WASHINGTON — A decision three years ago to bring together airlines, GDSs and travel agencies to tackle the debit memo issue has helped to significantly reduce a long-festering point of friction among the three factions.
ARC reported last week that since 2013 it has seen a 46% reduction in the number of debit memos created for the airline tickets it issues. The decline has been most significant in the last year, falling 26% between 2014 and 2015 on top of a 16% reduction from 2013 to 2014.
This latest improvement comes three years after ARC launched the Debit Memo Working Group, bringing together the industry players involved in more than 90% of debit memo creations: the airlines, travel agencies and GDSs.
Debit memos, long an industry headache, each year cost agencies millions of dollars and countless staff hours to deal with.
ARC COO Lauri Reishus called them "the most annoying, costly, inefficient process in our industry." The working group, she said, was an effort by ARC "to try and solve an entrenched industry problem."
ARC presented its most recent findings to the working group here last week, on the eve of ARC's annual TravelConnect conference, which kicked off Oct. 22.
Based on data for the first nine months of the year, ARC projected that in 2015 there would be one debit memo created for every 365 tickets issued through ARC, down from one for every 289 tickets in 2014 and one for every 249 tickets in 2013.
However, the dollar value of those reductions has fallen just 10% since 2013. This year, ARC projects there will be $1 of debit memo created for every $733 in ticket value issued through ARC. That compares with $1 for every $663 in 2013.
ARC attributes that discrepancy to the high dollar value of debit memos for credit card chargebacks, which represent 32% of all debit memo amounts but only 13% of their volume.
Members of the working group said last week they were pleased with the reduction, but they also cautioned there is a long way to go in fixing the debit memo problem.
"We're in a marathon; it's not a sprint," said Doug Mangold, ARC's managing director of product. "We're just getting started, and we have a lot more to do."
There are myriad reasons debit memos are issued and no standard way of identifying and tackling them. The working group is trying to bring order to the system in part by trying to get all parties to learn to speak the same language.
Craig Miller, director of revenue accounting for United Airlines, said a key focus has been to standardize reason codes for debit memos, a standard that he said would reduce the amount of back-and-forth spent disputing them.
Agents, he said, "will get a debit memo and understand it." Such standardization, he said, also makes it easier to identify the most drivers of debit memos.
United is one of many members of the working group that uses ARC's Memo Manager application, which enables users to identify things such as which travel agents have had the most issues and why. Miller said that being able to analyze such data had enabled United to produce training packets for its top 10 agencies on ways to avoid debit memos.
ARC launched Memo Manager several years before it created the working group. Once it had been in use long enough to produce sufficient data, Mangold said, ARC could identify the root causes of debit memos and begin tackling them.
Both Mangold and Shelly Younger, ARC's manager of settlement services, said that the collaboration among different parts of the industry working to fix the debit memo issue has made a difference.
"Even during their breaks, they are having informal conversations that lead to real solutions," Younger said. "The networking is as important as the work in the meetings."
Jeffrey Earlbaum, president of ETA Travel in West Conshohocken, Pa., and a member of the working group, agreed
"The biggest thing has been to create dialogue between the three industry stakeholders so that we can vent our issues and learn how to work together," he said. "It's been wonderful to have people on all sides to be able to say, 'Here are certain situations that I've experienced in the past with debit memos and ways I think we can improve the way they were resolved.'"
Echoing United's Miller, Earlbaum said that creating standards in debit memo coding made it easier and less time consuming to figure out why the memo was issued.
In fact, this year, debit memos are also being resolved more quickly. Credit card chargebacks, for example, were taking on average about 55 to 65 days to resolve in 2013. This year, Mangold said, the average time is under 30 days.
Younger said several stories coming out of the working group spoke to the ways it was helping to solve the problem, such as an airline tearing down its entire process, then reducing some of the memos it was issuing as well as the fees it was charging, or an agency that developed new training modules, then shared them with the group.
"It's encouraging people to go back to their teams and say, 'What can I target, and where can I do some additional training to reduce this?'" she said.
Reishus attributed the working group's success to the fact that "people have actually been sharing information and sharing their perspectives and letting data guide their work, not myths or anecdotes but hard data."