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.
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.
The next step is to understand the legal context. How do contracts and other documents, like order forms, certificates and licenses work? Which are the requirements to make sure that these documents, which may be entered into between companies from different countries, have legal value in the country your client is based in? The assessment hereof may vary substantially per country in Latin America.
For an effective account receivables management in Latin America, you should understand local payment processes. Such payment processes may vary per country or region, and each company may have their own specifics. Generally speaking, payment processes may be subject to tax requirements, foreign currency exchange issues, short term or long-term economic circumstances, and administrative requirements imposed by law.