As airlines’ inability to issue refunds made headlines during the early stages of the pandemic, the ingrained inefficiencies of travel payments played out on the world stage.
Many travel suppliers and distributors are now also recognising the payments pitfalls they have accepted (and ignored) for too long. There’s an appetite for change, but where do you start?
Read on to learn why, as the travel industry becomes cleared for takeoff, now is the time to reconsider your B2B payments strategy - and immediately reap the rewards.
Longer lead times? Time to unlock working capital.
Industry analysts predict that, while travel patterns may be permanently reshaped by the COVID-19 pandemic, the hotel industry will see a slow but steady recovery now through 2022.
Consider hotels’ average daily rate (ADR), as an example. Following other historic sector shocks — 9/11 and the 2008 Recession — it took 24 months and 36 months, respectively, to move from trough to peak ADR.
The pandemic has directly impacted hotel booking lead times, which means unlocking working capital must become a top priority.
As of June 2020, the proportion of hotel bookings made 8-30 days before check-in has shrunk, while lead times over 30 days have increased, particularly in the EMEA where +30 day lead times are now the majority.
For the majority of OTAs securing and paying for new bookings with bank transfers or corporate credit cards, working capital will be tied up in future bookings longer than ever before — and perhaps for some time to come.
OTAs are now realising that scheduling virtual card loads "just in time" for hotel charges maximizes the period that working capital is available to them — even as booking lead times increase.
This is driving new payment optimisation strategies through virtual card platforms like Ixaris Payments, which OTAs use to create virtual cards on demand in 24 currencies.
For hotels, virtual card payments also bring several quick wins. Currently, hotels accepting bank transfers wait up to 30 days for payments to settle, compared to just 2 days with virtual cards. This, taken together with hotels’ decreased appetite for extending credit to OTAs, means virtual card payments are now highly attractive to hoteliers.
Bloated back office? Time to streamline
Economic crises have historically forced entire industries to re-evaluate their back office operational costs in favour of new and sometimes radically lean approaches.
The shift towards a more efficient and technologically enabled back office was already well under way before the pandemic, but now shaving costs swiftly and effectively — without negatively affecting the health, loyalty and satisfaction of customers — is the order of the day.
It’s time to get serious about creating a leaner, more efficient back office. How much of their working day does your finance team spend on internal emails? About 28%.
Slash this to next to nothing with an instant messaging app like Slack. How much time do you spend wading through multiple marked-up versions of the same spreadsheet? Use software like Google Sheets or Microsoft Excel online, which allow for team collaboration in real-time.
How much time does your finance team spend reconciling payments? Payments by bank transfers, and some card products, mean complex reconciliation involving meticulous manual matching — particularly if a single bank transfer is used to pay for multiple bookings.
Manual work can easily introduce errors and slow things down, bloating back office work (and costs). With Ixaris Payments, you can easily attach and match booking references to payments with a unique virtual card for every booking.
Ixaris virtual cards can also be automatically emptied and destroyed after use, further lightening administrative loads.
Forever fighting fraud? Time to crack down
Recently, the United States’ Federal Trade Commission received over 14,000 travel-related fraud complaints tied to COVID-19, totaling over $28.5 million dollars in losses for consumers and suppliers — making travel the single largest category for fraud losses year to date in America alone.
But fraud is not a new challenge for distributors like OTAs, which manage and exchange massive volumes of personal and payment data.
For example, when an OTA sends card details to a hotel, they are often stored at a reception desk, exposing them to potentially fraudulent use for days or weeks before check-out. However, when OTAs schedule virtual card loads with a platform like Ixaris Payments, the virtual card is "empty" during the days or weeks that hotels hold card details, significantly reducing the potential for fraud.
Many virtual cards can also be set to be destroyed after a single use, further eliminating fraud risks. And if fraud (or a supplier disruption or default) does occur, unlike with bank transfers, there’s a formal mechanism in place to revert stolen funds.
Wary of disruptions? Time to manage risk
Virtual cards are protected by Visa and Mastercard’s chargeback process, which can reverse card payments in the case of fraud, or if a merchant cannot honour a booking or enters default.
In other words, if a hotel goes bankrupt or doesn’t respect their service terms, chargebacks would help an OTA get their money back, and vice versa.
Planes may have been grounded this spring, but Ixaris’ clients were not. Chargebacks protected Ixaris’ clients from the impacts of an unprecedented volume of flight cancellations triggered by the COVID-19 pandemic, which saw a 100% suspension rate for 22 major airlines and a 80-99% cancellation rate for dozens of others in March 2020.
You can learn more about how Ixaris recently helped customers process $70 million in chargebacks with a 99.98% success rate in its latest whitepaper - Chargebacks and The Travel Industry.
Margins tightening? Time to create new revenue streams
Now more than ever, adding a basis point or two to your bottom line is not only a sensible safety precaution — it can make the difference between hitting your targets or missing the mark. But how will you get there: by cutting costs or increasing revenues?
Start with a payment optimisation plan that does both. A virtual card platform like Ixaris Payments not only unlocks working capital with "just in time" payments, but it can even pay for itself by generating new revenue streams from the payments OTAs already make.
Now is the time to prioritize payments
The pandemic is exposing inefficiencies that businesses and entire industries have long overlooked, from redundant office spaces to supply chain silos.
In travel, payments have had baked-in complexities for decades, but these can no longer be tomorrow’s problem.
Now is the time to make simple but effective adjustments to your payments strategy to improve your bottom line. Re-evaluating your payments strategy today can return a score of quick wins — and just in time.