News | DistributionLessons to be learnt from LeisureLinkThis article was originally published onBy Viewpoints | October 6, 2016 It is discouraging and unfortunate that the failure of LeisureLink will leave some consumers and suppliers out in the cold. Hopefully they will be able to recover some if not all of the funds still owed to them.NB This is a viewpoint by Frank Putman, chief financial officer at NextPax.This is a highly competitive mostly unregulated industry where channel managers and OTAs all claim to be top dog.At the same time, property managers need to filter through the ever increasing myriad of distribution options to decide how and through whom to market their properties.The fact that companies raise millions in funding and have top industry professionals on their boards, ultimately guarantees neither the survival of their businesses nor their guest bookings.The funding that you read about almost always has milestones attached, which if not reached could leave the company without any or only with reduced funding.It maybe comforting to read about these industry heavyweights accepting positions, but to what extent do they actually offer support or advice to the management of the company and what guarantee are they to the ultimate survival of the company?Ultimately it is the property manager who has to decide how to distribute the properties. A channel manager can be of great service here, getting you connected to a multitude of channel through a single connection (more on this can be read here).But as recent events around LeisureLink have painfully shown there can be risks attached as well.The LeisureLink failure foremost centers around credit risk and business continuity risk.Credit risk exists because the model under which LeisureLink used to operate was such that they were merchant of records. They were collecting the booking amounts from the guest/OTA and would only transfer that to the property manager within ten days after departure of the guest at the property.If we assume a lead time of 60 days between the booking and the departure of the guest at the property, it means that if the channel manager fails within those 70 days the property manager runs the risk of not getting paid.But there are other models in the market which can reduce or negate this credit risk all together.One option is to choose a channel manager using a similar merchant model but who receives the booking amounts on a escrow (third party) account, ring fenced from its daily operations.The caveat of this model is that property managers will be faced with a delay in payments if the channel manager falters. But the escrow account should guarantee they do get paid.Alternatively a channel manager can be chosen where the property manager acts as merchant of records and receives the payments directly from the guest or OTA. As the property manager receives the payment directly from the guest he/she does not run any credit risk on the channel manager.One word of warning on this is that if the OTA is the merchant, property managers potentially still face credit risk on the OTA.At NextPax we have chosen the second option. The channel manager will often accommodate the passing of the payment details of the guest through its (PCI compliant) platform directly to the property manager or its payment provider.Even though the financial consequences of the above credit risk can have severe direct consequences for property managers, the operational risk of having properties off the market for a certain period of time can be just as devastating.Diversification can offer some risk mitigation here, but has its drawbacks as well, as it requires multiple integrations.There are solutions possible that guarantee the continuity of the business but they are heavily dependent on the jurisdiction in which of the channel manager operates. A property manager should therefore always check with their channel manager what precautions have been taken to ensure the operational continuation in case of a failure of the company.We wish all who have been affected by the failure of LeisureLink all the best.NB This is a viewpoint by Frank Putman, chief financial officer for NextPax.