Airlines vs Accommodation: How Different Types of Suppliers Are Paid

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paying suppliersHaving the right supplier base is essential for travel companies as it dictates their ability to successfully win customer bookings.

When looking at ways to strengthen relationships with suppliers it is important that travel companies understand the impact that different payment methods can have on suppliers.

Infographic – Airlines vs Accommodation: How Different Types of Suppliers Are Paid

Different types of suppliers are paid in different ways, but there are common challenges that are experienced.

Research conducted by Phocuswright, which was co-sponsored by WEX, into the European payments landscape shows that almost three quarters of airlines (69%) are paid via a GDS using a billing and settlement plan – of these most settle with a credit card (81%) and some with cash (19%).

Away from GDS bookings 31% of air travel is booked directly with the airline. Here the payment methods are more varied:

  • 58% agency’s credit card
  • 36% customer’s credit card
  • 30% Virtual Card Numbers (VCNs)
  • 21% direct funds transfer from a bank
  • 9% cash for cheque

When it comes to paying accommodation providers and other travel suppliers, the payment methods used by travel companies are disjointed:

  • 45% agency credit cards
  • 24% VCNs
  • 23% cheque
  • 15% customer’s credit or debit cards
  • 8% other methods

Looking in more detail at how hotel bookings are made by travel companies, 56% are booked on an agency basis (where the travel company earns a commission) whereas 44% are made on a merchant basis (with the travel company committing to a block of rooms and selling these onto the end customer).

For merchant basis hotel bookings, travel companies typically settle using the following payment methods:

  • 60% credit card
  • 27% VCNs
  • 27% direct billing with automated payment (e.g. funds transfer)
  • 23% automated payment without billing
  • 15% direct billing with manual payment (e.g. cheque)

While there’s much discrepancy in how suppliers are paid, both by the type of supplier and even amongst different suppliers of the same type, common challenges are presented in the payment methods used:

  • Fraud and disputes – agency credit cards leave travel companies exposed to fraud risk should the card be misused, this in turn can create extra workload for suppliers in seeking to resolve disputes
  • Reconciliation workload – payment methods which do not tie a unique reference to a particular payment/transaction make reconciliation harder for both travel companies and suppliers
  • Costs – certain payment methods are costly to accept while those that create manual work take up resources that could be used elsewhere in supplier businesses
  • PCI DSS requirements – passing on consumer credit cards creates the need for suppliers to be PCI DSS compliant

View our infographic

Virtual Payments Solve Key Payment Challenges For Suppliers

Our whitepaper, 5 Reasons Why Travel Suppliers Love Virtual Payments, explores the challenges that travel suppliers of all types face when accepting payments in more detail.

It shows how virtual payments, which are easily integrated into existing systems, can help solve these payment challenges for suppliers.

Download 5 Reasons Why Travel Suppliers Love Virtual Payments now.

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