According to data from UN Tourism, 2024 international tourism arrivals are expected to increase by more than 15 percent compared to the year before, reaching a historic high. As the surge in global travel hits unprecedented levels, the revenue opportunity for online travel businesses is huge.
However, the increase in cross-border travel also opens the door to a series of tough operational and financial challenges. Travel companies are increasingly reliant on moving money across borders as part of their business model, often incurring significant operating costs in the process. Current financial systems used to move money across borders are slow and expensive, which is eating into their hard-earned profits and diluting the revenue opportunity at hand. In fact, our research found that 66 percent of global travel executives believe inefficient payment systems are harming their profits.
This changing landscape will have a disproportionate impact on small to medium-sized travel companies, whether that be tour operators, online travel agents (OTAs) or destination management companies. Recognising the impact and embracing modern payment systems will be critical for those global travel companies to stay competitive in today’s market.
Turbulent cross-border transactions
Travel companies are exposed to some of the most complex financial challenges. It’s estimated that 88 percent of online travel companies are frequently making payments to suppliers or vendors in different countries and foreign currencies. Typically, they have to establish multiple financial relationships or set up local entities in new markets to power these transactions. However, a reliance on these legacy banking rails can involve multiple intermediaries which can result in costly payment delays.
Moving money across borders is not only slow and complicated but also exposes travel businesses to the sting of volatile foreign exchange (FX) fees. Traditional banking providers usually offer unfavourable exchange rates and charge high fees for currency conversions, which can hurt a travel business’s profits. For smaller and medium-sized travel businesses, these legacy systems are not only a costly pain but also divert focus away from core operations and slow international growth. If they are to capitalise on the surge in global travel and compete in today’s environment amid several larger entrants, they must find a way to simplify their financial operations.
Clearing for take-off with a modern payment system
Increasingly, online travel businesses are shifting away from traditional banking providers to fintech platforms that can tackle these cross-border financial challenges. Fintech providers are continuing to advance alternative modern payment systems that can simplify the payout and reconciliation process to help travel businesses save time and money. It’s clear the demand for these solutions is there: 9 in 10 travel executives globally plan to upgrade their payment technology as a priority over the next 12 months.
In search of simplicity, an all-in-one solution from a single provider is a good starting point for travel businesses. An end-to-end payment and financial operations platform can simplify the process of accepting payments, settling funds and managing payouts, no matter the country or currency, through one integration. One of the key features that can support global travel businesses is a multi-currency account. This enables businesses to manage high volumes of cross-border payments in different currencies cost-effectively through one single account, removing the need to set up their own local entities or work with multiple banks in each market. For example, a customer can pay for a trip in GBP and the business can payout to the supplier in USD, all from the same account. This combined with built-in hedging solutions can help travel businesses manage their FX exposure and cost. Elsewhere, virtual cards are also gathering pace among global travel businesses as a way to pay suppliers in minutes, eliminating unnecessary conversion fees and any surprise foreign transactions.
Customisable end-to-end solutions offer a silver bullet for global online travel businesses, by removing the complexity of using disparate legacy systems and multiple providers. Modern payment systems reduce the operational costs which burden small and medium-sized travel businesses in particular, enabling them to maintain a lean operation and scale faster.
Destination: increased profits
In an increasingly borderless travel industry, upgrading to a modern payment and financial operations system will be business-critical to stay competitive. Businesses that rely on outdated, inefficient payment systems will continue to see their margins eroded. With global travel forecasted to keep growing, travel businesses must equip themselves with the right infrastructure that powers, not dilutes, the huge revenue opportunity at hand.
