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Booking surge could cause severe cash-flow problems for small agencies
Payments company Nium reports January’s net sales for travel agents are up by an unprecedented 700% year-on-year – but this could also place enormous strain on their payment processes.
Spencer Hanlon, Global Head of Travel Payments and Head of Europe at Nium said: "We all know that the negative volatility caused by the various waves of the pandemic – resulting not only in unsustainable lower levels of travel bookings but also painful cancellation and refund bottlenecks – has sadly resulted in many great travel companies closing."
"But even sadder still is the fact that this current ‘positive volatility’ as bookings surge will cause many to face trading difficulties and cash-flow problems – and in extreme cases could well lead to further closures."
This is because too many travel agencies – particularly SMEs – are still reliant on old-fashioned credit cards to finance their businesses, Hanlon says.
Creditors are unlikely to allow them to rapidly increase their credit lines, despite the bookings flooding in, or offer them flexibility in how to manage payments efficiently.
"The smarter ones amongst those at risk might well decide to turn away bookings and sadly miss out on this much needed once-in-a-lifetime boom."
"Those who don’t could quickly find themselves in a very difficult situation where they can’t fulfill bookings."
Hanlon recommends these measures:
1) Maximise cash at all times: do more with less and pay only when payment is due, and not before.
2) Have complete visibility of all transactions: reconciliations shouldn’t be time consuming.
3) Speed up processes: no more twice weekly payment schedules, those days are gone.
4) Ensure everything is easily controllable: you need to be able to specify precisely the currency of use, where the transactions can occur, and control the dates on which transactions can be executed.
5) In short: automate all financial payments processes or you´ll forever be at the mercy of volatility.
Nium urges travel agencies to implement these immediately and permanently and always ‘be prepared ‘for future volatility.
Nium is a fintech payments company with a strong presence in the travel sector.
https://www.nium.com/platform/travel-and-logistics
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Editor for TravelMole North America and Asia pacific regions. Ray is a highly experienced (15+ years) skilled journalist and editor predominantly in travel, hospitality and lifestyle working with a huge number of major market-leading brands. He has also cover in-depth news, interviews and features in general business, finance, tech and geopolitical issues for a select few major news outlets and publishers.
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