Thursday, June 13, 2013

Wotif squeeze supplier margins?

I see that has announced to its suppliers by email today that they will be launching a new virtual credit card payment method over the coming months.

OK, what does this mean?

Accommodation providers when notified of a new reservation will be allocated a unique virtual credit card number that they are authorised to charge for the net amount of the booking via their EFTPOS terminals.

Virtual credit card payments are becoming more popular and are made possible by the OTA setting up “Single-use ghost accounts” (SUGAs). Here’s a quick run-down:
  • SUGAs are transaction-specific, and are used only once per transaction.
  • They include controls, or credit limits for the exact payment amount.
  • Each purchase request, such as a hotel reservation is first electronically evaluated against a company’s pre-specified controls, including spend limits, merchant restrictions, acceptable usage dates, etc.
  • The transaction is then assigned a virtual credit card number with which vendors can process payment using existing POS credit card networks.
  • When the transaction completes, the credit card number expires and the account closes–never to be used again.
While larger hotel operations may see the advantages in improved accounting efficiencies, improved cash flow and guaranteed payment - smaller operations such as motels will be solely focused on bearing the new impost of credit card commissions when processing Wotif payments.

OTAs such as Wotif are being squeezed with declining growth in demand, increased competition and increased costs in doing business. Accommodation suppliers will be aware that these pressures are being passed-on and margins of online business are being chipped away.

Along with the rise in commissions announced last year, will Wotif's new payment method be more likely to improve their balance sheet, more than their suppliers'?

For accommodation providers, the art of setting appropriate tariff and yield management has never been so crucial. 
"Great news! We´ve listened to your feedback and Wotif Group will be launching a new virtual credit card payment method over the coming months. This project has been in the pipeline for quite some time and we are pleased to be able to offer a payment process that is secure, convenient, and more efficient for our supplier Some of the great benefits include:
* Faster payment – You´ll be able to take payment at the time of check out.
* Less hassle – Streamline your accounts receivable process. With virtual credit cards, there's no need to submit an invoice for payment or wait for our remittance advice to balance your books.
* Guaranteed payment – Wotif Group Virtual Credit Cards are 100% guaranteed to have the full funds for payment.
* Support – As always, our Accounts team will be on hand to help you with any payment enquiries you may have.
You don´t have to do anything to start receiving virtual credit card bookings and we will contact you closer to the launch date to make sure you´re ready for when virtual card payments are rolled out.
How does it work?
* When a customer makes a booking for your property on one of our sites (,,, or the Booking Details on the Supplier Extranet will include a unique virtual credit card number that you can charge directly just like any other credit card. We will also include these details on your booking confirmation email. NOTE: Major channel managers will be advised of these changes. If you use a channel manager, please contact them directly if you have any questions regarding the delivery of your booking information.
* The funds available on the card will equal the NET amount of the booking (the advertised rate minus our commission).
* The dates you can charge the card will also be highlighted.
* Simply charge the virtual credit card using your point of sale terminal in the same way you´d charge any other credit card.
Every booking you receive from the launch date onwards will contain virtual credit card details. You will still need to invoice us for any Wotif Group bookings that were made up until this date as normal. (You can easily check which bookings were made before the launch date using the guest list on the Supplier Extranet. Once you´re in the Guest List, click on the Latest Bookings link to narrow your search).
We also wanted to take this opportunity to respond to some recent industry commentary about the financial security of dealing with some online travel agents.
Wotif Group is an established, robust, publicly-listed company. We present audited public financial statements twice a year. Our strong financial position is one of the key strengths we offer to both suppliers and customers. If you would like to see financial details relating to Wotif Group, they can be found in our most recent annual report.
As always, your Wotif Group Product Team is here in New Zealand to answer any questions you might have. Please get in touch with them as soon as possible if you have any concerns about the virtual credit card process for any reason.
The Wotif Group Product Team"

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