The travel industry is an international business sector of great economic importance. According to Phocuswright, global travel industry gross bookings reached US$1.6 trillion in 2017. As per the same research, travel and tourism accounts for 10.2 percent of global GDP. This makes the travel industry one of the largest and fastest growing sectors in the world.
The travel industry is the first in a series of blog posts about account receivables management for international business sectors.
How to Describe the Travel Industry
As per Revfine, the travel industry is concerned with providing services related to travel from one location to another. This includes services that are directly related to the travel itself, such as transportation, but also includes services related to catering for travelers’ needs and wants after they have arrived at their destination.
The travel industry includes the tourism industry, which relates to the industry centered on tourism, being the specific act of travelling to a different location, either for business or pleasure.
The travel industry may include service providers in (1) transportation: like the airline industry and car rental, (2) accommodation: like hotels, campings, bed & breakfast and shared accommodation, (3) food & beverage: like restaurants and bars, (4) entertainment, and (5) connected services: like financial services (travel insurance and travel medical plans, for example), (online) travel agencies and tour operators.
Another crucial type of service provider in the travel industry are the digital booking platforms.
Debt Collection in the Global Travel Industry
To effectively collect debts in the global travel industry, it is important for the debt collector to take the following into account.
Understanding the Travel Industry
The travel industry has its own “eco-system”. It generally consists of a chain of several international and / or local service providers. Several of these service providers earn on the same transaction – whether that is a booking for a vacation or a business trip, or the actual stay of an individual at a certain location. These service providers are often part of an existing network, whereby business owners, executives and employees know each other well. Many people have a lifetime career in the travel industry. This inevitable affects the style of debt collection and means that the debt collector has to understand the travel industry’s eco-system in order to be successful in collecting.
Understanding International Business Dynamics
The travel industry is almost by definition an international industry. A large part consists of people traveling to a location abroad, for vacation, for business or for other reasons. International debt collection differs in essential ways from local debt collection, as the claims are cross-border, covering multiple jurisdictions, business habits and sometimes languages. Options to legally enforce payment of international debts is substantially more complicated than looking to recover a local debt through legal proceedings. Therewith leverage changes and the focus shifts to amicable collections only. The debt collector must be aware of this and must be familiar with international debt collection in order to successfully collect in the travel industry.
Solution Minded Approach
Given the previous two points, debt collection in the travel industry means that the debt collection has to be solution minded. The interests of creditor should be taken into account, but also the relationship creditor-debtor, the fact that the focus should be on amicable collections and that leverage may be limited, but on the other hand, in case the commercial relationship is still there, that often the debtor depends on the creditor within the travel industry eco-system and that the debtor has a clear interest in solving issues. The debt collector often acts as negotiator or dealmaker, instead of “just” collector.
The travel industry is one of the largest international business sectors. The travel industry is all about providing services related to travel from one location to another. In order to provide debt collection services for the travel industry, the debt collector has to understand the travel industry, international business in general, and has to be solution minded.
If you want to know more about debt collection for the global travel industry,or for international business sectors, please reach out to Cobroamericas, on Linked-In or follow us on Twitter.
To participate in conversations about debt collection in Latin America please join the Linked-In Group Debt Collection Latin America.
As international provider of B2B account receivables services, we are often contacted by companies for assistance in the similar business sectors.
Account receivables management for international business sectors is a niche and specialized job. It is important for companies from such sectors to receive tailor-made assistance, whereby the service provider’s unique in house expertise is complimentary and covers such areas the customer does not cover in-house.
It is essential to determine the reason(s) why the debtor does not pay the outstanding debt. Does the debtor have financial issues? And if so, how deep are the problems? If there are no financial issues, is there may be an issue with the delivered products or the services that were provided? If this is the case, can the creditor offer solutions? Or are there other reasons why the debtor is not paying?
The final question relates to the costs involved with international debt collection, and what the cost is the creditor is prepared to pay. The answer to the question what the costs will be, depends on the age and size of the claim, the location of the debtor, and if the strategy will entail an amicable approach or legal proceedings. When it is clear what the potential costs would be, and how much the creditor is prepared to pay, the debt collection strategy can be adjusted accordingly. As at the end of the day, international debt collection is all about the economic benefit and keeping the costs for the creditor as low as possible.
GDPR is the abbreviation of “General Data Protection Regulation”. GDPR is a regulation that requires businesses to protect the personal data and privacy of citizens of the European Economic Area (EEA) for transactions that take placewithin the EEAmember states, as well as the transfer of personal data outside the EEA. The EEA includes all countries of the European Union plus Iceland, Liechtenstein and Norway.
The so called “data controllers”and “data processors”of personal data must put in place appropriate technical and organizational measures to implement the data protection principles. That also goes for debt collection agencies active in international debt collection, whereby the creditor or the sending debt collection agency is the “data controller” and the receiving debt collection agency the “data processor.
