How to streamline payment processes in the travel industry

The payments ecosystem has become exceedingly complex nowadays, especially in the travel sector. Sabre Corporation and The Paypers present the travel industry’s players and the Sabre solution of streamlining payment processes for them. 

Large travel bookers such as Online Travel Agencies and Consolidators generate millions of payment transactions each year and are under continuous competitive pressures to reduce costs whilst ensuring the best customer experience possible and a good working relationship with their suppliers. A key component of a payment strategy has traditionally been the financial incentive (or rebate) that can be derived from the volumes transacted on virtual cards. But that perspective is now evolving, and travel payment solutions now go far beyond the rebate to optimise supplier payments, and consider multiple elements such as cross border fees, forex fees, and surcharges applied by merchants on some cards etc. to achieve a more comprehensive optimization of the bottom line.

The travel industry generates millions of payment transactions per year, and in 2018, the global travel industry performed better than most other economic sectors as the total number of travel bookings increased by 7.3% over one year, as per Phocuswright's Global Online Travel Overview 2019. Furthermore, the report revealed that top travel markets remain unchanged (US, China, Japan, Germany, and the UK) and the global online travel market is predicted to reach almost USD 818 billion by 2020. Clearly, this is a very profitable space to focus on effective payment management. At the same time, new more flexible and travel-focused payment solutions capitalise on significant opportunities across the large and growing set of travel payment transactions.

A look at the travel industry players

The travel ecosystem can be complex, but in its simplest form, it is made up of suppliers (i.e. airlines, hotels, etc.), a distributor (GDS - Global Distribution System), and resellers, such as travel agencies.

Airlines

The number of air departures across the globe has increased by 38 million, with airlines transporting in 2018 a total of 4.3 billion passengers compared to 4 billion in 2017, according to the International Civil Aviation Organisation (ICAO). Meanwhile, low-cost carriers (LCCs) account for approximately 31% of the world’s total scheduled passengers, as in 2018 they transported an estimated 1.3 billion passengers, thus claiming a strong market share in air transportation. LCCs market share was the highest in Europe, accounting for 36% of total passengers transported in the region. These figures mean that over 5.6 billion payment transactions have been processed last year, and the transaction volume doesn’t stop here.

Hotels

Hoteliers represent a subdivision of the travel industry focused on delivering traveller overnight accommodations and often includes many related travel goods and services such as meals and transportation. This means an increased number of transactions, but the hospitality sector is more fragmented than air providers and this means many different expectations and opportunities for payment.

Payment for hotel accommodations typically does not occur until time-of-stay and can often include additional ancillaries or related stay expenses.  Another complexity for hotels is when a traveller does not have a credit card but is travelling for business – the direct billing and collection process is manual and quite cumbersome.

Global Distribution Systems (GDS) seamlessly connect these vast volumes of supply and demand in a consolidated and automated way, so that online travel agencies can focus on selling large transaction volumes, which must be processed in multiple currencies to suppliers across the world, and for each of those payments, they must manage fees and rebates that directly impact on already tight profit margins.

Online travel agencies

For travellers, booking a trip today can be as simple as an online search and reservation process, however, behind the scenes, a lot is happening: on the supply side there are thousands of airlines in the world, and each of these airlines has a vast number of fares that are managed dynamically. On the demand side, there are thousands of travel agencies, which sell air segments and hotel rooms to millions of customers every day. And each of these entities is either paying or getting paid for the millions of travel transactions that occur.

Travel Management Companies (TMCs)

A Travel Management Company (TMC) strategically manages an organisation’s business travel program by providing a consolidated process to book corporate travel, including flights, hotels, car, railway tickets, and can extend visas or other travel support as needed. This comprehensive coverage results in many different transactions, reconciliation and reporting requirements, and much more to manage.

Top 3 ways to optimise payment processes in travel

Streamline with automation and innovative virtual methods

If we look at the global travel payments industry, the main challenge is the need for companies to manage fund collections and then consolidate and reconcile that information when those transactions occur in different currencies. For instance, in the Middle East, the ‘vast majority’ of B2B payments are settled via SWIFT bank transfer, and the mechanisms through which companies can make these payments always come with manual reconciliation or added fees. From a regulatory licensing, FX, and cash management perspective, the regional markets can become complex.

This makes it difficult for international payment companies to provide services suitable for intra-regional payments using domestic currencies.

