Tuesday, March 19, 2019

BY PAT CHARLA

The ‌intricacies of establishing an affiliate network are the subject of many trade show workshops and provide fodder for countless conversations among industry peers and topics for articles and blogs. They are a source of ongoing exchanges both online on Facebook and LinkedIn and offline in association meetings, educational groups, and networking events. We’ve heard all about how to start an affiliate network, how to attract affiliate partners, how to treat affiliate partners as customers, and just about every other sales-and-marketing-focused topic that we can imagine.

affiliate network uber-killer While these are certainly important, I submit that once networks have been established, we need to change the conversation to acknowledge that how you select an affiliate, the standards you require, and how you manage the ongoing relationship with the affiliate provider all comprise the most critical aspect of your business—and may very well be the key to your future survival in this changing world.

Let’s look at two converging realities:

1. As the world gets smaller and more of your clients become true globetrotters, many of you will step up and offer services in other markets through your affiliate relationships.

2. It has to be acknowledged that TNCs have both redefined and legitimized chauffeured ground transportation. Our industry is mainstream and is now, more than ever before, recognized as an integral part of the corporate travel management process.

You’re undoubtedly starting to show up on the radar screens of travel managers, event planners, hotel company executives, and many others involved in getting people around.

Today, corporate travel buyers realize that ground transportation not only matters but it also is a spending category that needs to be managed. Depending on who you talk to, that spend can be anywhere from 5 to 13 percent of total corporate travel spend. For some companies, ground transportation costs are in the tens of millions of dollars.

Larger footprint, more visibility. Must be good for business, right?

Unfortunately, there is also a third reality: TNCs have, in many markets, lowered the bar for taxi companies and luxury ground transportation operators as well. TNCs are cheap and easy, and more or less consistently show up to deliver a ride from point A to point B.

But are they safe? And do their loyal riders care? We are all keenly aware that TNCs have their issues, and detractors are quick to cite the well-documented mayhem caused by their drivers. Their supporters counter with accusations that passenger attacks also happen in regulated vehicles and, with the monumental number of transactions TNCs process each day, the ratio of incidents to rides is just not significant enough to warrant concern.

affiliate network uber-killer In response, there has been a concentrated effort by the legitimate ground transportation industry to combat TNCs by pointing out their disregard and disrespect for the municipal, state, and federal regulations (particularly commercial insurance and background checks) that have governed ground transportation for decades.

The conclusion to be drawn, of course, is that TNCs are not concerned about the safety of their passengers. Duty of care then became the war cry of traditional transportation companies in their fight against the market share decline that their unregulated competitors have caused. In some cases, deregulation of our industry has also begun popping up in the conversation.

It’s a problem, without doubt. How big a problem the lack of insurance and background checks are for politicians and executives is not quite as clear.

There are three problems with this way of thinking.

The first problem is that while “duty of care” is a legal obligation for companies in more than 50 countries, especially as it applies to travel, it is not law in the United States as of yet. While many travel buyers may feel that protecting their employees is a moral obligation, that responsibility is not a legal one. Even if the law changes, there is a second problem, which was identified by a 2015 ground transportation study sponsored by Dav El/BostonCoach and EmpireCLS Worldwide.

According to a Global Business Travel Association (GBTA) news release detailing the study, it was found that “only about one-third of business travelers are at least somewhat familiar with all aspects, such as pre-employment driver certification, driver training requirements, and regulations affecting each ground transportation method. Travel buyers are more familiar with most of the duty of care aspects than business travelers, but less than a quarter are very familiar with all of them showing education is necessary to inform them of the differences between ground transportation methods.”

That brings us to a third problem, and from my perspective, the only real problem. Now that we, and others, have shined the light on the issue of traveler and vehicle safety, we have pulled back the curtain on our own dirty little secret: An operator may be legally licensed and insured, and meet all of the minimum requirements for regulation, but what is a requirement in one city, county, or state—in terms of insurance, background checks, drug testing, and driver training—runs the gamut from little or no requirements to very tight regulation.

