The travel and tourism industry is one of the world’s largest industries and one of most thriving sub-sectors is the travel and timeshare niche.
A timeshare is a property with a divided form of ownership among multiple partners with each owner getting a period of time within which they enjoy ownership rights of the property.
The concept of timeshare allows for the provision of cheaper vacations at choice locations. Here’s how it works – let’s say you purchase a share in a hotel or a vacation property of your choice, you pay an initiation fee for the property and a monthly fee that maintains your ownership status however, you are responsible for the taxes on the property for as long as you remain an owner. The timeshare units could be sold as partial ownership, lease or “right to use” and just as the options for sale vary, ownership status also varies.
Travel and timeshare companies manage timeshare services and are indeed profitable especially when you consider the amount of persons that go on vacations yearly or are in need of timeshare services.
However, most banks are hesitant to approve merchant accounts for travel and timeshare companies especially the newer, less-established ones and the main reason for this is the unpredictability associated with the travel industry.
High-ticket prices, cancellations and a large volumes of chargebacks, which are when credit card providers demand businesses refund the loss of disputed or fraudulent transactions, are some of the reasons why traditional financial institutions refuse to approve a business’ a travel merchant account.
The effects of non-approved merchant accounts cripples the business operation of timeshare companies as a merchant account enables the travel and timeshare company to accept payments in multiple ways, typically via debit and credit cards. Any business that takes reservations over the phone or online needs to be able to take credit card payments.
Merchant accounts are subject to approval by financial institutions that power it and since merchant accounts are subject to approval, the underwriters for the acquiring bank and merchant processing company accesses the level of financial risks which your business is likely to generate for the parties involved.
Low-risk businesses find it easier to secure merchant accounts while businesses which are designated as “high-risk” are in for a rough time (that’s putting it mildly). Sadly, travel and timeshare companies are categorized as high-risk businesses and below are the major reasons why timeshare businesses are listed as high-risk include:
- The industry it’s in. The travel and tourism industry is one sector where prices are in a constant state of flux which makes cancellations, chargebacks and skyrocketing prices a common feature. Some industries are considered high risk while others aren’t and timeshare companies are considered high-risk.
- Length of time spent in the business. Traditional institutions are reluctant to provide merchant accounts for travel and timeshare companies which are just starting off. This reluctance is understandable especially when you consider the amount of capital travel and timeshare companies move and the amount of risk involved.
- Your personal credit. An improved credit status makes your business less risky
- Likelihood of chargebacks. Travel and timeshare companies are prone to chargeback transactions which that are caused by disputes over charges or claims of fraudulent services by clients.
- The location of your business. Home-based businesses are deemed the high risk to payment processors. In addition, the specific region which the business targets can cause it to be designated as high-risk. For example, businesses that target war-torn or conflict-prone areas.
Travel and timeshare companies fall in most or all of the categories above and this make getting a merchant account extra difficult and the type of merchant account they get is different from those operated by low-risk businesses – a High-Risk Merchant Account.
Getting a High-Risk Merchant Account That Suits Your Business
For you to remain in the fast paced and highly competitive travel industry, you need to get a merchant account provider that will enable your business accept card payments because that is the future of business transactions.
For your application for a travel and timeshare merchant account to be successful, you will undergo stringent scrutiny by underwriters who evaluate the level of risks involved and ensure that your outfit is legitimate and is built on a workable model.
Different underwriters have different requirements. However, here are some of the basic requirements for a merchant account evaluation:
- Your Social Security Number or Employee Identification Number
- Valid government-issued identification, e.g. drivers license
- A bank letter
- A chargeback ratio that is less than 2%
- A secure, functional website
- Your most recent bank statements over a stipulated period of time(subject to underwriter’s definition)
There are a lot of challenges that attend procuring a merchant account, particularly for a travel & timeshare business.
However, the pros outweigh the cons.
Once you are able to negotiate the bottleneck of finding a serviceable merchant account provider, your Travel and Timeshare Company has the potential to make tons of money.
Contact Blue Wave Merchant Solutions today to get started!