Ryan O’Holleran, head of enterprise sales EMEA of Airwallex, shares his four areas of stunted growth within travel and his advice on how to navigate these challenges
Guest Post: How OTAs can navigate key growth challenges
It’s tough out there in the travel space at the moment, at least that’s what we’re hearing from founders, CFOs, and CTOs. It’s no secret that the travel industry is currently facing a critical inflection point, with rising costs and challenging macroeconomic conditions coming to the fore. Online travel agencies (OTAs) are particularly affected, and making a profit is a real challenge with the lingering impact of the pandemic and slower-than-we’d-like return to tourism levels.
This piece will focus on four specific areas where we see growth stunted in the travel space including how OTAs can navigate these challenges:
Ironically, one of the major hurdles for OTAs stems from operating across multiple markets themselves - paying vendors in different geographies. Many OTAs fall into the double conversion trap, where they collect and spend in multiple currencies, resulting in financial losses that can be easily avoided. Implementing efficient currency conversion systems is crucial for OTAs to avoid unnecessary expenses and ensure paying and collecting money locally in relevant currencies is seamless and cost-effective.
The absence of multi-currency options at the checkout stage can lead to a frustrating booking experience for customers. Consumers want, and increasingly expect, local payment methods to be accepted, and often the difference between a sale for an OTA and a customer going to a competitor can be which payment methods are accepted, and in which currency. OTAs need to offer flexible payment solutions that cater to the preferences of their global clientele while providing preferred and local payment options. This is particularly important when dealing with bookings from customers who are more cost-conscious or regions where there are significant economic challenges.
Additionally, high payment gateway fees eat away at profit margins, making it essential for OTAs to negotiate favorable rates or explore alternative payment methods to maintain profitability.
OTAs often rely on a limited number of cards to make bookings and pay suppliers. This practice poses security risks and can result in unforeseen delays in supplier payments, negatively impacting a business’s bottom line. Not to mention the increased damage done if fraud occurs and accounts get locked.
Refunds too can present a challenge and if refunds need to be issued due to a suspected fraud, there will again be potential FX costs associated.
Friendly fraud, when a customer challenges a legitimate payment, is also a concern for many OTAs. This might happen when multi-currencies are involved and a customer believed they were paying one rate, but ended up confused due to FX costs or paying in an unfamiliar currency that wasn’t converted properly.
OTAs must prioritise effective risk mitigation strategies to ensure secure transactions and timely payments. Implementing robust payment systems and exploring secure alternatives can help mitigate these security concerns. Single-use virtual or recurring use cards designated to a specific team can be a great way to help stay protected and mitigate risk more effectively.
Operating on a complex web of providers and systems is a time-consuming challenge for many OTAs. The fragmented nature of financial operations can hinder efficiency and productivity. To address this issue, OTAs should consider selecting providers that can not only scale with them as they grow as a full-stack solution but also integrate and play well with each other as a modular solution.
This consolidation reduces the number of connections and streamlines cross-border payment processes, leading to improved operational efficiency, lower foreign exchange fees and more transparency. Additionally, leveraging API integrations can enhance file management and reconciliation processes, further optimizing OTA operations.
As the travel industry faces unprecedented challenges, OTAs must navigate various growth obstacles in order to thrive in today’s ever-changing landscape. These are just four of the most common hurdles OTAs face when growing internationally - in reality, there are many more.
However, the good news is that there are tech solutions out there that can, in one fell swoop, eliminate these growth problems. Choosing the right financial and technology partners is crucial and, if chosen correctly, could allow OTAs the time, money, and resources to focus on what really matters, giving a great customer experience, increasing revenue, and scaling across borders.