What have American Airlines, Sabre, Amex GBT, Tripadvisor, Expedia and many other big travel companies all got in common this year? Well, based on media reports, they’re all among major travel industry players that have made redundancy rounds of varying sizes this year, following in the footsteps of major tech firms last year. Meanwhile though the wider travel tech industry has suffered a skills shortage since the pandemic caused a mass exit of workers to other professions. Could the redundancies in the big travel companies be good news for the travel tech industry looking to hire? We asked a range of travel experts whether they thought the tables might now turn, or if we’re still going to face challenges in the longer term.
Online Travel Companies Make a Bundle Investing Customer Cash
25.08.2023 - 14:13 / skift.com / Dennis Schaal
The longtime business models of online travel companies ranging from Airbnb to Expedia and Booking.com are getting increased scrutiny from the media and short-term rental hosts because these companies hold onto customer funds, and invest them for profits before disbursing them, sometimes months later.
My reaction to this — with one caveat that I will discuss further below — is so what. One reason they would be foolhardy to send the money to hosts and hotels at the time of booking, which might be months in advance of a stay, is because the trips might be cancelled and never take place. And these companies, which use some of these monies for cash flow purposes, would be fiscally irresponsible to shareholders and employees, for that matter, if they didn’t invest these customer monies, and make some dinero.
A Tuesday Wall Street Journal story detailed how Airbnb and Expedia Turn Customer Cash Into Profit, Aided by Rising Interest Rates. For that matter, so does Booking.com when it accepts prepaid bookings, as it’s been doing more of in recent years, as well as some major cruise lines, which sometimes accept a customer deposit on a cruise a year or more in advance.
During the third quarter, which ended September 30, Airbnb generated $58 million in interest income from its own cash, as well as from customers’ advance bookings, the Wall Street Journal reported. Expedia took in $20 million in interest income, taking advantage of rising interest rates, during the same period.
Although it wasn’t discussed in the Wall Street Journal piece, Carnival Corp. generated $74 million in interest income during fiscal year 2022, which ended November 30. Unlike Airbnb, Expedia and Booking, which forward a cut of these customer monies along to hosts and hotels around the time of the stay, Carnival generally pays travel agents when the sailing is paid in full regardless of the time of the departure date.
Not all of the cash the online travel companies are investing to take advantage of rising interest rates is customer money. The Wall Street Journal said “customer funds accounted for around 30 percent of the company’s [Airbnb’s] current assets.”
Nothing is really too much new in the business models of these companies as it pertains to their practice of banking customer monies prior to the stay other than interest rates are increasing, and they are seeing a greater benefit than in the recent past. Another wrinkle is that in recent years Booking.com has been doing a lot more of these prepaid bookings as it got heavier into short-term rentals. In its earlier years, Booking.com didn’t get heavily involved in payments, and most of its customers paid the hotels directly during their stays.
Airbnb hosts have been prolific writing
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