PhoCusWright Trends in Travel Payments -...

Trends in Travel Payments

April 16, 2013 A PhoCusWright Special Project

Elavon2013 Airline & Lodging Symposium

Douglas QuinbyPrincipal Analyst

PhoCusWright Inc.

Map the Travel Payments Landscape Region Method

Model  Travel Segment

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

© 2013 PhoCusWright Inc.  All Rights Reserved. 3

Airlines11%

Lodging7%

Other suppliers3%

Travel agencies28%

TMCs*13%

Online travel agencies7%

Wholesalers/tour operators

12%

Corporate travel managers

7%

Technology / payment solution providers

12%

More Than 1500 Travel Industry Professionals Surveyed

* Global – operational in 3 or more regions and includes some overlap, so the pie exceeds 100%.Base: Total – 1,523 respondentsSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

PhoCusWright Special Project Deliverable (Payments Project): Final Draft  March 25, 2013. Not for distribution.

© 2013 PhoCusWright Inc.  All Rights Reserved. 4

Project Partners:Sponsors:

CyberSourceElavoneNett International Pty Ltd.GlobalCollect Services BVIxaris Systems Ltd.Mastercard WorldwidePayPal Inc.UATPU.S. Bank Corporate Payment Systems

The State of Pay

© 2013 PhoCusWright Inc.  All Rights Reserved. 6

Base: Total – 1,244 respondentsSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Conventional Methods Most Widely Accepted

All Respondents

Debit cards

Electronic funds transfer

Check

Credit cards

Cash

0% 20% 40% 60% 80% 100%

Already supported Not yet but planning to

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

© 2013 PhoCusWright Inc.  All Rights Reserved. 8

Base: Total – 1,244 respondentsSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

“Alternative” Methods Most Widely Accepted

All Respondents

Dedicated terminal payments

Alternative online methods

Closed prepaid cards

Pay‐by‐installment plans

Cash cards/cash‐on‐delivery (COD)

Virtual cards

0% 20% 40% 60% 80% 100%

Already supported Not yet but planning to

A Mobile Payment Revolution…?

Do you support mobile‐only payment methods?

© 2013 PhoCusWright Inc.  All Rights Reserved. 11

Supported Mobile Payment Methods – All Respondents

Total – 1,244 respondents, 323 travel suppliers, 178 travel wholesalers, 733 travel retailers and 190 technology providersSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

1%

2%

3%

12%

14%

12%

NFC‐based mobilepayment solutions

Mobile card‐swipeservices

Mobile paymentEFT services

0% 20% 40% 60% 80% 100%

Already supported Not yet but planning to

Airline Channels and Payments

© 2013 PhoCusWright Inc.  All Rights Reserved. 13

Global* Airline Passenger Revenue by Region (US$B), 2010‐2012

*Canada, MEA not included.Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

27% 26% 27%

29% 29% 27%

31% 32% 33%

7%  7%  7%6% 6%  6% 

2010 2011 2012

LATAM

Eastern Europe

APAC

Western Europe

U.S.

© 2013 PhoCusWright Inc.  All Rights Reserved. 14

Global* Airline Passenger Revenue by Channel (US$B), 2010‐2012

*Canada, MEA not included.Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

47% 46% 45%

17% 16% 16%

10% 10% 10%

26% 28% 29%

2010 2011 2012

Airline Website

OTA

Direct Offline/Other

Travel Agencies

U.S. Airlines: Website Revenue by Payment Method 

93% 2% 1%

4%

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

46%

22%

13%

10%

5% 4% Credit Card

EFT

Debit Card

Cash/Check

OnlineAlternativeLoyaltyRedemption

APAC Airlines: Website Revenue by Payment Method 

Indirect Airline Sales: ARC and IATA/BSP

Sources: ARC, IATA and PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Direct, 45%

Indirect, 55%

© 2013 PhoCusWright Inc.  All Rights Reserved. 18

Global ARC/IATA Payment Method Mix

Sources: ARC, IATA and PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape IATA 1 

Card, 52%

Cash, 48%

2003

Card, 49%Cash, 

51%

2011

© 2013 PhoCusWright Inc.  All Rights Reserved. 19

Global ARC/BSP Sales and CAGR by Region for 2003 and 2011

Sources: ARC, IATA and PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

13%

4%5%

14%

10%

19%

 ‐

 10

 20

 30

 40

 50

 60

 70

 80

 90

 100

APAC U.S. WesternEurope

MEA South/CentralAmerica

EasternEurope

CAGR (%

)

Sales (US$B)

