Cash & Liquidity ManagementCash ManagementCash Management RegionalLodge cards: The easy way to save on travel purchases?

Lodge cards: The easy way to save on travel purchases?

For decades, the lodge card has been one of the most crucial payments tools in global business travel. Yet through the adoption and integration of new technologies, lodge card payments providers are now able to offer travel managers more dynamic solutions than ever before.

For decades, the lodge card has been one of the most crucial payments tools in global business travel. Yet through the adoption and integration of new technologies, lodge card payments providers are now able to offer travel managers more dynamic solutions than ever before.

The world isn’t a very big place, and a huge proportion of companies must expand, trade and do business abroad in order to establish sustainable growth and scale. That’s why global business travel is a major industry – and 2019 is set to be one of the industry’s biggest years to date.

According to the Global Business Travel Association (GBTA), the worldwide corporate travel sector grew by more than 7% in 2018. By 2022, revenues are expected to reach an annual $1.7 trillion. Yet while business travel is becoming faster, simpler and far more common across a wide range of industries, it’s also becoming steadily more expensive. The BCD Industry Forecast 2019 has predicted airfares will increase by another 1% globally this year alongside hotel rates – while regional fares in Europe are anticipated to increase by closer to 2% in 2019.

In order to navigate these rising expenditures, maintain cash visibility and maximise savings, treasury teams absolutely must adopt a dedicated and dynamic centralised technological solution. Fortunately, that solution already exists, and many corporate firms are already reaping the benefits.

Research conducted last year by the GBTA and corporate travel solutions provider AirPlus International found that 56% of American travel buyers manage their travel programmes using central travel accounts (CTAs). These accounts are more commonly referred to as ‘lodge cards’ or ‘ghost accounts’ and are incredibly flexible financial tools organisations use to facilitate air transactions for multiple employees across a single account.

Lodge cards are nothing new to the corporate travel market, but they’ve evolved dramatically over the course of the last couple of decades to accommodate for new travel demands and fintech integrations. That’s why scaling businesses in search of a cost-effective, data-driven platform to control and monitor corporate travel spend would do well to explore lodge cards and the added value they might be able to offer.

How do lodge cards work?

A lodge card is a centralised payment method organisations can use to facilitate company travel purchases – typically exclusive to airfare or rail fare. A wide range of incumbent financial institutions and niche corporate travel providers offer lodge card accounts, which provide an organisation with either a single issued company card, multiple subsidiary cards as part of a wider group account or cards issued on a per cost or per profit centre basis.

The concept and inherent benefits are relatively straight forward: by booking all business flights or rail trips via the entity’s single issued lodge card, all purchase data can be automatically deposited into the information system of a company’s travel agent and central travel account dashboard. As a result, every time a travel order is being passed, a company’s travel provider will automatically require a payment authorisation from the issuer to benefit from a payment guarantee.

Firms then receive weekly or monthly purchase statements and repay the issuer under payment terms varying from seven to thirty days based on the type of lodge card product they’ve taken out. Meanwhile, the travel agent is typically paid directly by the card or account issuer. For this reason, corporate travel agents tend to favour working with companies that possess a lodge card, as the agent can enjoy security of payment and reduce risk management costs, as well as enhance cashflow optimisation thanks to shorter payment terms and full predictability of inbound flows.

In terms of process and how lodge cards actually work, the workflow process begins when a company contacts its travel agent to make an order. The travel agent will then book that order using a central reservation system (CRS) like Amadeus, Galileo or Worldspan – which will enable the agent to identify available flights and generate the booking. That booking is then recorded into the billing settlement plan (BSP) to initiate the billing process.

After the booking is complete, travel data is collated, collected and submitted from the travel agent to the lodge card issuer via the acquiring side of the payment system or via a travel-dedicated data flow. Issuers can then cross-check amounts using data feeds from the relevant CRS or BSP, which they go on to report to the customer via increasingly intuitive and visual account dashboards and management information systems.

It is then the card or account issuer’s remit to intermediate between the company and their travel agent, allowing both parties to benefit from the negotiated financial or product terms that best correspond to each other’s needs. That being said, the benefits for companies and treasury teams stretch far beyond a simple billing procedure and predictable, predefined booking terms.

