Singapore based finance company, Nium, is warning that too many APAC outbound tour operators and travel agents are exposing themselves to unnecessary cancellation risks via old fashioned payment methods.
The pandemic caused chaos in this sector, not only did future business opportunities come to a complete stand still, booked (and often paid for) trips were cancelled and refunded, creating widespread cash flow issues, so how can the industry protect itself.
Think about it … if things went south tomorrow, would you be prepared?
Back in 2020 cancellation rates well above 100% levels not only caused an existential crisis for travel businesses as they pondered a world with no travel, it also caused them a short-term refunds crisis that bankrupted many.
How would many APAC tour operators and travel agents cope with that same challenge today if there was another COVID wave? Or indeed any other kind of catastrophic event such another virus, freak weather conditions or even a geopolitical event – be that across APAC or just affecting their location – leaving travellers unable to undertake the international travel plans they’d paid for?
The answer is that any tour operator or travel agent who is paying their travel suppliers via bank transfers would have an exceptionally difficult time getting refunds.
“In such a catastrophic situation the reality is that even refundable bookings might not be refunded, and if they are the payments could take weeks or even months,” head of travel, Nium, Spencer Hanlon, said.
Non-refundable bookings are hard to get back and some companies are in deep legal action, still, from cancellations in March 2020 and it is likely they will never see the money again.
“But is there any way to manage or even avoid this risk?” Hanlon, said.
“Thankfully there is in the form of virtual credit cards. In the same way the consumer credit cards offer the consumer much greater protection in the case of a service not being delivered, B2B virtual cards also protect travel companies.”
“That means that if there were another wave of cancellations it would be significantly easier to claim a refund – and just as importantly this would be resolved, very quickly, meaning APAC tour operators and travel agents would have the money back in their accounts in a matter of days, not years.
Virtual cards would also make the operational side of a mass-cancellation scenario a lot easier to handle too, for example by automating the reconciliation side of things.
From a day-to-day business perspective they make a lot of sense too: they offer controls that traditional cards or bank transfers don’t, allow for much quicker payments, and are also significantly cheaper too.
