Why is up to 20% of OTA profit still spent on paying suppliers?
Online Travel Agents (OTAs) sit at the center of a complex payments ecosystem. Not only do they need to ensure payment acceptance from customers around the globe, they need to pay their own suppliers too. But with those providers often spread across a broad range of industries, countries and multiple currency and payment types, even the simple act of paying for goods and services can get complicated quickly.
Paying the price
For OTAs, particularly those that deal with hundreds – even thousands – of suppliers across the globe, the appeal of ‘virtual’ prepaid cards is easy to see. The technology to issue ‘single-use’ cards provides businesses with a quick and simple way to pay their suppliers, all through a centralised system that makes it easy to keep track of spending. Moreover, virtual cards provide OTAs with a way of navigating some of the industry’s biggest crunch points.
Or do they? New research by Ixaris into the spending profile of five medium-sized OTAs suggests that even those agencies with a seemingly ‘optimised’ payment solution may still be spending tens of thousands more than necessary on paying their suppliers. By failing to optimise their payment processes, many are needlessly exposing their business to surcharges, FOREX fees as well as management and reconciliation costs.
While numbers may differ from agency to agency, Ixaris data suggests that even an average OTA could be spending between £40,000 and £165,000 every year just on payment-related costs, many unnecessarily.
“We’re calling on any OTA, even those who feel that they’ve got this issue locked down, to look again at their spend profile,” said Ixaris Solutions’ Chris Mason, General Manager. “We’re seeing a huge drain on OTA margins, even though the issues behind that drain can be tackled. Any OTA impacted by these factors should consider undertaking a review of its payment processes and seeking efficiencies wherever possible.”