Where your Supplier Costs Roam, But Your Profits Stay Home
Uncovering the common profit pitfalls in the online travel industry and just how crucial financial accuracy is in boosting your bottom line
While the unprecedented events of the last few years have caused financial and operational turbulence for every Australian industry, one could easily argue that the travel industry was among the hardest hit, with the COVID-19 pandemic bringing both global and domestic travel to a cataclysmic standstill. Now, just over 3 years after the first waves of lockdowns and restrictions were introduced, the industry is proving to be bouncing back at an impressive rate, with outbound travel now at 80% of pre-COVID levels and domestic travel having risen back to at 92%1,2. Many of the industry’s big players including major airlines, online travel agents and hotel booking companies have also recorded strong profit turnarounds in FY23, fueling the sector’s remarkable recovery.
Booking volume may be soaring but financial accuracy is still resulting in lost revenue and reduced margin
Yet while these figures look promising, there are many residual effects of the COVID-19 pandemic that are making financial accuracy and profit maximization more challenging for businesses in a post-pandemic world;
STAFF SHORTAGES
With companies across the tourism sector having been forced to cut staffing to skeleton operational levels during the height of the pandemic, not only was a significant amount of experience lost, but organisations have also been forced to be selective in their rehiring process to maximise financial growth and navigate the challenges posed by the tight post-pandemic labour market. Naturally, organisations have focused on filling positions in high-growth, high-return departments such as customer service, leaving departments such as finance, procurement, and operations to continually operate with minimal staff as companies struggle to keep up with the resurgence in demand.
As Profectus’ Executive General Manager - Operations, Tony Horn, explains, the resultant time pressures and constraints these departments are placed under creates the perfect storm for payment errors and supplier charges to go unnoticed, putting margin and bottom line bottom line at significant financial risk.
“When you’re working in an organisation with billions of dollars in turnover each year, you can imagine the sheer number of suppliers invoices and transactions that the accounts payable staff are dealing with each day,” explains Tony. “Combine this with the fact that operational departments are operating with skeleton staff, and you can understand why these employees simply don’t have the capacity to check that each bill is accurate before processing it - they just have to pay it.”
Our data shows that at least 3.5 errors occur in every 10,000 accounts payable transactions and supplier overcharges amount to, on average, 2.25%. Additionally, our 20+ years’ experience in conducting real-time invoice audits have consistently found that 1 in every 10 invoices contain a line-item error.
“While these figures may seem negligible, especially when they might only amount to a few dollars per booking, it’s the snowball effect that of these errors going undetected time and time again that hurts your bottom line,” says Tony. “After all, it doesn’t take much for a few dollars, multiplied across hundreds of thousands of invoices, and hundreds of different vendors and suppliers, to quickly amount to millions in lost revenue.”
REDUCED MARGINS
Another major challenge faced by companies across the travel sector is that, while the volume of bookings has almost reached that of pre-COVID times, profit margins haven’t followed suit. With vendors fighting to regain the massive losses experienced during the height of the pandemic, travel suppliers commissions have failed to return to their pre-pandemic levels, forcing online travel agents and hotel booking giants to have to be far savvier about their spending in order to protect their margins and maintain a competitive edge.
Logically, most companies automatically look for ways to cut operations costs or alternative areas in which they can maximise profit margins, however many fail to ensure that they money they are spending with suppliers and vendors is being spent correctly. As our audit and recovery data has proven time and time again, hidden overcharges, whether, intentional or inadvertent, can have a significant impact on a business’ bottom line.
“When discrepancies go undetected, businesses are left vulnerable to potentially massive losses in revenue without even realising it,” explains Tony.
UNIQUE INDUSTRY SUPPLIER AND VENDOR CHALLENGES
Finally, the nature of supplier and vendor relationships within the travel industry means companies face several unique challenges when dealing with suppliers and vendors, all of which contribute to the impossible task of guaranteeing financial accuracy throughout the procure-to-pay process. These include complex commission structures, inconsistencies in seat/bed allocations, data integration difficulties, unpredictable market conditions and limited supplier and vendor competition.
A key example of these unique industry challenges is the recent rise in seat allocation inconsistencies on flights, with many airlines allowing seats purchased through a third-party travel agent or provider to double booked. This has resulted in an increasing number of passengers being bumped to a different flight and airlines in some instances passing on the difference in fare charges to the travel agent. With the aforementioned staff shortages making it impossible for these companies to compare the invoices they receive with the original ticketing charges, businesses have no choice but to unknowingly absorb these hidden overcharges, reducing their operating margin.
Enter Profectus: The Gateway to Profit Protection
Just because these challenges are pervasive across the travel industry, it doesn’t mean that your organisation is locked into a non-refundable, one-way ticket to financial inaccuracy for good. With over 20 years’ experience in being the trusted, profit protection partner for countless ASX 100 companies, our cutting-edge audit recovery services and source-to-pay automation technologies provide the additional layer of financial security you need to boost your financial accuracy and minimize profit leakage.
SPECIALISTS IN FINANCIAL ACCURACY FOR TRAVEL
Not only do our team of expert analysts know that you have unique supplier contracts and rate cards that demand careful handling, but we’re also familiar with the nuances with which these contracts and rates are negotiated within the travel industry.
As such, we’re well-versed in navigating the complexities of travel supplier relationships, unravelling convoluted invoices, and reconciling multiple data sources, such as email and contract documents. And, unlike the Big 4, we take the time to check every transaction, every invoice, and every contract, line-item by line-item to ensure nothing slips through the cracks. Our meticulous approach includes cross-referencing with rate cards and contract terms specific to your suppliers, and in-depth analysis of supplier agreements, ensuring that every financial transaction aligns with your specific agreements.
It’s how we’ve recovered over $72M in lost revenue alone in FY23 and check over 3.3B transactions annually. By identifying and eliminating discrepancies and overcharges, we can help you protect your profits and fortify your financial position in the post-pandemic recovery.
With our advanced digitisation processes, we also transform scattered data into clear, actionable insights, enabling you to make informed decisions that will further enhance your competitiveness.
NO RECOVERY, NO AUDIT MODEL
When it comes to all of our recovery audits, including our Accounts Payable and Merchandise Audits, we operate under a zero-risk ‘No recovery, No fee’ model to ensure you’ll be guaranteed to receive a return on your investment.
How? We conduct a free evaluation with all clients before we begin to ensure working with us will be a valuable investment. You then only pay based on what we recover.
UNMATCHED ATTENTION TO DETAIL FOR SUPPLIER RELATIONSHIPS
We understand the significance of supplier relationships within the travel industry. While we leave no stone unturned in our quest to protect your profits, we employ a collaborative approach to resolving any identified discrepancies and recovering any lost income. Not only does this take the pressure off you when it comes to navigating supplier relationships, but this approach also works to foster stronger and more fruitful supplier partnerships.
THE TICKET IS IN YOUR HANDS...
Is your organisation looking to minimise costly overcharges and maximise your hard-earnt profits? By engaging Profectus as your profit protection partner, you’ll leverage our expertise to thoroughly examine every transaction and unearth any hidden overcharges specific to your suppliers, reducing payment errors, and ensuring every dollar spent aligns with your agreements. With Profectus by your side, you can confidently navigate the complexities of supplier contracts, rate cards, and invoices, empowering your business for sustained growth and prosperity in a resurging travel industry. Book a free, no obligation discovery call with our travel expert, Frank Morberger, today to get started.