In International B2B Debt Negotiations, likely most of the negotiations between creditor and debtor will take place by phone. Depending on the complicity of the claim and the negotiations, it may be useful to have several conversations before reaching a conclusion – an agreement, or escalation (engaging third party intermediaries, starting legal action or freeze the commercial relationship, for example). During such conversations, creditor and debtor will be able to better understand each other’s position, show and receive empathy, discuss several potential solutions without formalizing anything yet (as that will happen by email).
An alternative to phone calls or in-person meetings about international claims, is to engage in negotiations by means of video calls, like Zoom or Skype, or similar Apps. The advantages as opposed to phone calls, is the creditor and the debtor can see each other and make visual contact. This may be perceived as more personalized than a normal phone call, and a suitable (and more efficient) alternative if in-person meetings are not possible due to distance, costs or emergency (like the 
International B2B Debt Negotiations can be done via in-person meetings, phone calls, Zoom or Skype meetings, or email. Probably the most efficient combination is to have phone calls or Skype and Zoom meetings, whereby email is used as a complimentary tool to summarize, send formal proposals, formalize agreements and follow up on promises.
Information a company may look for to receive from their clients includes:organization charts(containing the full legal name, the registered address, description of business activities, and extract from a formal register, like the Chamber of Commerce); details of the Ultimate Beneficial Owner(s) (UBO(s)); the source of funds and / or wealth of the client and its UBO(s); and public office or government position(s) held by the UBO(s).
Finally, the international debt collection agency should understand the nature of each case it handles. Key case information may consist of: a detailed breakdown of the debt; the full legal name, registered address and business activities of the debtor, as well as key contact persons (which may include the signatory parties or owners); and all supporting documents in connection with the claim, including but not limited to, contracts, invoices, order forms, order confirmations and (relevant, email) correspondence.
If you feel awkward following up with companies abroad about outstanding invoices, please keep in mind that like debtors, also yourself as creditor may, at some point, be facing liquidity issues due to the current economic crisis. International trade and in connection therewith, cashflow between countries have deaccelerated or sometimes, have come to a full stand-still. The creditor continues to be in its right to claim payment of outstanding invoices, for work or services delivered. Actually, it is of utmost importance and sometimes even vital for the creditor to get invoices paid, in order to safeguard its own liquidity.
Your debtor’s situation may change rapidly, due to the spread of COVID-19 and subsequently, the effect on the economy and measures that local governments take. Showing empathy for your counterpart is therefore essential during today’s economic crisis. Call your debtor up and ask them how their business is going. Try to understand the circumstances they are in. Remember, your debtor was once – or still is and may be again in the future – your client! Try to level and understand the issues they deal with. Keep in mind that many businesses may have to temporarily close doors, and some may not be able to survive and go bankrupt. The COVID-19 outbreak and the economic crisis may have a big financial and mental effect on people.
The COVID-19 outbreak and the global economic crisis caused by the outbreak, means that not only the debtor, but also the creditor, may face liquidity issues. However, international B2B collections will continue. During the current crisis, it is important to take an amicable approach to payment of outstanding debts, and to show empathy for your counterpart. With the foregoing in mind, the focus should be on negotiations for a tailor-made solution for outstanding debts during the COVID-19 crisis.
If you speak the language of the country your negotiation counterpart is in, you have access to much more information than without speaking the language. You can obtain information about the economy, business habits, and political and social circumstances of the country your counterpart is based in. This means you will be able to better understand the context for your negotiations and you can fine tune your negotiation skills and strategy taking into account such specifics.
By speaking your counterpart’s language and understanding the context his or her business is operating in, you be able to show more empathy. Showing empathy is a key element to successfully negotiate an international deal. On the other hand, if you speak your counterpart’s language, it will be easier for him or her to be empathetic towards yourself, as you will be in a better position to explain in detail your business and what is important for you to achieve during the negotiations.
When you are in cross border negotiations, it is important to understand the context of the international business deal. What is the value of the deal? Where is your counterpart based? Are they a small, medium-size or big company? Do you have in -depth information as the ownership of the company, the decision makers and what potentially the commercial and financial value is for your counterpart of the deal you are working on? These are some of the questions you may want to ask yourself before you start cross border negotiations.
always aim for the best solution possible. What the best solution possible is, depends on the specific circumstances of the deal or the dispute. In any case, the only way to end up with the best solution possible, is to be solution minded. You should let your counterpart know that your aim is to find a solution. With this in mind, your counterpart will likely move more easier in your direction and a solution comes in sight.
Once the cross-border negotiations are over, make sure you continue monitoring your agreement with your counterpart. Also, evaluate the results of the negotiations and the value for you of the deal you reached. It is very likely that this will not be the last time you negotiate in international business, and your aim should be to learn from each time you negotiate. Being evaluating the results of cross border negotiations, you can improve your techniques for next time you negotiate an international business deal or try to solve a cross border financial dispute.