Secret government audit reveals how big travel companies can overcharge clients

Travel management companies have pocketed tens of millions of dollars in commissions and hidden mark-ups when handling accounts for big clients, a secret government audit has warned.

The audit details can be revealed as Brisbane-based Corporate Travel Management reels following revelations it will have to refund UK customers — including the British government — up to 77.6 million pounds ($157 million) that was overcharged.

Corporate Travel, a sharemarket-listed business valued at more than $2 billion, has helped arrange travel bookings for clients ranging from Wesfarmers, to the Australian government, to managing refugee barges for UK authorities.

On Friday, the company revealed mass refunds dating back to work as early as 2021, saying the matter was "serious" but isolated to the UK.

It refused to answer analyst questions about how overcharging had occurred or whether it believed any criminality was involved.

Audit reveals how to dud clients

The ABC has separately obtained copies of a June 2022 audit of the Queensland government's QTravel program, which outlines a shopping list of ways travel companies could potentially dud their clients.

The Lessons Learnt Review, obtained under Right to Information laws, was based on the experiences of consultants Butler Caroye and Goldspring.

The review detailed how unnamed travel management companies can earn income from suppliers, including airlines, hotels, and car rental firms, through commissions.

To compensate, a solution over the past 20 years had been that travel management companies were to pass on to their clients "all commissions received in full".

But commissions were part of confidential contracts between supplying companies and the travel management businesses. 

"One case some years ago resulted in a clearly identified underpayment of eight figures based on the travel management companies' interpretation of 'commission' in the contract that was legally difficult to dispute."

Plane ticket mark-ups

Another warning related to mark-ups in plane tickets. The review said an audit for a large business compared its travel management company's raw bookings data to settlement data with the world's airlines trade association.

"It was discovered that the travel management company had been applying hidden arbitrary mark-ups to international airfares for five years," the review said.

"An out-of-court settlement was agreed where the travel management company paid an eight-figure sum in compensation for the overcharging."

Another problem festered if a travel management company used a hotel booking system but was incentivised "to make lower available net rates seem unavailable so they can book a higher rate that earns them a commission", the review said.

The review said a threat of an audit of the travel management's booking patterns "can be effective" but required cooperation from the hotel chain "which might not be forthcoming".

"But it certainly does occur due to the difficulty of prevention."

The Australian Travel Industry Association, which represents agents including Corporate Travel Management, told the ABC it was committed to "upholding a fair, transparent, and consumer-focused travel industry".

Australians could have confidence that its accreditation scheme provided independent reliability and members "must meet rigorous financial, ethical and professional standards".

UK 'appalling overspend' scandal

The scandal in the UK is blowing back against Corporate Travel. The UK Home Office confirmed it was informed by the Australian travel business of overbilling late last month.

"An urgent investigation is underway into this appalling overspend, which happened under the previous government. All taxpayer money owed will be recovered," a Home Office spokesman said.

Corporate Travel, which said the problem related to billing from 2021, declined to answer questions. 

It has done key work with the UK government, including repatriations during COVID-19, managing a controversial asylum-seeker barge program and winning a contract for hotels accommodating refugees in April this year.

Short-sellers, who make money from share prices falling, have long accused Corporate Travel of problems with its accounts, which the company has consistently denied.

Doug Tynan, co-founder of GCQ Funds Management, was one of those short sellers and said a host of accounting red flags had been apparent in 2018, and problems had continued.

"For a while there, Corporate Travel was claiming its European business had higher margins than Mastercard. It just didn't add up," he said.

"Those European margins will look a lot different after customer refunds."

Corporate Travel's shares have been suspended since August, while auditors review accounts, and it does not expect to publish financial statements this year.

The Queensland government travel audit even included an anecdote about dealing with bad service, citing how a bank, once suffering from unacceptable booking times and slow answers, called in senior personnel of its travel management company for a lunchtime boardroom emergency meeting.

"The procurement team ate a catered lunch during the meeting but offered the [travel managers] nothing. They then left them in the room alone for half an hour. Finally a waiter asked if they'd like coffee and then served them coffee that was cold," the review said.

The procurement team returned and told the travel managers: "now you know how we feel".