Merchant of Record vs. Tour Operator: A 2025 Travel Finance Guide

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The U.S. travel sector is on track to exceed $1.35 trillion in spending in 2025, and one of the most important financial decisions tour operators now face is how they manage payments. The choice between running your business as a Merchant of Record (MoR) or continuing as a traditional tour operator has become more consequential as digital wallets, alternative payment methods, and rising chargeback risks reshape the economics of travel. This guide explains both models clearly, outlines the financial implications, and walks through the real risks and opportunities travel operators are facing in 2025.

1. Understanding the Two Models: Merchant of Record vs. Traditional Tour Operator

What is a Merchant of Record (MoR)?

A Merchant of Record is the legal entity responsible for accepting customer payments, processing those transactions, managing disputes, and ensuring compliance with tax, card scheme, and PCI requirements. In travel, this means the operator collects funds directly from the customer, settles with suppliers, manages refunds, and handles compliance obligations such as VAT, sales tax, PCI DSS, and chargeback liability.

This is not the same as simply using Stripe, Square, or another gateway. Gateways only route payments. The MoR owns the entire financial chain, so from checkout to settlement, which includes fraud management, reconciliations, regulatory obligations, and any liabilities that arise from the sale.

When a tour operator becomes the MoR, they move from being an intermediary to acting as the principal seller. That shift brings more control over pricing, payout timing, customer relationships, payment methods (including BNPL and digital wallets), and data critical in a market where cart abandonment is often caused by clunky payment flows.

The Traditional Tour Operator Model

Under this structure, the operator acts as an agent. Customers book through the operator’s platform, but payments go directly to the supplier. Airlines, hotels, rail providers, or activity suppliers act as their own MoR. Operators earn commissions, and often 10 to 30 percent, once the customer has traveled.

This model limits liability and reduces infrastructure needs, but it also creates financial friction. Operators wait 30 to 90 days for payout, have no say over refund timelines, and operate with little insight into customer payment data. In 2025, as customers expect instant confirmations and flexible payment options, those limitations are increasingly restrictive.

The Practical Differences

In an MoR model, the operator has immediate access to customer funds rather than waiting for post-service commissions. They also hold responsibility for taxes, PCI DSS compliance, chargebacks, and settlement. Operators choosing the traditional model offload most of that responsibility to suppliers but sacrifice control and margin.

This distinction explains why many operators are moving into hybrid structures, acting as MoR for high-margin direct bookings while remaining agents for OTA or supplier-driven reservations.

2. Pros and Cons: Financial Impacts of the MoR Model

Advantages

Stronger Cash Flow and Higher Margins
MoR operators collect payments upfront, then pay suppliers net of costs. This strengthens liquidity, supports marketing investment, and allows for broader markup strategies on bundled services. Markups of 5 to 10 percent on combined products, so transport, lodging, and activities, are common when the operator is the MoR.

Better Control of the Customer Experience
MoR operators can offer flexible payment options such as instalments, digital wallets, and stored payment methods, reducing cart abandonment and deepening customer loyalty. They also own the transaction data, allowing for improved forecasting, segmentation, and personalised marketing.

Global Expansion Without Local Entities
Running an MoR model makes it easier to operate internationally. If structured correctly, an operator can handle multiple currencies, cross-border taxes, and international payouts without having to establish local companies in each market.

Disadvantages

Increased Liability
When acting as MoR, the operator assumes responsibility for every dispute and refund. Chargebacks in travel rose after 2024 disruptions, and each dispute carries administrative costs and potential processor penalties.

Compliance Requirements
PCI DSS Level 1 is costly for operators processing large volumes. Operators must also manage fraud controls, strong customer authentication in Europe, and complex tax obligations.

Operational Overhead
Running an MoR model requires robust systems to handle supplier payouts, reconciliation, error management, and dispute resolution. Scaling this without proper infrastructure can lead to revenue leakage.

When each Model works best

An MoR model typically benefits operators with revenue above $2 million annually, strong direct booking channels, diversified supplier networks, or an international customer base. Smaller or newer operators may prefer to remain agents until they reach stable volumes, as the compliance and setup costs can be significant.

3. How to implement an MoR Model: A Step-by-Step Approach

Moving to an MoR structure usually takes three to six months and requires coordination between finance, legal, operations, and technology.

