BG:What prospects do the travel & tourism industry face in the post-pandemic recovery period?
IP: Business heavily suffered during the pandemic lockdowns. The broad travel & tourism segment has been among the hardest hit, some exited the business. Air transportation, holiday reservation platforms, hotels, recreational facilities and the likes heavily reliant on the free movement of people have witnessed double-digit dip in demand indicators. After a year of stagnation, the covid-19 vaccination has bolstered consumer confidence, which has boosted the demand for both domestic and to lesser extent international trips. People are exhausted of being separated from friends and family, and look forward to a getaway from the stressors of the home office.
The first signs of recovery in early 2021 prompted the travel & tourism industry to gear up for a sharp increase in package holiday reservations and airplane tickets booking. Getting up and ready to handle increased transaction volumes puts forward the need to recalibrate operations. Data reconciliation automation is one of the first things that would bring efficiency benefits.
What makes financial reconciliation so critical for the travel & tourism businesses?
Travel & tourism businesses are heavily transactional oriented.
Companies strive to deliver personalised travel experience for their customer. That means they need to build and sustain an enormous partnership network across the globe to make sure every destination and customer preference is covered. The more counterparts involved – the more transactions to be processed and reconciled.
On the other hand, holiday makers require easy and fast online access to pick their destination and complete their purchase. Reservation platforms have provided a very wide choice of payment methods – credit cards, e-wallets, bank transfers, EFTs, prepaid cards and so on. The incoming and outgoing payments data is recorded in different file format and the companies have to liaise on a regular basis with numerous payment service providers to reconcile their statements with internal booking records.
In both cases, the speed and precision in that matter are of primary importance for the financial health of the company – crunching through heaps of customer receipts and supplier payables manually is slow, carries risk of costly errors, and fails to track the cash position. On the other hand, the automation of reconciliation integrates all financial processes around the revenue collection. Reconciliation tools do the mundane ticking and tying in the background, while the accounting teams focus on reporting, analysis and thorough investigation of outstanding items.
What are the reconciliation process specifics for travel & tourism businesses?
The travel & tourism business model is both B2C and B2B. Transaction flows are high-volume, very dynamic, and have certain seasonality peaks. In addition, every deal closed is associated with multiple transactions that involve several parties – the end customer, the vendor, the vendor’s suppliers, the payment processors. Payments across that long chain have to be settled and reconciled at sync. Typically, reservation platforms are on the crossroad of those transactions flows and monitor them very closely.
First, complex multistep reconciliation is performed to sort out payments initiated via POS, credit card, bank transfers and so on. Second, reconciliation of financial data in reservation platforms tends to generate a lot of exceptions (both in terms of numbers and types). They need to be tracked for their aging and their root cause to address risk situations such as fraud, delays and errors. Third, this is a global business unrestricted by boundaries and one of the main concerns is the currency differences and how to mitigate that risk.
Depending on its role, every service provider is entitled to a defined portion of the end customer payment or a fee. The amounts may be small but multiplied thousand times and it becomes clear that the reconciliation workload is formidable, factor in technical time to process it, plus errors that pop up whenever manual effort is at play. On the other hand, this is a highly competitive business, so promotion campaigns, loyalty programs, special discounts and other marketing instruments for incentivising customers and partners inevitably add another layer of complexity for the reconciliation teams in Travel & Tourism. Fast-growing companies quickly realise that the only way to prevent operational inadequacy compromising financial health is to establish a level of reconciliation automation that would empower them to keep robust financial reporting and controls over revenue collection.
How are these challenges addressed in software solutions such as ReconArt, then?
ReconArt has gathered a lot of experience working for more than a decade on industry specific recon challenges with some of the leaders in the travel & tourism industry. As a rule, after the implementation is finished our customers are well trained and self-sufficient to manage our reconciliation software platform and implement new processes in it. But we also gather constant feedback that inspires improvements and new features in every new product version we release. Every customer of ours benefits from those enhancements and we actively collaborate to meet their evolving needs continually.
ReconArt’s key competitive advantage originates from its cutting-edge technology matching engine that can handle millions of transactions quickly and with flexibility and precision only achievable by rule driven machine processing. Around that core we have developed capabilities to address the total reconciliation lifecycle, as we call it. Meaning: every step of the reconciliation process can and should be automated. Travel & tourism are a showcase industry that benefits tremendously from automation in that respect.
Recon data files in virtually every machine-readable format (and we know they come in daily in hundreds in the travel & tourism back-offices) are uploaded, verified and checked for inconsistencies hands-off. Data can be automatically cleaned, enriched and prepared for the matching itself. Those steps alone make up enormous time and stress savings for the reconciliation teams because compromised data integrity and manually correcting it put matching results at stake.
The data sets comparison itself is concluded by a mere push of a button. If that’s too much to ask, the users can instruct the system to follow a schedule for each operation and just check the results afterwards. ReconArt can handle very complex, multi-step matching relationships – 3-way-matching, 1-to-1, 1-to-many, many-to-many. In our experience with travel & tourism clients we have encountered really complicated matching scenarios, but once the system is taught the business logic, algorithms, not humans do the rest.
Within seconds ReconArt produces thousands of items matched with the outstanding items listed and properly flagged. Talking about exceptions management, those are a central consideration for reconcilers, particularly in travel & tourism. Their automatic classification is a starting point to investigate what underlies each mismatch – whether it’s a timing delay, double entry, charge back, fee, or some suspicious activity.
If we have to switch smoothly from detailed transaction level to aggregated overview of the cash position, the reporting features of ReconArt allow its users to get an instant, near-real time glance on every reconciliation account and identify immediate action items.
In conclusion, ReconArt has been an indispensable tool for financial controls and reporting for the specific needs of the global travel & tourism companies and is now ready to fast track their recovery through process transformation in the data reconciliation arena.