

Saturday, 6 March 2010

How prompt payment can boost your business

If there is one thing that is virtually guaranteed in a recession it is that companies, particularly smaller ones, take longer to pay their bills. When cashflow becomes problematic, because the orders are not flooding in, it is very tempting for companies to start paying their suppliers later. Of course, those suppliers then have their own cashflow problems and this cascades its way throughout the economy.

What happens then is that companies that become known as prompt payers start becoming increasingly attractive to suppliers. Smart companies realise that by signing up to initiatives that promote speedy payment, such as the Better Payment Practice Campaign in the UK, can use it to their advantage.

The travel industry is little different. However, late payment can become an even bigger problem because of the thin margins that many in the industry work on.

This is where many of our products, based around virtual credit cards, can become incredibly useful.
Take Event Trustee, our credit-based, automatic invoice settlement tool. It uses virtual cards to automatically pay pre-agreed event costs at pre-scheduled times and reconciles each item with the same unique number when it is booked, billed or paid for.

It helps event management companies and other agencies organising events improve their cashflow in two ways. Since pre-agreed payments cannot be made until an invoice has been received, hotels invoice you as quickly as possible. This means you can invoice your clients sooner.

At the same time, because the invoice is paid for by a credit company initially, you have longer to settle the eventual bill.

But that’s not all. Since you are paying suppliers, such as hotels, more quickly they may offer you better rates to pass on to your clients. And if there’s something that can help you survive an economic downturn better than anything else, a happy client is it.