Chinese travel companies are expanding overseas at a rapid clip, but their international ambitions are colliding with a less glamorous reality: cross-border payments. The gap between when customers pay and when trips are fulfilled can stretch from several months to nearly two years, exposing firms to significant foreign exchange (FX) risk.
One executive at a pioneering Chinese travel company that expanded abroad noted that overseas business volume surged 30%, with strong gains in revenue, bookings, and traveler numbers. Longer holiday periods have fueled a spike in outbound bookings, even filling niche destinations that once required arduous journeys. Yet the same executive admitted with a wry smile: “We’re making money, but we’re also taking heavy losses.”
The culprit? 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 firms seem to be winning on all fronts, so how can they still suffer significant losses?
The time-lag trap
The answer lies in a defining characteristic of travel consumption: the time lag between payment and fulfillment. This gap varies by product type:
- Conventional outbound group tours: 6–12 months
- High-end customized outbound trips: 90–120 days
- Premium sports travel packages: 2–18 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, they often need to pay upfront to secure overseas resources—hotel rooms, ground services, tickets, and transportation—requiring them to convert currencies in advance and maintain substantial reserves of US dollars or other local currencies overseas.
The value of these foreign currency holdings is not fixed. Exchange rates fluctuate constantly, exposing travel companies to FX 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 report that manual reconciliation, payment delays, repetitive processes, and disconnected data systems are all too common.
Modernizing payment systems
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 FX 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. For more on how travel firms are streamlining payments, see this example from Thailand. And as the industry embraces digital tools, AI is moving from pilots to profit.
