In the first instalment of our Navigating Risk blog series Navigating Risk: An Overview of Travel Industry Risks , we explored the nature of risk in the travel industry. The truth is that travel companies have to navigate many anxiety-inducing risks—insolvencies, disruptions, chargebacks, reputational damage and high insurance premiums, to name a few.

In this, our second instalment of the Navigating Risk blog series, we explore the benefits of managing risk using data. This may sound intimidating at first, but it doesn’t have to be. Using data to manage risk is about breaking down the process into smaller, more manageable steps. The best place to start is with the data you already have at your fingertips.

Data: Your Risk Management Toolkit

Your travel business has access to a wealth of data internally and externally that you can use to manage and mitigate risk:

 

Internal data sources:

Booking data: Analysing booking data not only outlines customer preferences but also potential vulnerabilities. For example, it may reveal an over-reliance on a destination prone to disruptions that may heighten your company’s risk profile. 

Payment data: Analysing payment trends helps to improve fraud detection and prevention strategies and highlights improvements in the payment process itself, which can boost conversion rates.

Website data: Understanding how users interact with your booking system alerts you to potential roadblocks that may increase cart abandonment, allowing you to boost conversion rates.

Customer support data: Every business receives complaints. Recurring complaints reveal areas of your operations where you should make improvements—perhaps you need more transparent pricing or conduct more thorough supplier due diligence.

 

External data sources:

Economic trend data: Staying updated with the state of the economy helps you to anticipate shifts in demand or consumer spending power. This allows you to adjust your pricing strategies and stay competitive as markets change.

Travel restrictions and health alerts: Travel providers learned the importance of monitoring travel restrictions and health alerts during the COVID-19 pandemic. Although the pandemic may be over, it’s still important to track destination restrictions in case disruptions upend travel plans. 

News reports: Keeping an eye on local and national news is crucial for keeping informed about potential disruptions that may affect your business.

 

How Effectively Utilising Data Mitigates Risk

We’ve established that you’ve already got plenty of data at your fingertips that you can use to mitigate risk in your travel business. But how can you use it to mitigate risk? Let’s explore the ways you can use internal and external data to address risk:

Operational Efficiency

Risks come in many shapes and sizes, and almost all of them have the potential to limit your operational efficiency. Using data, you can identify bottlenecks in various areas of your business, including in your booking process (such as payment roadblocks) or other areas where customers tend to get stuck. Making targeted fixes allows for a much smoother experience, which translates to lower cart abandonment rates.

Payments are a foundational aspect of your travel business’s operations. Travel payments are a risky business without the right systems in place. You need to be able to accept various payment types, deal with fluctuating exchange rates and have a secure payment system that adheres to the relevant payment regulations. Data plays a pivotal role in your travel payments strategy, allowing you to manage chargebacks [link to ‘How to Lower Your Chargeback Ratio’ article] and optimise the payment process to create a seamless customer experience.

Another aspect of risk is failing to future-proof your business. This involves not keeping up with changing customer preferences. The good news is that data provides granular insights into booking trends, allowing you to seek strategic partnerships with providers that better align with your customer’s preferences.

Fraud detection and prevention

Fraud is a glaring problem in the travel industry, and it is only getting worse [link to ‘Travel Industry Fraud Update: New Threats and Silver Linings’ article]. Travel merchants that don’t invest in sophisticated protection are becoming more vulnerable to fraud. So, how do you protect your customers and, by extension, your business from the rise in fraud?

To combat fraud, we recommend using fraud detection tools to monitor and identify suspicious transactions, such as those made from new or unusual IP addresses or involving large sums of money. Fraud detection systems use traveller booking data, spending patterns, billing information, transaction data and booking details to find abnormalities that may suggest fraud. 

Although helpful, effective fraud detection and prevention goes beyond using these tools. Truly impactful fraud prevention and detection requires human expertise to review suspicious transactions and understand the nature of changing (and, unfortunately, increasingly sophisticated) fraud tactics. 

Reputational risk management

As we explained in the first instalment of the Navigating Risk blog series, a good reputation takes years to build—but it can be shattered in an instant. That’s why a proactive, data-driven approach to risk management is vital for safeguarding your business. By monitoring traveller sentiment, responding to feedback and identifying reputational risk hotspots, you gain a greater understanding of your customer’s needs and pain points.

 

Mitigating Risk: Building a Data Driven Culture

The digital revolution has given travel businesses a near-endless list of potential opportunities, but the risks have also increased. The current environment demands that businesses use their data well, but using data well requires a data-driven culture.

Building a culture around data will not happen overnight, but it will allow your business to become more agile and customer-focused, reducing risk. To start your data-driven risk management journey, try these steps:

Focus on key data first

It’s easy to get overwhelmed by endless data points, so start the process by focusing on a handful of vital metrics. For example, if one of your focuses is reputation risk, a good starting point might be focusing on chargeback rates, negative reviews and complaints. 

Alternatively, you may choose to focus on operational risk first. In that case, it’s best to hone in on internal booking errors and supplier data, such as quality issues, complaints, delays and cancellations. Even small changes informed by data insights can have a significant impact on mitigating risk.

Utilise suitable tools

Using the right tools can transform data into risk-reducing insights. For example, a customer relationship management (CRM) platform allows you to analyse past bookings, preferences and customer feedback. Additionally, website analytics tools allow you to reduce operational risk by identifying bottlenecks or analysing the impact of time-limited offers or pricing changes.

But this is only the beginning. A data-driven culture mandates not sitting still—you will need to keep adapting and integrating new tools and approaches to reduce your risk travel businesses’ exposure and deliver your customers the experiences they expect.

 

The Main Takeaways: Managing Travel Risk With Data

Travel businesses that take a data-driven approach to risk management are well-positioned to mitigate risks from reputational damage to chargebacks. While aspects of risk management may seem intimidating at first, remember these key points: start with the data you have, make incremental change (because a data-driven culture doesn’t happen overnight), and utilise suitable tools to mitigate risk.

The journey to becoming a data-driven travel business is ongoing. By using data well, you move from panicked and reactive risk management to calm and proactive risk mitigation.