B2B Payments

How Travel Streamlines Payments In A Complex Web Of B2B Connections

The travel industry is a highly fragmented, complex web of suppliers, distributors, tourism companies and online travel agents (OTAs), all hustling to keep pace with the changes occurring in how travelers — both for pleasure and business — plan, book and pay for their trips.

A lack of standardization and infrastructure capabilities makes connectivity difficult for a supplier — for example, a hotel group — trying to integrate its inventory (room) availability to a distributor, so that the distributor can facilitate online bookings. However, that’s only the beginning of how silos in the travel sector can trip up these B2B relationships.

According to Duane Overgaard, VP and GM of Connectivity for hotel distribution company DerbySoft, market fragmentation creates bottlenecks in B2B transactions throughout the travel arena.

“There are not always easy connectivity options that exist to enable commerce to take place with all different types of platforms,” he told PYMNTS in a recent interview. “The hotel industry is very segmented, and it has a ton of systems utilized between central platforms that a hotel sits on to property management systems, as well as ways people are booking the travel.”

The opportunity in travel distribution is to enable connectivity across all those various channels, he added, and to facilitate B2B connections between travel suppliers, distributors, OTAs and travelers.

While the biggest industry players — including Expedia and Booking.com — may have the resources to build out that connectivity themselves, smaller players in the market can lag behind. When it comes to payments, a lack of connectivity can mean abandoned bookings, as payment methods increasingly become a competitive differentiator.

That’s particularly true as payment habits change from one jurisdiction to the next. In markets like China, said Overgaard, mobile payment technologies are quickly climbing to the top of travelers’ preferences. If one OTA or supplier cannot accept that payment method, they risk that traveler moving on to a competitor. The market opportunity here, he noted, is for distributors to facilitate and integrate that payment method for travel agencies and suppliers.

The Business Travel Impact

As consumers adjust their travel booking and payment habits, similar shifts have been seen across the corporate travel segment as well. Indeed, according to recent analysis from McKinsey & Company, travel industry disruption is repositioning travel agencies’ role in the industry.

“The travel sector’s problem … is that the underlying model is fracturing,” the report stated. “Traditional travel agencies now tend to tailor their services to business travelers, rather than provide options and products for a broad set of customer segments.”

While suppliers continue to invest in their direct-to-consumer models, OTAs have found an opportunity with business travelers — which have their own shifting payment needs. One of the largest disruptors in this area is the virtual card.

Virtual cards can offer businesses a way to securely enable employees to book and pay for travel without compromising security on physical corporate cards, and without forcing employees to front the bills then expense those transactions later. Yet, for hotels and other travel suppliers, acceptance can be a challenge: Virtual card details are often faxed to the property or relayed over the phone, raising the risk of errors and compounding the administrative burden of payment acceptance.

DerbySoft’s latest initiative aims to ease the burden of virtual card acceptance by automating virtual credit card population at the time of booking on OTAs. Dubbed the Payment Connector, the suite of services was designed with travel industry B2B payments solution provider Voxel Group to integrate the virtual card capability for distributors.

Overgaard noted that this solution aims to broaden participation for travel suppliers and distributors, and retain their ability to facilitate virtual card transactions to remain competitive.

However, the travel industry continues to evolve, with payment habits changing, too. Apple Pay and PayPal, for example, are growing in popularity with bookers in markets around Asia. Overgaard also pointed to the initial deployment of the Payment Connector solution for a client in Europe, operating within the wholesale travel distribution business model — a model that has been around for decades, he said, but is similarly experiencing growing pains from shifting payment needs.

Keeping Pace With Change

Evolving traveler populations are similarly driving change in the market, said Overgaard, pointing to the increase of travelers in Asian markets. As these shifts occur, the industry must be able to remain flexible with changing rules like tax calculation requirements, or rules related to the currencies in which prices are displayed.

Payments, he added, will continue to be a major disruptor in the space, though.

“There are a number of payment opportunities that are evolving, that hotels are looking to accept and integrate,” he said, noting that shifting payment habits mean travel suppliers must not only adjust their accounts receivable and payment acceptance tactics, but must incorporate those payment tools into how they reconcile and manage accounting.

“This is not unique to the hotel and travel industry,” he continued. “This is evolving in all lines of business, with different payment options emerging. It’s not just restricted to hotels, but this is a space where sometimes the travel industry lags behind other industries.”

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New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.

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