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Education

Dealing with disasters "[T]hroughout 2023, it has seemed like overlapping trav-

el miseries are the new normal. Snow gives way to ice,
in the travel industry which gives way to hail, which gives way to heat so blis-
tering that planes can't take off. That's what it feels like.
Meanwhile, there aren't enough flight crews, maintenance
crews, or traffic controller crews to keep planes in the air.
Airlines are losing luggage, losing seat assignments, los-
ing upgrades.

"I spend most of my time as a travel agent working with
business travelers. The goal is to get them where they need
to be, at the time they need to be there, for as little money
as possible. ... But for the first time in the dozen years I’ve
been doing this, budget concerns are taking a back seat to
fear." (See https://tinyurl.com/4tyvs3j7).

These events don't just cause immense devastation during
the incidents themselves but extend beyond to a financial
cost in either compensation made to travelers, refunds,
By Bob Kaufman chargebacks, and/or the time spent dealing with the
administrative issues.
ConnexPay
The chargeback issue in travel
n March 2023, 276,485 tourists visited Maui, spend-
ing $619.9 million in that month alone—up 35.1 The chargeback dilemma has emerged as a particularly
percent from the previous year (see https://tinyurl. thorny issue for the travel industry. Even during normal
I com/fhd393xy). Given this was before the tourism operations, chargebacks are unusually high. Travelers
season had really kicked off, over the summer we could who miss their flight will often make a chargeback claim
have seen billions of dollars being spent on an island with through their bank rather than going through the airline
a population of only 164,221. Tourism typically accounts or travel agency's refund process, which causes the
for around 70 percent of the island's economy (see https:// industry's financial stability to take a hit.
tinyurl.com/3tnb4dwy).
These big-ticket chargebacks, which often surge follow-
However, in August, a fire broke out in the town of Lahaina ing major events such as natural disasters, create a dom-
that, at the time of this writing, was believed to have ino effect. Airlines are left grappling with reduced profit
resulted in more than a hundred fatalities—a devastating margins, increased processing fees, and a heightened
toll. The message, as with most natural disasters, then vulnerability to future disruptions. The spiraling cycle of
became: Stay away. Now is not the time for tourism that chargebacks not only chips away at the industry's finan-
forms so much of the island's economy (see https://tinyurl. cial health but also hampers its ability to recover swiftly
com/bdee8wkw). after unexpected events.

The impact of this tragedy and immediate aftermath is Navigating these challenges requires a reimagining of
spreading far beyond the island itself. Within the travel payment systems that can weather the storm of unpredict-
industry, it is affecting the hotel chains that millions of ability. The traditional static payment methods of the past
guests would have stayed at, the airlines that would have are ill-suited to handle the intricate web of chargebacks
taken them to the island, and the travel agencies they and refunds that arise from the chaotic aftermath of un-
would have booked trips through, which could be major foreseen events.
flight comparison sites or mom-and-pop travel agencies.
Online travel agencies (OTAs) spend billions of dollars to
This disaster is harming a travel industry already finding attract customers, and yet when it comes to arguably the
it difficult to fully get back to pre-pandemic levels, and most important part of a transaction with that customer,
it is far from the only exogenous event that the industry the payment, they hand them over to the airline, hotel or
has had to deal with: just days after the disaster in Maui, other partner.
Hurricane Hillary had a similar effect on flights across the
United States (see https://tinyurl.com/ywff6h32). The weakness of this model (sometimes called the agency
model) was highlighted during the pandemic: as flights
These events have consequences that reach much and hotel stays were canceled, consumers turned to the
further than individual flights themselves. According to OTAs for refunds only to be frustrated because the OTA
"Something Has Happened to the Travel Industry. I'm the could not help them get refunds or rebook their journey
One Dealing With It." by Erica Wilkinson and published because they, legally speaking, weren't the legal entity that
by Slate (see https://tinyurl.com/4tyvs3j7): charged the traveler.
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