“Our overseas business volume surged 30%, with significant growth in revenue, bookings and the number of travelers.”
An executive at one of China’s first major travel companies to expand overseas said the business had benefited from longer holiday periods, which drove a sharp increase in outbound bookings. Even some niche overseas destinations that once required Chinese travelers to make long, arduous journeys were now packed with visitors.
Yet despite the strong performance, the executive admitted with a wry smile: “We’re making money, but we’re also taking heavy losses.”
Why?
Because many Chinese travel companies expanding overseas are falling into the same trap: cross-border payments.
“Purchasing travel resources overseas requires substantial foreign currency reserves. But with exchange rates moving in our favor this year, our costs for buying hotel rooms, ground services and transportation overseas have fallen. The same amount of renminbi can now buy more resources when converted into US dollars,” the executive explained.
On the surface, Chinese travel companies expanding overseas seem to be winning on all fronts. So how can they still suffer significant losses?
The answer lies in a defining characteristic of travel consumption: the time lag between payment and fulfillment.
The length of this gap varies significantly by product type:
* For conventional outbound group tours, the gap between payment and fulfillment can extend to 6–12 months.
* For high-end customized outbound trips, it typically ranges from 90 to 120 days.
* For premium sports travel packages, the gap can be even longer, stretching from 2 to 18 months.
In other words, travel companies can face a gap of several months to nearly two years between receiving customer payments and fulfilling bookings.
Meanwhile, these companies often need to pay upfront to secure overseas resources, including hotel rooms, ground services, tickets and transportation. This requires them to convert currencies in advance and maintain substantial reserves of US dollars or other local currencies overseas.
That is where the problem begins.
The value of these foreign currency holdings is not fixed. Exchange rates fluctuate constantly, exposing travel companies to foreign exchange risk.
One Chinese travel company reported strong business growth in the first half of this year, yet foreign exchange losses reportedly eroded an amount equivalent to 80% of its net profit.
Beyond currency risks, cross-border payment operations present another challenge. Executives at Chinese travel companies expanding overseas also report that manual reconciliation, payment delays, repetitive processes and disconnected data systems are all too common.
To address these challenges, Chinese travel companies need to modernize their cross-border payment systems. One key step is to match incoming and outgoing payment currencies wherever possible, reducing unnecessary currency conversions and exposure to exchange rate fluctuations. Companies can also use more flexible payment arrangements and foreign exchange hedging tools to better manage currency risks and cash flow.
Another priority is to simplify payments to overseas suppliers. Multi-currency accounts, virtual cards and integrated payment platforms can help companies automate payments and reconciliation, reduce manual processes and improve visibility into their global financial operations.
Hong Kong-based travel group Travel Expert offers a practical example. With support from Airwallex, the company now enables customers in 25 countries to make online payments, while different departments use their own multi-currency virtual cards for spending and reconciliation. The company has reportedly reduced foreign exchange costs on overseas hotel payments by up to 3%.
As Chinese travel companies expand globally, competition is shifting beyond booking volumes and market reach toward operational efficiency and profitability. The next stage of international growth will depend not only on attracting more travelers, but also on managing cross-border payments more effectively and protecting profit margins.
