Payment Unsettled: Cost Opportunity and Disruption in Travel's Complex Payment Landscape

Payment Unsettled: Cost Opportunity and Disruption in Travel's Complex Payment Landscape Published October 2013 Analysts: Douglas Quinby, Michael Gerra, Caryn Smith, Ivan Bekkers, Chetan Kapoor, Lorraine Sileo, Maggie Rauch

 

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The "always-on" mantra of modern technology means that travel companies often focus their attention and energy toward consumer-facing areas of their business – social media, mobile, metasearch, and the ongoing tug-of war between suppliers and online travel agencies. Payments, while a critical part of the customer experience, often plays second fiddle. Yet an effective payment system is a key element of conversion, while payment processing efficiency can have a long-term impact on margin.

As travel technologies and traveler booking behaviors change, so do payment methods and their associated challenges. Payment Unsettled: Cost Opportunity and Disruption in Travel's Complex Payment Landscape unravels the complexities of travel payments, highlighting key emerging technologies, practices and trends. 

Topics include:

  • Detailed analysis of the state of travel payments for the airline and lodging segments
  • Payment methods and trends for B2B and B2C bookings
  • Dynamics surrounding Airlines Reporting Corporation (ARC) and International Air Transport Association's (IATA's) billing and settlement plan (BSP) services, and other B2B payment methods
  • Analysis of hotel merchant and agency models
  • Overview of key payment trends, including the cost of payments, payment fraud, online alternative payments, and mobile booking/payments

Purchase Payment Unsettled: Cost, Opportunity and Disruption in Travel's Complex Payment Landscape to navigate the travel payments landscape with clarity and confidence.

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  • Introduction
    • Study Background
    • Key Findings
    • Study Methodology
    • Industry Survey
    • Executive Interviews
    • Third-Party Data
    • Glossary of Terms
  • The State of Pay: Airlines
    • B2C: Airline Website Payments
    • B2B: Agency-Airline Payments
    • ARC and BSP
    • Beyond BSP
  • The State of Pay: Lodging
    • Merchant and Agency Models
    • B2B: Agency-Hotel Payments
  • Key Payment Trends
    • Cost of Payments
    • Payment Fraud
    • Online Alternative Payments
    • Mobile Booking and Payments
  • Partners
  • Sponsors

Phocuswright conducted this study using three key research activities:

  1. A quantitative, global survey of travel industry professionals
  2. Executive interviews
  3. Third-party data analysis


Industry Survey
Central to the study was a quantitative travel industry survey fielded through the following organizations: African Business Travel Association (ABTA), Association of Corporate Travel Executives (ACTE), Business Travel News (BTN), Hotel Electronic Distribution Network Association (HEDNA), International Air Transport Association (IATA), Tnooz, Travel Trade Gazette (TTG) and Web In Travel (WIT).

Phocuswright fielded the survey between November 2012 and January 2013 and received 1,523 qualified respondents. The respondent pool represents a rich cross-section of travel industry sectors and geographic regions. The more mature travel markets of North America, Western Europe and Australia/New Zealand collectively account for 40% of respondents, while Eastern Europe, Asia, the Middle East, Latin America and Africa each account for approximately 10% of respondents (see Figure 1). Companies with operations in three or more regions are grouped into a "global" category, whose respondents account for 13% of the sample.

The survey sample includes a diverse mix of travel intermediaries (60%), suppliers (21%), corporate travel buyers (7%) and technology and payment vendors (12%) (see Figure 2). Each chart in this report identifies the respondent base for each question by segment and number of respondents (e.g., base: 692 travel retailers).

Executive Interviews
Phocuswright conducted 30 confidential, executive-level interviews across multiple stakeholder segments and geographic regions in travel payments and settlement, including:

  1. Travel companies: airlines, hotels, online travel agencies, etc.
  2. Travel industry associations and technology firms
  3. Payment solution providers (PSPs), issuers/acquirers, card networks
  4. Alternative and emerging payment solution providers


Third-Party Data
Phocuswright partnered with IATA to analyze 2003-2011 data from IATA's global Billing and Settlement Plan members. This data includes total sales volume and transactions – referred to as "standard charging units" or "SCUs" in IATA terminology – by payment method (card or cash), country and region. For the same time period in the U.S. market, Phocuswright collected sales and transaction data by payment method from the public website of the Airlines Reporting Corporation.

The resulting analysis is an aggregate projection of global and regional airline market size by payment method. This projection was created with data from 1) Phocuswright's industry survey and related interviews, 2) IATA and ARC, and 3) existing Phocuswright market sizing statistics. Throughout this analysis, all figures are in US$ unless otherwise stated. Totals in charts may not always add to 100% due to rounding or other reasons as indicated.

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