Periods of high cancellation during the pandemic have led to problems refunding travelers, with some refunds taking many months to process. To preserve vital cash flow, travel companies have offered vouchers for future travel, but limited clarity on the lifting of government restrictions has resulted in uncertainty for those travelers seeking to redeem them.
A new global study by Amadeus highlights the impact that ‘refund uncertainty’ is having on traveler confidence and bookings during 2021, as the industry begins its recovery. Over half of Malaysian travelers (68%) confirmed that the increased risk of cancellations due to the pandemic is a barrier to booking travel this year, with refund uncertainty (51%), the inability to change their booking travel date as well as time (48%) and the inconvenience of the refund process (47%) topping concerns when a flight is cancelled.
Several airlines are taking proactive steps to overcome refund uncertainty through innovative new payment options. Around the world, a major European carrier has taken the lead with a ‘Pay When You Fly’ (PWYF) option, allowing travelers to make a flight reservation (which also includes a hotel or car hire) by paying a small deposit in the region of 15% and then settling the balance a few weeks before travel.
Klein Wang, Regional Head of Merchant Solutions, Asia Pacific, Amadeus commented: “Malaysia is currently undergoing the third COVID-19 wave, putting a halt on all travel arrangements be it local or international. Nonetheless, Malaysians are hopeful (42%) that travel could get better within the next 12 months. In rebuilding traveler confidence, Amadeus believes that flexible payment options like PWYF can mitigate the pain points of customers who want to plan travel but are wary of cancellation policies. As we look towards travel recovery, these new innovative approaches will not only help drive the industry forward but also provide higher value bookings.”
According to the Amadeus study, 63% of Malaysian travelers are more likely to book air travel using the PWYF payment option as compared to a ‘Buy now, pay later’ offer (i.e., where you enter a credit agreement with a financial provider and pay for the air ticket in instalments) at 49%.
Alongside overcoming refund uncertainty, PWYF could boost industry revenues with Malaysian travelers willing to spend 61% more per trip on average, and 56% of Malaysian travelers more likely to add additional services like meals and bags, if PWYF is offered by the airline.
Learn more about how new flexible payment options are boosting travel’s recovery in our new report.
About Pay When You Fly
PWYF refers to a novel payment option that sees the traveler pay a small deposit, in the region of 10-20% of the total cost (which is non-refundable in the event the traveler decides to cancel). The balance is then settled a few weeks prior to departure, minimizing the risk of cancelation. Importantly, the traveler does not enter a credit agreement and is not liable to pay the entire balance. In the event of cancelation, the airline is not faced with a high number of refunds to process because the bulk of the traveler funds remain with the traveler until the last minute.
About Buy Now Pay Later
BNPL refers to deferred payment options where the traveler enters a credit agreement, typically with a third-party fintech company, and is liable for the entire balance of the booking. Payments tend to be made in installments up until the date of departure, with the primary benefit for the travelers being the ability to spread the cost of the trip over a longer period.
About the research
Research was carried out by Opinium on behalf of Amadeus during May 2021 based on a survey with 5,000 travelers*, drawn in equal numbers from France, Germany, Malaysia, the UK and the US.
*Respondents traveled at least three times a year before the pandemic.