In some cases, $100K to $300K of insurance is enough; in other jurisdictions, it’s necessary to have $1 million or more. Yet $5 million is now a corporate standard. For some operators, FBI background checks ensure that an individual’s criminal record, no matter where the crime was committed, is identified. Unfortunately, in many markets, we have to hope that a criminal in one state (or sometimes even a jurisdiction) doesn’t move and come to work for you in another, because a state background check is exactly what it says it is—in other words, it could be limited.

My conclusion? Depending on how things shake out in the next couple years, and as your influence in the corporate travel industry grows, I believe that how you structure and run your affiliate network may become your greatest competitive advantage and insulate your company from less qualified competitors. That being said, it could just as easily become your Achilles’ heel.

How? As corporations become more focused on their duty of care obligations (whether moral or legal) for traveling employees, travel policies will tighten and the industry will begin to hold itself to a higher standard: Just because your local regulations don’t require Automated Fingerprint Identification System checks, your affiliate partner may, require you to also do so—and show proof.

When I asked industry veteran Jim Luff if he agreed that operators must actually know that their affiliates meet the standards booking company has not only established but also guaranteed to a corporate buyer, he said, “If the industry wants to widen the gap between TNCs that don’t require fingerprinting, a proactive and expanded background check can further differentiate ourselves from them. It demonstrates a level of safety commitment that goes above and beyond government requirements.”

He added that “in a world where an Uber driver starts shooting people minutes after dropping off a passenger, I think corporate travel planners will appreciate the added effort of a more thorough and comprehensive background check.”

The obvious answer, of course, is to self-regulate, establish “premium provider” standards for insurance, background checks, and more—and enforce them. But I am not naïve enough to think that this is easily achievable or will be a reality in the short term.

Nonetheless, I am a big believer in “evolution, not just revolution,” and the hurdles should certainly not stop operators and affiliate managers from taking immediate steps to clarify and memorialize the requirements of doing business with their affiliate providers and vice versa.

Some suggestions:

1. Change the statements you make on your website to protect yourself from misrepresentation, especially if you are in a market where standards and regulations are more stringent. You simply can’t claim that the affiliates in your network are an extension of your service and are held to the same standards and responsibilities that you demand from your own employees. I would suggest that you change your statement to one similar to what appears on the Hy’s Limousine Worldwide Transportation website (­hyslimo.com): “These companies are researched carefully and all must successfully go through a thorough application process before joining our network so we can ensure that they can provide the service that our clients have become accustom to from Hy’s. Many factors are taken into consideration during this process including quality and size of fleet, on-time service, driver/staff professionalism, and safety records. Our affiliates must conform to all local and state requirements and all insurance and permits must be up to date.”

2. Set up a system to track insurance renewal dates, request Accord forms sent directly from the insurance company, and make sure that you have new certificates of insurance prior to the expiration date of the coverage.

3. Execute a legal agreement. Consult an attorney who can help craft one that includes much of what you would find in a subcontractor agreement or noncompete and nondisclosure clauses.

Don’t take on an affiliate network piecemeal. Make a list of the major markets, ask others for recommendations, and process the paperwork beforehand. Last-minute requests with no paperwork or previous experience can only lead to issues.

Demand that your software provider gives you access to a neutral booking platform (e.g., FASTTRAK, Limo Anywhere, LiveryCoach, and the others in various stages of integration with the Gridd Network). Don’t be forced to select an affiliate because of the automation they use. Business model, similar culture, and commitment to customer service excellence should be the deciding factor in who you give your business, not their technology provider.

Every passenger riding in an affiliate vehicle should always receive an email with a link to a satisfaction survey. Always keep reminding the customer that you are their transportation manager and know if the affiliate is providing the service you demand.

If you use tablets for airport meet-and-greets, you should use an affiliate that provides the same. A frequent traveler who is used to a better service product will be wary of a chauffeur with a messy paper sign. And really, it’s 2016.

I have watched the industry survive the aftermath of 9/11, make it through the Great Recession, and collectively tackle all the changes and challenges both between those troubled times and since. TNCs have been a driver of change, and I have no doubt that the operators who position themselves to expand their services into new verticals and provide innovative solutions will prosper. Managing your affiliates so they provide your caliber of service miles beyond your market will serve you well whether the TNC model is unsustainable or they, too, evolve. [CD0516]