A: Tim Morgans, procurement executive of the Prudential, writes: There is no right or wrong model. The key lies in developing an understanding of an organisation’s travel mix, travel patterns and requirements. This must be complemented by a strong grasp of the corporate travel agent’s costs and the economic principles involved in arriving at a balanced solution.

So much emphasis can be placed on the model that potential savings from negotiations can be overlooked.

A commission-based relationship is the traditional model - sales revenue creates commission generated by airlines and hotels, which in turn supplies a revenue stream that offsets the travel agent’s costs. In past years, the surplus has in most circumstances been returned to the travel buyer.

The key issue with this model is that the organisation has to wait before commission is returned, so there is little scope for budget reductions.

As airlines move away from percentage commission to fixed payments, the travel buyer has to rethink. Many move to a lean travel service where non-value adding services are removed.

A management fee requires the company to pay for the provision of the services on a monthly or quarterly basis. By paying for the service, the travel buyer can pursue net deals that will lead to budget reductions at the start of the financial year.

Under the transaction fee model, a fee is applied each time a transaction passes through the agent. What constitutes a transaction must be well-defined - it could be interpreted as a reservation or the dispatch of a ticket, for example. Application of the fee must be agreed, because two identical airline tickets booked simultaneously by the same traveller can incur two charges, for example.

Within today’s market, the buyer must demonstrate savings while delivering a service perceived as free of charge to ensure continual corporate buy-in. With reducing commission, how can the buyer deliver savings and maintain an adequate commission stream? Some are turning to commission support programmes, under which the company contributes towards the upkeep of the programme.

Extranet page development and improved travel and expense cards are making it more practical to transact with preferred hotels and airlines.