Are there too many players in the online travel industry value chain?
The lack of standards, a push towards virtual cards to simplify the payment process and the role of technology in reducing complexity are among the challenges facing the global travel industry.
Many would argue that the systems and methods online travel businesses use to sell travel services have become too convoluted. Technology companies can play a role within this space to reduce the levels of complexity that have complicated purchasing within the sector.
These were among the issues discussed during a recent World Travel Market session which involved people from all corners of industry including Alex Banbridge, chief executive of TourCMS, David Cabreza, Director, Hilton Worldwide and Suhail Uddin, Business Development – Travel, Ixaris Systems Ltd.
EyeforTravel caught up with Uddin, to find out what emerged from the debate.
EFT: Are technology providers today really solving the problems that already exist within the travel industry?
SU: Well the panel conclusively agreed that there is a definite problem when it comes to the complex process of buying travel services to sell online. In order to solve this issue, technology companies play a valuable role in simplifying this process, making it as cost effective as possible to connect global suppliers with buyers.
However, to show just how convoluted the process has become, Alex, our moderator, posed this question: "How many of you sell your own product on your website to your customers?" Surprisingly only three hands went up which means that the vast majority of people were actually selling someone else’s product on their site.
Another concern raised is the lack of standards in the industry. The dearth of collective forms of standardisation, such as those that are now evident in the airline industry, must be brought into the travel industry more widely. With businesses in the travel sector failing to play to the same tune, companies are forced to put in duplicate efforts and are consequently finding it difficult to add value. One suggestion was that suppliers could support a standard interface.
David Cabreza from Hilton pointed out that consumers are demanding many different ways to carry out their bookings and so a degree of variety was unavoidable. By attempting to accommodate everything will only add more complexity to the business, and he noted that companies will need to make trade-offs. Complexity in the industry is one thing but having complexity in your own business is something that should be avoided.
EFT: Would you say there too much fragmentation within the travel industry and are there too many different types of payments methods on offer?
SU: We all seemed to agree that the wide range of payment methods on offer for end users is a good thing. Maintaining consumer choice is key. A market with too few large players would ultimately reduce this choice and damage competition. While it is important to have the right number of participants so you have a changing market, what the industry doesn’t want is stagnation because there are too few multinationals.
We then went on to explore how a wide range of different payment methods can add complexity to businesses as they try to accommodate everything. Suppliers in particular struggle when it comes to dealing with payments. For instance, David pointed out that a big problem on the part of hoteliers and other providers is getting the cash in through the door. There are probably 70 or 80 different types of payments available to Hilton Worldwide, and suppliers simply cannot be everything to everyone. He noted that suppliers would like to offer things like bank transfers or PayPal, but that in the end they had to pick and choose the ones with which they deal. When debating potential solutions to this problem the panel argued that there could be an opportunity for a company to deal with all the payment complexity for travel businesses, ensuring that they just got paid the way they want.
EFT: How are technology providers helping online travel agents (OTAs) and other players within the travel chain deal with this problem?
SU: OTAs using traditional card purchasing programmes often experience significant problems with fraud, complex and costly back-office reconciliation and significant numbers of failed transactions. The panel agreed that technology providers can play an important role in solving these problems, in particular virtual cards. By using virtual cards, OTAs can enjoy greater control over purchases and less risk of fraudulent use by staff. On top of that there are more successful transactions as each payment is made on a unique one-time virtual card - rather than having many payments done on a single card that may get blocked due to over-frequent use. In addition, the entire payments process can take place automatically because the travel agent’s IT systems communicate directly with the technology provider’s application programming interface to access the virtual account systems. Virtual prepaid cards are also helping those in the airline industry by removing the need to pay hefty surcharge fees, reducing the knock-on effect to travel agent profit margins.
EFT: How is the industry struggling to comply with the issue of payment card industry (PCI) compliance, and how can technology providers be a part of the solution?
SU: During the session Alex pointed out that one major OTA sends credit cardholder information to their hotel suppliers via fax. The panel warned that this was a ticking time-bomb, particularly when considered against PCI DSS (data security standards) for transactions. Alex also commented that many of the agents he both knows and works with also fax credit card details – followed by the strong recommendation that technology solutions be adapted in order to solve this.
Urging companies to move away from outdated modes of payment that bring the threat of exposing cardholder information, along with subsequent fines, the panel agreed that a shift from such practices towards virtual card payments could be part of the answer. The last thing the travel industry now needed is a major security breach. As virtual cards are created as needed and only used once, the consumer’s credit or debit card details do not need to be passed on to travel service providers. In addition, as the consumer’s own card can be processed by a specialist payment provider in such a way that the merchant never sees the credit card details, they are not taking any risks - this lies solely with the payment provider.
When noting that smaller companies may find it difficult to comply with PCI regulation due to a lack of resources, the panel agreed that installing the right kinds of technology could help enormously with compliance, as it would almost completely eliminate back-office reconciliation problems.
EFT: So what would you say were the key messages to emerge from the session?
SU: I’d say there were three.
1. The process between suppliers and buyers needs to be simplified, with consideration given to reducing fragmentation but still retaining enough choice for the end user.
2. OTAs need to work alongside technology providers in order to help solve the problems they currently face, such as fraud, reconciliation and surcharge fees.
3. The issue of PCI compliance is a hot topic that has sparked much debate in the travel industry, bringing serious issues to the fore if companies do not recognise its significance in time and make changes before they face a major data breach.
To download a copy of the Ixaris Travel Industry Payments Barometer, click here