# Trends and opportunities

**Travelers and travel professionals require a significant upgrade to existing travel software infrastructure**\
\
There has been very little software and payment innovation in the travel industry since the 1990s. The last large landscape change was when Online Travel Agencies (OTAs), the direct-to-consumer business model in travel, made their debut. Since then, most innovation in travel software has focused on B2C experiences.\
\
However, evidence suggests most consumers are not actually happy with their DIY (do it yourself) booking experience when customer service is required. OTA net promoter scores are low; Expedia’s is a 3. Booking.com fares even worse, at a -1. For comparison, Apple’s is a 47, and Costco’s is a 79. *<mark style="color:yellow;">`1`</mark>* For trips with any complexity, including multiple-city itineraries, re-booking or cancellation, a high-touch experience is needed.\
\
Especially since the onset of COVID, consumers have been increasingly seeking out high-touch experiences when booking travel (involving the use of a travel professional). The most significant increase in intent-to-use for travel professionals is Millennials – consumers aged 18-38.*<mark style="color:yellow;">`2`</mark>*\
\
But travel professionals do not have the technology infrastructure to service Millennials in the manner to which they have become accustomed. Millennials want an online experience – a login, a DIY option, the ability to pay online – all of these are out of reach for most travel professionals who cannot afford the high price tags such solutions require (in the hundreds of thousands to millions of dollars). The travel industry will need to demonstrate significant innovation to meet the needs of the Millennial and younger generations.\
\
Despite the myth that the OTAs have put travel professionals out of business, the existing market for travel professionals remains robust. There are over 100,000 travel agents in the U.S. alone and over 1,000,000 globally, who collectively booked a notional value of \~$330 billion of travel in 2019.*<mark style="color:yellow;">3</mark>* That segment has also returned to growth after losing share to the OTAs after many years. *<mark style="color:yellow;">4</mark>* Additionally, the rise of social media has created a generation of travel influencers who may seek to monetize their audience by selling travel online.\
\
Xeni allows travelers to get high-touch service while enjoying the same online convenience the OTAs provide.\
\
1\. <https://customer.guru/net-promoter-score/priceline-group>  <https://customer.guru/net-promoter-score/expedia-inc>

2\. <mark style="color:blue;">Washington Post (Bailey Berg), “Why 2021 will be the year of the travel agent”. May 13, 2021</mark>&#x20;

3\. <mark style="color:blue;">IBISWorld March, 2020</mark>

4\. [https://www.bls.gov/ooh/sales/travel-agents.htm#:\~:text=Employment](https://www.bls.gov/ooh/sales/travel-agents.htm)\
\
\
**Travel suppliers require more inventory distribution channels**\\

Wholesale travel suppliers are sub-optimally served by the current ecosystem as well. For these suppliers, the OTA buyers constitute an oligopsony (a state of market in which only a small number of buyers exist for a product). Suppliers who seek to route around the OTAs by selling inventory to travel professionals face a prohibitively costly and cumbersome distribution process. The industry lacks a widely used platform that would democratize and de-bottleneck inventory distribution, rendering distribution efficient and seamless.\
\
**Challenges with payments in the travel industry**\
\
Finally, the entire travel industry suffers from an archaic payments system that hurts everyone. The travel payments process has three serious problems: (1) It’s slow – settlement of every counterparty can take up to 60 days. (2) It’s expensive – multiple intermediaries take 1 – 3% of the booking value, with total intermediation cost typically \~6%+. (3) It’s insecure – e.g., an estimated $20b is lost to fraud in the travel payments process every year. The industry is ripe for a transition to DLT-based payment settlement but cannot be transitioned there in a piecemeal way as customer adoption would be too slow.\
\
Payments in travel are dominated by credit cards (travelers), wire transfers, and ACH payments (suppliers) – a system whose only positive attributes are that it is widely accepted. The industry suffers from high credit card fraud rates, high counterparty risk, slow settlement times (which can lead to solvency issues), high payment costs, and complex cancellation and disputes processes.\
\\

* **Credit card fraud**: nearly 5% of global online air travel bookings are fraudulent, costing airlines alone up to $5 billion. Airlines reject up to 25% of legitimate orders to avoid fraudulent bookings. Overall, fraud is a $20 billion a year problem for the travel industry. Travel is particularly prone to fraud because it features high ticket goods primarily bought online. The cost to a travel professional of bearing fraud is enormous – they might earn a 10% commission on a given trip, but if the trip is fraudulent, they must bear 100% of the COGS; that means they will need to book ten more trips (of the same value) just to make up that loss.<mark style="color:yellow;">`5`</mark>
* **High counterparty risk:** counterparties in travel are paid sequentially after the trip has been completed. For example, if a customer books their hotel on an OTA site, the payment will be processed once the stay has been completed. The OTA then sits on that money until they choose to send the respective payments along to the relevant counterparties, which could include a travel agent owed a commission, and a hotel owed their cost of goods. Each counterparty is at the mercy of whoever accepted the payment – if they elect not to pay or go out of business in the meantime, the counterparties are left holding the bag. Unpaid commissions are a problem for over 40% of agencies. <mark style="color:yellow;">`6`</mark>\
  \
  5\. <https://www.chargebackgurus.com/blog/airline-and-travel-agency-chargebacks>

&#x20;     6\. <https://www.phocuswire.com/The-hidden-costs-of-travel-payments>\
\\

* **Slow settlement times:** because of this sequential payment process, settlement of all counterparties can take 30-60 days, a substantial working capital tie-up.<mark style="color:yellow;">`6`</mark>
* **High payment costs:** on average, payments in travel represent \~6% of total booking costs, which are passed along to consumers in the form of higher prices. However, for complex bookings (mainly corporate bookings with many changes and cancellations, or for bookings involving currency translation), the cost can go as high as 12%.<mark style="color:yellow;">`7`</mark>
* **Complex cancellation and dispute processes:** Disputes are a massive issue in travel – the industry’s chargeback rate is more than twice the average of other industries.<mark style="color:yellow;">`8`</mark> There is no single source of truth for the counterparties in each travel transaction. Invoices and statements come in varying formats, so when counterparties try to reconcile a booking, they may not be able to identify the same transaction. Since they will each rely on their database, they will certainly not be looking at the same data set about that transaction. The lack of transparency in transaction data is the primary cause of chargebacks.<mark style="color:yellow;">`9`</mark>\
  \
  For the reasons listed above, payments represent an anvil around the neck of travel professionals and inventory suppliers. The current payments system simply does not meet the needs of the industry and results in lost profits and higher costs for every constituent. A blockchain-based system could solve all these problems, but a critical question remains: how to transition an entrenched industry into a DLT-based payments system?\
  \
  **Because of our value added services, Xeni is able to attract travel buyers, resellers, and suppliers onto our platform; from there, we can directly settle their transactions using our blockchain based system.** After demonstrating the value of blockchain-based settlement within our own ecosystem, Xeni can expand this offering out to the broader travel industry.

![](https://2005911696-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FjBEJy1Qpg6GRQ8lDXR5E%2Fuploads%2F39lxQg1GTHVbz5mxy0TU%2Fpage%206%20img1.png?alt=media\&token=95bb909b-db4c-4a76-8b63-3d82f8053322)

7\. <https://www.pymnts.com/travel-payments/2018/global-b2b-innovation-technology-adoption/>

8\. <https://www.kansascityfed.org/~/media/files/publicat/reswkpap/pdf/rwp16-01.pdf>

9\. <https://www.chargebackgurus.com/blog/airline-and-travel-agency-chargebacks>