How do companies benefit from lodge cards?

First and foremost, lodge card solutions offer travellers several key advantages. Non-frequent travellers without a corporate card benefit from easy payment of their tickets, as well as from the comprehensive travel insurance benefits that typically accompany central travel accounts. On the flipside, more frequent business travellers benefit from company lodge cards because lodge cards take ownership of flight and rail ticket purchases – which are often the most expensive aspect of corporate travel. This in turn frees up corporate card payment limits to be spent elsewhere.

Yet the key benefit corporates can expect from investing in a lodge card solution is data. After all, in order to optimise travel expenses and monitor compliance with corporate travel policy, it’s absolutely critical that travel managers and treasurers have a full, 360-degree view of all the travel-related expenses being tallied up. That view and the data underpinning it enable teams to complete their knowledge of corporate travel activity and utilise that knowledge to negotiate terms with suppliers.

Best of all, travel managers can view this data in real-time using intuitive client dashboards that enable companies to segment, filter and organise travel data and create custom reports, set and monitor targets or create and track expenditure goals.

Data included will typically range from the personal information of travellers and airline codes, to routing and segment details, travel agent invoice numbers, dates, travel agent fees, ticket numbers, accounting unit references, internal account numbers use and more. Using this data, reconciliation becomes totally streamlined – freeing up time for teams to reinvest in other high-value tasks while simultaneously offering travel managers the information required to make more efficient bookings and travel arrangements.

What’s the difference between a corporate card and a lodge card?

At first glance, the lodge card might sound relatively similar to the corporate card – and fundamentally it is similar, but the two payment products actually have two very different and clear-cut remits.

In order to define those remits, treasury teams and travel managers typically divide the corporate travel management chain into three chronological steps.

The first step is pre-travel. This incorporates tackling issues like mission authorisation, booking and the payment of train and airline tickets. It’s this step in which lodge cards or central travel accounts intervene, working alongside software solutions to carry out the dynamic workflow we’ve already touched upon in order to make the booking, payment and commence data collection processes.

The second step of the chain is the travel itself, which is where corporate cards are deployed. Corporate cards are often referred to as ‘walking plastic’ because they are designed to serve corporate travellers as they are ‘walking’ outside of the office. A corporate card is issued to pay for taxi fares, restaurants, hotels, rental cars, fuel and other typical travel expenses incurred during a trip.

The third and final step is post-travel, which involved expense reports, employee reimbursement and policy survey. Corporate card products are typically integrated with existing expense management software alongside lodge card data. This offers travel managers and treasury teams a consolidated view of all expenses incurred as part of the three-step travel chain – from authorisation to return and reconciliation.

How are lodge card payments changing?

The lodge card has been around for over three decades – which is a pretty long time in the fast-moving payments space. Yet rather than be outpaced by disruptive fintech and new products, lodge cards have actually evolved along with the sector in order to stay relevant and continue to provide unique added value to the corporate travel management chain.

Without doubt, the biggest change in lodge card payments over recent years has been the rapid decline of physical lodge cards themselves. Although they’re still available and typically offered as part of any mainstream corporate CTA – and are actually experiencing a period of rapid growth across many African, Asian and South American markets – the vast majority of payments providers have shifted focus to virtual lodge cards.

For example, American Express now offers travel managers CTA in which airfare is booked using a virtual account number (VAN) that sits with the company’s travel agent. These single-use VANs include start and end dates for each transaction, and can also now be used for some hotel and low-cost carrier airlines.

Similarly, last year lodge card industry leader AirPlus teamed up with the Australian-based robotic process automation firm Troovo to streamline the data entry requirements of its A.I.D.A. virtual travel payments solution – enabling the platform to generate a virtual card invisibly and automatically for transactions to eliminate manual data handling.

Other providers are working to expand the market through the provision of new big data capabilities offering enhanced analytics – and subsequently, the ability to make big savings. Products like Onecard Lodge by RBS come pre-equipped with the bank’s high-powered Smart Data OnLine (SDOL) management information platform. SDOL offers travel managers a 360-degree view on daily transactions, customised reporting that can be seamlessly exporting to TMS or ERP systems and built-in compliance tools.

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