Notes by Rajeev Goswami

More Travel Agency Partners and OTAs Embracing This Payment Model

Online travel is evolving rapidly, and Online Travel Agencies (OTAs) and other travel agencies are increasingly adopting the Merchant of Record (MoR) payment model. This shift changes how agencies handle payments, optimize operations, and enhance customer experience. As a corporate travel manager, understanding these changes can help you navigate and negotiate better travel solutions.

Here’s why the MoR model matters—and what challenges and opportunities it brings to corporate travel management. It’s a shift that empowers you, the corporate travel manager, to take more control and make more strategic decisions in your role.

What Is the MoR Model?

Traditionally, agencies have adopted a pass-through payment model for collecting payments for bookings made to corporate travel. In the pass-through model, OTAs/Agencies act as middlemen. Payments are made directly to suppliers (e.g., hotels or airlines), with the supplier acting as the Merchant of Record, controlling funds. Agencies collect commissions from suppliers for the booking.

With the MoR model, the agencies take complete control of payment processing. They charge customers directly through their payment gateways or otherwise, manage the flow of funds, and pay suppliers. This process enables them to oversee the entire transaction, improving service and operational efficiency.

Advantages for Corporate Travel Managers

1. Enhanced Financial Insights and Reconciliation

The MoR model enables OTAs to provide corporate travel managers with:

• Payment safety and security since all payments are made to an agency, not multiple suppliers. This process avoids credit card fraud or misuse.
• Detailed, customized expense reports tailored to your organizational needs.
• Streamlined reconciliation processes, offering clarity and accuracy in financial records.
• Real-time insights into travel spending, allowing for better budget control and strategic planning.

These features make it easier for corporate travel managers to track and manage travel expenses, ensuring alignment with company policies. The MoR model may necessitate some adjustments to existing policies, but it also offers the opportunity to enhance policy compliance and control over travel expenses.

2. Improving Traveler Experience

The MoR model allows OTAs to handle directly:

• Refunds and cancellations, making them faster and hassle-free.
• Flexible payment options like installment plans may suit employee preferences or align with cash flow policies.
• Seamless handling of itinerary changes without involving suppliers, saving time and reducing frustration.

This efficiency level helps travel managers ensure smoother employee journeys and greater satisfaction.

The MoR model significantly improves the customer experience, making your job as a corporate travel manager productive and more satisfying.

3. Cost-Saving Opportunities

The use of virtual cards in the MoR model brings additional benefits for agencies, including:

• Cash rebates on supplier payments can translate into savings that OTAs may pass on to clients.
• Increased security by reducing fraud risks during payments.

Further, Agencies can provide additional discounts as they receive net rates from suppliers and apply markup before selling to corporations.

These advantages and improved operational control make OTAs with MoR capabilities strong partners for corporate travel programs.

The Challenge: Additional Costs

While the MoR model brings significant advantages, it has challenges.

One notable issue is the additional costs agencies incur when processing customer payments. Unlike the pass-through model, where customers pay suppliers directly, OTAs, as MoR, must bear processing fees.

For corporate travel managers, this could translate to:

• Increased booking fees, as OTAs may pass on these costs.
• Resistance from travelers, who might need help understanding why specific fees are higher when booking through an OTA than directly with a supplier. In some cases, reward points may be affected as the agency might have negotiated a discounted rate impacting reward point eligibility.

To mitigate this, corporate travel managers must:

• Negotiate fee structures with OTAs, ensuring transparency and value for money.

• Consider the long-term benefits of streamlined processes, better reporting, and superior customer service that the MoR model enables.

Why It Matters to You

By leveraging the MoR model, OTAs can act as strategic partners for corporate travel programs, offering:

• Accurate and efficient financial reconciliation, saving time and reducing errors.

• Customizable reports that provide insights into travel trends and help optimize budgets.

• Enhanced service levels, including faster refunds, flexible payment options, and improved booking experiences.

While the additional costs associated with the MoR model may require negotiation and adjustment, the overall benefits make it a compelling choice for organizations aiming to elevate their travel management processes.

Our Take

We at WWstay have successfully used the MoR model for over ten years to provide corporations with accommodation booking and payment solutions.

It has helped corporates get timely, detailed, real-time reports, better prices, and quick refunds for cancellations.

It has also helped corporations use WWstay to service their junior employees and contract (Non-profile) workers who do not have corporate credit cards. In such cases, Wwstay, being MoR, could pay for these employees, including incidentals in some cases, through its virtual card program and provide reconciliation.

The MoR model is a win-win for both agencies and corporations. The benefits are more than the small additional cost, if any.

As a corporate travel manager, are you working with Agencies that are adopting the MoR model? If not, exploring how they can streamline your operations and enhance your travelers’ experiences is worth exploring. Let’s discuss how the right partner can transform your travel program.

#CorporateTravel #MerchantOfRecord #TravelManagement #OTAs #VirtualCards #ExpenseReconciliation

References

1. McKinsey and Skift Research (n.d.). The Evolving Role of Experiences in Travel September 24. https://www.Mckinsey.com. Retrieved November 21, 2024, from https://www.mckinsey.com/industries/travel-logistics-and-infrastructure/our-insights/the-evolving-role-of-experiences-in-travel#/
2. Connexpay (n.d.). 5 REASONS OTAS ARE BECOMING MERCHANTS OF RECORD. https://www.Phocuswire.com. Retrieved November 21, 2024, from https://www.phocuswire.com/connexpay-5-reasons-otas-merchants-record