Future-proofing your travel business

The effects of the political and economic uncertainty that we witnessed in 2017 – such as the fluctuating Pound – are sure to continue to feature throughout the coming year. There’s no rest for travel companies. They must be discerning when it comes to managing their businesses effectively to ensure they remain in the black and can continue to prosper. Beyond these ‘unknown’ pressures, what else should travel companies be considering in 2018?

My advice to them is to think more strategically about payments. They’re not just an operational function or overhead, but a way to gain competitive advantage. Here are my top five payment considerations to get ahead in 2018:

1.      Expand payment choice for global consumers 

Consumer appetite for global travel is more now than ever before. This brings huge opportunities for expanding business in new markets, but the challenge is that different regions have different payment preferences. And even within a country there are myriad options. China, for example, is showing healthy increases in outbound tourism with travellers going further afield. The market presents a huge revenue opportunity for travel companies. But consumers prefer to pay via Alipay, WeChat Pay and JDPay. Accepting payments via these channels is a huge step in tapping the market. But how many travel suppliers outside of China accept these forms of payment?

There is an easy solution – look to the back-end. Having a universally accepted payment method such as Virtual Account Numbers (VANs), means you can pay travel suppliers regardless of what payment method consumers choose at the front-end. The more payment types you accept at the front-end, the more a consumer is likely to book with you. Simple. 

2.      Use data as the ultimate sales tool

Thomas Cook is the latest in a string of high-profile travel agents to announce it is closing stores and undertaking a review of operations. Like many traditional agents the company has realised that, to survive and compete with disruptive OTAs, it must beef up its online presence and have a truly omni-channel strategy. For many years, the travel industry has been driven largely by price, with many agencies shaving a point off pricing to gain ground.

However, advances in artificial intelligence (AI) and data analytics have enabled newer online players to deliver more timely, relevant and personalised services to boost customer experience and get a larger slice of the pie. For example, numerous OTAs are hiring large numbers of data scientists with a view to being able to offer insurance, theatre tickets or a restaurant booking based on customers’ personal interests. OTAs will continue in this vein and we’ll also see more of the traditional players follow suit, investing in technology infrastructure and talent to better compete in a challenging industry.

3.      Be innovative in the way you accept payments

Amazon’s seamless, one-click payment process made it incredibly attractive to consumers, as well as sellers and partners, and as a result, it’s now one of the world’s leading online retailers. Now we have another online behemoth raising the stakes in travel customer convenience. In November, Airbnb launched its .Split Payments’ features, allowing guests to split expenses of the booking. This month, it’s gone one step further with the launch of Pay Less Up Front. This allows guest to pay for bookings in two instalments, making the buying and payment more accessible. While this will come as fantastic news for consumers, they’re not the only ones who should be paying attention. Innovation in payments will become a key differentiator amongst travel businesses, particularly OTAs. Those that can offer a flexible, fast and easy payment experience for consumers, while having B2B payment processes in place to support it, are sure to gain market share.

4.      Be innovative in how you make payments

Since 13th January 2018, extra fees of up to 20% which companies levy on card payments for items such as flight tickets, were banned in the UK. Under the old rules, businesses were not allowed to profit from surcharging but the actual costs they incur could be passed on. Now the new EU Directive preventing this has kicked in, there could be an impact on the bottom line for travel companies. Travel operators have three potential responses: absorb the additional costs; pass them on to consumers by upping the price of their holidays; or reduce their own costs to off-set this.

We hope most will choose the latter and take positive steps to manage their own costs associated with making travel supplier payments. There are huge gains to be made by abandoning traditional payment methods. Our own analysis shows agencies are spending up to 3% more on each international transactions compared to alternatives like VANs.

5.      Tackle rising incidence of fraud head-on

With billions of transactions a year, it’s not surprising that fraud is a top pain point for travel companies. The problem is so engrained in the industry that according to Phocuswright research travel agencies now set aside 1-2% of their revenue into managing fraud. In an industry where margins are already tight, it’s still a substantial cost. But with today’s advanced payment solutions, minimising the risk and cost of fraud is as simple as changing the way you pay. 

The travel industry is forecast to continue its growth in 2018. Addressing these five issues will mean your business will be in the best position to take advantage.