One of the biggest challenges of the post-pandemic recovery is traveller confidence in the booking process – most significantly what impact future changes of travel rules could have on arrangements. While the black clouds have started to disperse, the environment remains fluid and there are still concerns among both business and leisure travellers about the risks of travel.
Now, a new study of 5,000 travellers from across the world highlights the impact that these concerns are having, most notably with regard to the impact of ‘refund un-certainty’ on traveller confidence and bookings during 2021, as the industry begins its recovery.
The research from travel technology specialist Amadeus shows that four in five travellers (81%) see the increased risk of cancellations due to the pandemic as a barrier to booking travel this year, with refund uncertainty (46%) and the inconvenience of the refund process (38%) topping concerns when a flight is cancelled.
Periods of high cancellation during the pandemic have led to problems refunding travellers, with some refunds taking many months to process. To preserve vital cashflow, travel companies have offered vouchers for future travel, but limited clarity on the lifting of government restrictions has resulted in uncertainty for those travellers seeking to redeem them.
Several airlines are now taking proactive steps to overcome refund uncertainty through innovative new payment options. European flag carrier Lufthansa has taken the lead with a ‘Pay When You Fly’ (PWYF) option. The European major widened PWYF for flights within Europe for corporate travellers in Mar-2021, an extension of a scheme offered to a group of corporate customers for some years. British Airways Holidays also offers a book now pay later scheme while easyJet Holidays enables travellers to pay for trips in instalments as part of its Protection Promise measures, reports Phocuswire.
The Amadeus observations are based on research completed by Opinium across France, Germany, Malaysia, the UK and US in May-2021. This suggests that PWYF is the most appealing payment solutions option (39%) for travellers compared to traditional pay at booking (36%) and ‘Buy Now Pay Later’ (BNPL) schemes that require the traveller to enter a credit agreement for the entire balance (24%).
We’re now entering a critical phase for travel’s recovery, and the industry “needs to build confidence at every opportunity,” says Nicolas Ortiz, head of payment product incubation at Amadeus Payments.
He believes PWYF will “drive traveller confidence, encouraging travel planning and booking even in an uncertain environment with changing government restrictions”. The new approach “may also result in higher value bookings because travellers only need to make the balance of the payment when it’s clear the flight will depart as planned,” he says.
The research indicates that as well as building confidence by overcoming refund uncertainty, PWYF could boost industry revenues with travellers willing to spend 36% more per trip on average, and 49% of travellers more likely to add additional services like meals and bags, if PWYF is offered by the airline.
With almost two in three travellers (62%) likely to take-up new PWYF options to reduce exposure to the refund process we are certainly likely to see more companies adopt such practices.
PWYF ultimately allows the traveller to pay just a small deposit, in the region of 10-20% of the total cost (which is non-refundable in the event the traveller decides to cancel). The balance is then settled a few weeks prior to departure, minimising the risk of cancelation. Importantly, the traveller does not enter a credit agreement and is not liable to pay the entire balance.
It certainly offers benefits to both the vendor and the customer. Notably, in the event of cancelation, the airline is not faced with a high number of refunds to process because the bulk of the traveller funds remain with the traveller until the last minute.