The WTTC (World Travel & Tourism Council) confirms that the Travel and Tourism sector is a large sector with healthy growth. The WTTC estimates that this sector accounted for USD 6.3 trillion (i.e. 9.1% of global GDP) that involves 255 million jobs globally, and predicts that it will grow 2.7% this year.
Travel encompasses a wide variety of players including large merchants such as as airlines, rail operators, hotels, travel agents, car rental companies - all with significant and often complicated payment infrastructures - as well as the payment providers serving this merchants, including specialized payment network, issuers and acquirers.
Why are “payments” important in the travel sector and to these players?
EDC's experience and studies indicate that "payments" is important for travel merchants because it can impact both sides of their P&L account:
- On the revenue side: optimizing payments can have a significant impact on core sales (e.g., increasing conversion rates of online direct sales) and on ancillary revenue (e.g., increasing revenue from co-brand credit cards). For instance, some large airlines generate hundreds of millions of dollars in ancillary revenue from their co-brand card programs
- On the cost side: optimizing payments can reduce distribution costs for large travel merchants. For instance, an EDC's survey among airlines globally indicates that the average total of accepting payments is equivalent to $12.50 per ticket. And recent surveys by Cybersource and Worldpay estimated a revenue loss due to card fraud in the range of 0.9%-1.5% of revenue
On the payment provider side, the travel sector is also an important topic:
- It generates a significant proportion of card spend globally
- As such, it provides growth opportunities for payment providers such as merchant acquirers, payment gateways, fraud prevention vendors, DCC vendors, etc.
Download our recent whitepaper on Payment Trends & Opportunities in the Hotel Sector (March 2012).
EDC's Approach and Expertise
Our firm has considerable experience and expertise in payments-related consulting projects for large travel merchants and for travel-focused payment providers, having conducted multiple projects for companies in the travel industry - for both leisure and business purposes - since 2002.
Our Travel Practice team focuses on advising clients in this sector on payments-related cost reduction and revenue opportunities. For example, EDC recently helped a large travel supplier prioritize which payment methods to accept across five key countries. In another project for a leading online player, EDC completed a 360 payment diagnostic to review all aspects of payment (payment acceptance policy including range of accepted payment method and surcharging policy, risk management tools and processes, contractual arrangements with payment providers, etc.) in order to identify and rank key improvement initiatives.
EDC is also a regular speaker at events such as ACTE, Airline Business / UATP conference, Airline Payments Summit, ARC and IATA fraud conferences, Business Travel Show, CASMA, NBTA, Visa Global Airline Forum, etc. EDC is also a member of the Merchant Risk Council that involves major travel players.
Client testimonial from an top international airline company: “Edgar, Dunn & Company (EDC) provided knowledge and expertise which helped us to validate and enhance our payment strategy. We particularly valued their broad and in-depth industry intelligence, flexible approach and ability to adapt to our needs. EDC have therefore provided significant support to the cost of sale reduction which remains a core part of our Business Plan."
If you are interested in discussing any of these payments-related topics in the travel sector, EDC will be pleased to set up an initial conversation to discuss in further detail how your organization can optimize its payments infrastructure.
Contact: Pascal Burg, Head of the Global Travel Practice