2003 2011 CAGR

© 2013 PhoCusWright Inc.  All Rights Reserved. 20

57%

39%23%

13%1%

0%

43%61%

77%87%

99% 100%

South Korea Australia Japan India China Indonesia

Card Cash

IATA Card vs. Cash Sales by Select Countries, APAC, 2011

Sources: IATA and PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape IATA 6

© 2013 PhoCusWright Inc.  All Rights Reserved. 21

ARC/IATA Average Price per Transaction (US$) by Region, 2011

Sources: ARC, IATA and PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape  IATA 4

$310

$460

$363

$891

$588$652

APAC U.S. Global

Cash Card

Lodging: Pre‐ vs. Post‐

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Merchant Agency

Lodging

Has the Merchant Model Met Its Match?

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

© 2013 PhoCusWright Inc.  All Rights Reserved. 25

Base – 708 travel retailers, 156 travel wholesalersSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Pre‐Pay (Merchant) vs. Post‐Pay (Agency)

Intermediary Mix of Hotel Bookings by Contracting Model, by Region

MEA

Eastern Europe

Asia

LATAM

Western Europe

North America

0% 20% 40% 60%

Agency

Merchant

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Merchant Agency

Intermediaries Hotels

Lodging

“Is my client going to have a great experience?”

“Am I going to get paid?”

Source: PhoCusWright’s Travel Agency Distribution Landscape: 2009‐2013

© 2013 PhoCusWright Inc.  All Rights Reserved. 28

Percentage of Intermediaries with No Uncollected Hotel Commissions

Base – 658 travel retailers, 134 travel wholesalersSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

15%

17%

32%

47%

More than $1B

$100M‐$1B

$1M‐$5M

Less than $1M

Wouldn’t you rather pre‐pay 

in full?

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Base N=73 hotelsSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Three in Four Hotels Offer Pre‐paid on Websites

Base N=73 hotelsSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Pre‐paid Bookings Account for One in Five Website Reservation Dollars

The Cost of Payment

Electronic transaction fees

Global acceptance

Fraud

Unpaid/delayed

Staffing resources

PCI

The Cost of Acceptance:

Travel Website

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

© 2013 PhoCusWright Inc.  All Rights Reserved. 34

Airlines:  $7B Globally in Electronic Payment Fees

Sources: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape and IATA

OnlineAlternative

BSP/ARC Cash

EFT

Debit Card

Credit Card

1%

29%

6%4%

52%

Share of PAX RevenueShare of Payment Fees

© 2013 PhoCusWright Inc.  All Rights Reserved. 35

Total Fees Paid to Accept Electronic Payments by Method and Region (US$M), 2011

Note: Data excludes Canada and MEASources: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape and IATA

 ‐

 500

 1,000

 1,500

 2,000

 2,500

 3,000

 3,500

U.S. EU APAC LATAM EE

Online Alternative

ARC/BSP Cash

EFT

Debit Card

Credit Card

FraudCard FeesMobile Payments

Settlement Windows

Reconciliation

Global Currency Management

Taxes/feesNew Card Technologies/Standards

PCI

Travel Payments Concerns

Airline Website Global Fraud Rate: 

1.1%

Fraud rate here includes zeros – airlines who report no fraudulent bookings on their websitesSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

© 2013 PhoCusWright Inc.  All Rights Reserved. 39

© 2013 PhoCusWright Inc.  All Rights Reserved. 40

Retailers: Methods Used to Track Hotel Commissions

Base – 657 travel retailers, 134 travel wholesalersSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Use a commissionsettlement service

Run regular reports fromour accounting/back‐office system

Staff manually track all bookings,invoices and accounts receivable

0% 20% 40% 60%

Wholesaler

OTA

Trad. TravelAgencyTMC

© 2013 PhoCusWright Inc.  All Rights Reserved. 41

Staffing and Weekly Hours Spent on Payment Functions

Base: Total – 1,244 respondentsSource: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

0

5

10

15

20

25

30

$1M‐$5M $5M‐$25M $25M‐$100M $100M‐$1B More than $1B

Travel Companies by Gross Travel Bookings

Weekly Hoursper Staff

Staffing(median)

Electronic transaction fees

Global acceptance

Fraud

Unpaid/delayed

Staffing resources

PCI

The Cost of Acceptance:

Travel Website

Source: PhoCusWright’s Payment Unsettled: Cost, Opportunity and Disruption in Travel’s Complex Payment Landscape

Questions?

Douglas Quinby Principal Analyst, PhoCusWright Inc.

dquinby@phocuswright.com@Douglas_Quinby