A Thing
The Green SheetGreen Sheet

The Green Sheet Online Edition

December 11, 2023 • Issue 23:12:01

Dealing with disasters in the travel industry

By Bob Kaufman

In March 2023, 276,485 tourists visited Maui, spending $619.9 million in that month alone—up 35.1 percent from the previous year (see tinyurl.com/fhd393xy). Given this was before the tourism season had really kicked off, over the summer we could have seen billions of dollars being spent on an island with a population of only 164,221. Tourism typically accounts for around 70 percent of the island's economy (see tinyurl.com/3tnb4dwy).

However, in August, a fire broke out in the town of Lahaina that, at the time of this writing, was believed to have resulted in more than a hundred fatalities—a devastating toll. The message, as with most natural disasters, then became: Stay away. Now is not the time for tourism that forms so much of the island's economy (see tinyurl.com/bdee8wkw).

The impact of this tragedy and immediate aftermath is spreading far beyond the island itself. Within the travel industry, it is affecting the hotel chains that millions of guests would have stayed at, the airlines that would have taken them to the island, and the travel agencies they would have booked trips through, which could be major flight comparison sites or mom-and-pop travel agencies.

This disaster is harming a travel industry already finding it difficult to fully get back to pre-pandemic levels, and it is far from the only exogenous event that the industry has had to deal with: just days after the disaster in Maui, Hurricane Hillary had a similar effect on flights across the United States (see tinyurl.com/ywff6h32).

These events have consequences that reach much further than individual flights themselves. According to "Something Has Happened to the Travel Industry. I'm the One Dealing With It." by Erica Wilkinson and published by Slate (see tinyurl.com/4tyvs3j7):

"[T]hroughout 2023, it has seemed like overlapping travel miseries are the new normal. Snow gives way to ice, which gives way to hail, which gives way to heat so blistering that planes can't take off. That's what it feels like. Meanwhile, there aren't enough flight crews, maintenance crews, or traffic controller crews to keep planes in the air. Airlines are losing luggage, losing seat assignments, losing upgrades.

"I spend most of my time as a travel agent working with business travelers. The goal is to get them where they need to be, at the time they need to be there, for as little money as possible. ... But for the first time in the dozen years I’ve been doing this, budget concerns are taking a back seat to fear." (See tinyurl.com/4tyvs3j7).

These events don't just cause immense devastation during the incidents themselves but extend beyond to a financial cost in either compensation made to travelers, refunds, chargebacks, and/or the time spent dealing with the administrative issues.

The chargeback issue in travel

The chargeback dilemma has emerged as a particularly thorny issue for the travel industry. Even during normal operations, chargebacks are unusually high. Travelers who miss their flight will often make a chargeback claim through their bank rather than going through the airline or travel agency's refund process, which causes the industry's financial stability to take a hit.

These big-ticket chargebacks, which often surge following major events such as natural disasters, create a domino effect. Airlines are left grappling with reduced profit margins, increased processing fees, and a heightened vulnerability to future disruptions. The spiraling cycle of chargebacks not only chips away at the industry's financial health but also hampers its ability to recover swiftly after unexpected events.

Navigating these challenges requires a reimagining of payment systems that can weather the storm of unpredictability. The traditional static payment methods of the past are ill-suited to handle the intricate web of chargebacks and refunds that arise from the chaotic aftermath of unforeseen events.

Online travel agencies (OTAs) spend billions of dollars to attract customers, and yet when it comes to arguably the most important part of a transaction with that customer, the payment, they hand them over to the airline, hotel or other partner.

The weakness of this model (sometimes called the agency model) was highlighted during the pandemic: as flights and hotel stays were canceled, consumers turned to the OTAs for refunds only to be frustrated because the OTA could not help them get refunds or rebook their journey because they, legally speaking, weren't the legal entity that charged the traveler.

The last thing that travelers want is multiple transactions on their credit card. When you go to the grocery store, you don't get one charge for the meat, another for the dairy items and another charge for vegetables, but this is how it happens in travel. You book flights, a hotel and any extras like a rental car through an OTA and then have three separate charges on your credit card including a booking fee from the OTA.

Not only does this create frustration and confusion, but it results in the traveler's card being passed through to multiple systems and multiple providers, increasing the risk of the card data being stolen and fraudulently used.

The consumer is using an OTA for a reason: they want a one-stop shop, and yet, when it comes to the most important part of the booking, they will only get that one-stop-shop experience if the OTA is the merchant of record.

Disaster-proofing the travel industry

With recent events like the Maui wildfire underscoring the travel industry's vulnerability, the call for innovation and resilience has grown louder. The overlapping travel miseries arising from extreme weather, flight cancellations and chargebacks demand a transformative approach to payment systems. A solution that can untangle the knot of chargebacks and refunds, while fortifying the industry's financial stability, is critical.

This becomes even more vital when disasters and disruption are common in the travel industry. Having a single point of contact is better for the traveler, but also allows the OTA to take complete control over the customer experience. Imagine the customer goodwill that would result from being able to solve a customer's problems in a single phone call instead of passing them to multiple disconnected companies.

Becoming the merchant of record for transactions gives every part of the travel industry some much-needed relief during a difficult time and will be part of the support the industry needs to return to normalcy. end of article

Bob Kaufman is the founder and CEO of ConnexPay, https://connexpay.com. He started ConnexPay with a passion to improve travel companies' experience of paying and getting paid. His strategic foresight and visionary leadership have built ConnexPay into a company that now serves a multitude of businesses spanning several industries globally. Prior to founding ConnexPay in 2017, Bob spent nearly 20 years at U.S. Bank, where his tenure included serving as CFO of the Payments Services division as well as senior vice president, leading innovation projects across the bank's payments division. ConnexPay is the first company to bring together the two sides of the payment process - payments acceptance and virtual payments issuing—into a single platform with one contract and one reconciliation. Learn more at https://connexpay.comand contact Bob via www.linkedin.com/in/robert-kaufman-38b91a35.

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

Prev Next
A Thing