Growing its merchant network beyond air and transportation-related charges for the first time in 74 years, Universal Air Travel Plan began accepting charges from La Quinta Inns & Suites to serve its American Airlines client Wal-Mart. Soon, UATP expects to announce additional hotel chains as well as car rental firms as merchants, according to president and CEO Ralph Kaiser.
UATP's airline owners and issuing carriers began talking about merchant category expansionin mid-2008, when UATP reported record billings of $12 billion.
"We're a volume-based company, so the more volume we put on the network, the cheaper every transaction gets for the ownership group and our members," Kaiser said. "For every dollar of air, there is another dollar of associated travel and entertainment spend; part of that [additional spend] is hotel. If we could capture some of that, it would be helpful for corporations and good for our members."
"As UATP is the least expensive form of payment for air, it's probably going to become the least expensive form of payment for hotels and rental car companies," Kaiser said. "If I'm one of those merchants, I'd be happy to pick up several hundred million dollars of volume at a lower [transaction] rate. We don't have estimates on volume potential. We just know that it's pretty worthwhile for us to pursue." Kaiser declined to reveal UATP's hotel and car transaction fee charges, but has consistently said it is at least 1 percentage point less than payment competitors.
Developing Data Field Standards
UATP's councils, issuers and merchants developed data standards, reporting and delivery schedules for the new merchant categories, so technical development didn't begin until 2009.
"We wanted to bring our members along slowly and make sure we got it right," Kaiser said. "Going into a new merchant category completely unrelated to air transactions and the fields we populate for air was new territory. To add hotels, UATP had to expand data fields to include "check-in [and] check-out dates, room rate, property location, address, tax and customer reference info."
As each issuing airline provides client reporting, Kaiser said, it was critical for airline issuers and merchants to "understand data fields," which are the most important, what each would include and how they would appear in reports.
La Quinta became the launch hotel chain after Wal-Mart asked its UATP issuer American Airlines if it could use the payment card to streamline hotel billing, according to American's small and medium enterprise products marketing and sales strategy director Karen Buls. "We've been successfully running the program since 2009 and see additional opportunities to expand it," Buls said in prepared remarks.
Hotel acceptance on the UATP card, according to Wal-Mart travel services senior director Rick Johnson, "adds efficiencies and cost savings" to its travel program. "Plus this will provide a centrally billed product that can be easily reconciled."
Electronic Feeds Replace Paper
Instead of paper invoices, La Quinta now bills hotel charges to UATP accounts. American consolidates all air, rail, agency and La Quinta charges billed to Wal-Mart's UATP accounts and electronically transfers invoice detail to ease reconciliation and dataflow to financial systems, and speed payment, according to Wal-Mart and UATP.
"Even with the transaction fee, billing through UATP accounts provides La Quinta better reconciliation, speed of payment and data," Kaiser said. "Benefits outweigh the cost of accepting the UATP card," he added.
"Less expensive is certainly a driver for us," said La Quinta sales executive vice president Feliz Jarvis. "If we have a client like Wal-Mart, UATP provides us with opportunities to have the best of both worlds." Although it is less prevalent in limited service chains than in full-service, some large corporate accounts "look to us to provide centralized billing or direct billing. This can be time consuming and inaccurate for clients," Jarvis said, so the hotel chain looked for solutions.
La Quinta worked with Remco Software, maker of the NiteVision property management system used by the chain's nearly 800 franchised and company-owned locations, to code and test interfaces to Sabre and UATP. NiteVision electronically transmits hotel charges to UATP via the Web, according to Remco president and chief technology officer Mark Loyd. Payment authorizations are made only when corporate travel policy parameters are met, according to the companies.
Consequently, La Quinta could accept and centrally bill payment from an employee who presents a UATP card at a front desk, what UATP calls "walking plastic." When he envisioned network expansion to hotel, Kaiser said, he thought "centrally booked and billed" charges would be the norm. "We are not connected to traditional point of sale terminals and acquirers like Visa, MasterCard and American Express." But if proprietary hotel booking software is able to transmit charges to UATP, Kaiser said, "it will be up to companies and issuers to allow point-of-sale transactions."
La Quinta said it plans to accept UATP payment entered as part of the booking process or at the front desk. Now, La Quinta is "trying to expand" the UATP central billing to other clients and prospects with special focus on five to 10 clients for which it provides centralized billing, Jarvis said.
"I did not think that the model of being on a direct bill invoice would be attractive to switch to UATP's centrally billed form of payment," Kaiser acknowledged. "But because our economics are lower than traditional charge cards" and can deliver other advantages over paper-based invoicing, "it worked. I was pleasantly surprised because this broadens the appeal. Obviously if you can switch off an expensive card to UATP it makes sense to."
UATP now is focusing on signing and implementing additional hotel chains and car rental companies, as well as more of its 13 issuers.
"All of the U.S. issuers are now talking about, or making plans to follow suit," Kaiser said. In addition to American, issuers include Continental Airlines, Delta Air Lines, United Airlines, US Airways, AirPlus International. Outside the U.S., UATP issuers include Air New Zealand, Austrian Airlines, El Al, Japan Airlines, Qantas Airways and Gol in Brazil. AirPlus issues UATP-based company accounts for 10 carriers including Air China, Austrian Airlines, British Airways, Lufthansa, Northwest Airlines, Swiss International Air Lines, TAP Portugal and Singapore Airlines.
Pressure to add more issuers, merchants or accounts to boost transactions has intensified as billings last year dropped 25 percent to $9 billion, due to economic conditions in its three largest markets--Japan, Europe and the United States, Kaiser said. To boost transaction volume, UATP has targeted new merchant categories, issuers and corporate accounts.
"We were fortunate that as we were hatching this strategy we had some really big players--Wal-Mart, American Airlines and La Quinta--willing to do this," Kaiser said. "We feel really good about where we are because we've stress tested this every which way we could."