Virtual cards help to simplify the transactional journey for all parties involved in the payment process. A virtual card number (VCN) is a digital version of a static debit or credit card, with a randomly generated number, red by all major card issuers and card schemes, such as Visa. It can be used for any transaction and it is accepted internationally.offe

A VCN can apply uniquely specified controls (depending on the card issuer settings), including: how much can be spent with it, the period that it can be used for, how many times it can be used (often only for one payment), which merchant(s) can accept it, and more. After being utilised for transaction authorisation, the card number becomes invalid and cannot be used again.

Virtual cards can protect companies buying business travelling services against potential financial losses when a travel supplier fails. Also, because virtual card numbers are issued by card networks, users can initiate a chargeback process if a supplier goes out of business. This feature is beneficial especially in the case of a low-cost airline going out of business.

Virtual payments enable corporations to reconcile transactions by using a unique, virtual, automated, and integrated card number to pay for a specific travel event. Plus, security is added around foreign exchange transactions, as virtual cards ensure that you can pay suppliers globally in the currency they require.

For hoteliers, a traveller using a virtual card can guarantee a hotel booking and can make secure and pre-authorized payments at the hotel’s reception desk, so the staff can seamlessly process it as a typical card-not-present transaction.

Cross-border payments must be efficiently managed and paid

Many businesses trade with customers and suppliers located outside their country. For the past couple of years, the number of travel companies accepting payments in over 10 different currencies has doubled, and 61% of travel agencies are issuing payments in more than one currency.

Still, dealing with non-domestic payments presents for businesses many challenges such as currency fluctuations or cash flow problems caused by delays in sending and receiving cross border payments. Nearly 50% of businesses are dissatisfied with the rates that they pay for cross border payments and 80% consider changing suppliers if they could reduce costs.

Transaction fees can negatively impact the bottom line. For many travel companies, the costs of cross-border payments are exacerbated by exposure to FX fluctuations, fees, and mark-ups, most of which are not transparent.

Partnering with the right payment solution for your business needs

With increased regulatory challenges and growing agency payments needs, extracting value from transactions is becoming more complicated. Traditional setups using a single payments provider often connected to a single payments network (Visa or Mastercard) is simply not workable anymore. In a world where agencies pay a broad range of suppliers, each with varying card policies in a broad range of currencies, flexibility is key to optimize the financial outcome of each transaction. Having access to the broadest range of banking partners and the right technology provider that can facilitate your payments across platforms is instrumental to improve the financial outcome of every single payment

Travel management programs that prioritise frictionless travel with self-service tools, personalised offerings, and engaging content to provide convenience, comfort, safety, and helpful information are the ones that drive true value for the organisation. To build this value, it is crucial to have the right payment solution partner that can improve productivity and data quality, as well as facilitate your payments across platforms.

In corporate travel, it’s important to find the right payment solution, like Sabre Virtual Payments, that is easy to integrate and use with simple payments systems and processes and helps to ensure travel policy compliance for every purchase.

Sabre Virtual Payments is a unique, secure, automated and integrated payment solution designed specifically for travel to simplify and add value to transactions every day. With access to 35+ banking partners, 100+ currencies in 150+ countries, it provides the flexibility to select the combination of banks, schemes, and funding solutions that will deliver the most value, while keeping payments safe and secure. Sabre Virtual Payments allows you to pay anyone, anywhere and integrates seamlessly into current agency reservation and payment processes.

About Mirela Ciobanu

Mirela Ciobanu is a Senior Editor at The Paypers and has been actively involved in covering digital payments and related topics, especially in the cryptocurrency, online security and fraud prevention space. She is passionate about finding the latest news on data breaches, machine learning, digital identity, blockchain, and she is an active advocate of the need to keep our online data/presence protected. Mirela has a bachelor degree in English language and holds a Master’s degree in Marketing.

About Sabre Corporation

Sabre Corporation is the leading technology provider to the global travel industry. Sabre software, data, mobile and distribution solutions are used by hundreds of airlines and thousands of hotel properties to manage critical operations, including passenger and guest reservations, revenue management, flight, network and crew management. Sabre also operates a leading global travel marketplace, which processes more than USD 120 billion of global travel spend annually by connecting travel buyers and suppliers. Headquartered in Southlake, Texas, USA, Sabre serves customers in more than 160 countries around the world.