1. Assess Readiness
Review your sales volume, refund patterns, chargeback history, and risk profile. Operators with low chargeback rates and high direct bookings tend to see the strongest return.

2. Secure a Merchant Account
Travel is considered a high-risk sector, meaning processors will require financial statements, bank references, and detailed business information. Approval times can be longer than traditional retail businesses.

3. Achieve PCI Compliance
To operate securely, sensitive card data must be tokenized or kept entirely out of your environment. Most operators outsource compliance through a Level 1 gateway to reduce costs and risk.

4. Integrate Payments and Supplier Payout Systems
This includes linking booking systems, virtual card issuers for supplier payments, and ensuring settlement and reconciliation processes work smoothly.

5. Update Terms and Conditions
Your policies must reflect your new position as the principal seller. Refund timelines, cancellation rules, and dispute processes should be clearly defined.

6. Launch in Phases
Most operators begin with a limited rollout to mitigate risk and refine internal processes.

4. Navigating Key Financial Risks: Chargebacks, Refunds, and PCI Compliance

Travel is a high-risk industry due to long lead times between booking and service delivery. Chargebacks often spike during economic or global disruptions.

Chargebacks
Most disputes fall into two categories: “service not provided” or fraud. Strong documentation—signed waivers, GPS logs, proof of service, confirmation emails, and communications—significantly improves success rates in responses.

Refunds
Operators acting as MoR can manage refunds proactively, issue vouchers, or offer alternatives. This flexibility often preserves a portion of revenue compared to strict supplier-driven agency models.

PCI Compliance
Compliance failures can lead to significant penalties. Clear controls over card data, tokenization, encryption, and outsourced processing are essential.

5. 2025 Trends shaping the MoR Decision

Payments across travel are shifting rapidly. Key trends include:

• Strong growth in digital wallets and contactless transactions

• Increasing reliance on virtual cards for supplier payouts

• Wider adoption of biometric authentication and real-time fraud prevention

• Growing customer preference for instalments and flexible payment plans

• Rising use of orchestration platforms to route payments efficiently

Operators choosing the MoR model tend to be better positioned to leverage these trends, particularly those wanting to build global, scalable direct-to-consumer brands.

6. Case Studies: Real-World MoR Adoption

Large Online Travel Platforms
Global OTAs adopted MoR years ago, building significant ancillary revenue streams from fees, markups, and cross-selling. Their experiences highlight the importance of strong fraud controls and system automation.

Mid-Market Adventure Operator
A regional adventure business with annual revenue of $3 million, transitioned to MoR in 2024. After implementation, settlement times dropped from 45 days to two days, chargebacks fell by half due to improved recordkeeping, and revenue increased due to dynamic bundling.

7. A 2025 Finance Calendar for Tour Operators

January – Review chargebacks and renew PCI certification
March – Implement digital wallet options and test authentication flows
June – Conduct a mid-year MoR performance review
September – Refresh fraud training and audit supplier payout processes
December – Evaluate whether to expand, adjust, or hybridise the model for 2026

How Antravia supports MoR Transitions

Antravia guides tour operators through the entire MoR process, from evaluating readiness and selecting payment partners to embedding the financial controls needed to safeguard revenue. Our team combines hands-on travel finance experience with a deep understanding of booking platforms, card networks, tax obligations, and global payout structures.

We help you:

• design MoR and hybrid models based on your operational reality

• reduce fraud exposure and build airtight documentation

• automate reconciliation and payment flows

• prepare PCI compliance efficiently

• optimise margins through smarter pricing and bundling

• future-proof your payment infrastructure for 2026 and beyond

If you are considering a switch to Merchant of Record or want to understand whether your current setup is costing you margin, Antravia can assist with a structured assessment and practical implementation plan.

References

• Federal Trade Commission (FTC) — U.S. consumer protection, chargebacks, and dispute statistics
  https://www.ftc.gov

• Consumer Financial Protection Bureau (CFPB) — U.S. payment and financial compliance guidance
  https://www.consumerfinance.gov

• Internal Revenue Service (IRS) — Merchant Category Codes, tax obligations, and reporting requirements
  https://www.irs.gov

• Federal Reserve (FED) — U.S. payment system data, digital wallet trends, and economic indicators
  https://www.federalreserve.gov

• Visa Security & Merchant Guidelines — Global rules for merchants, chargebacks, authentication, and dispute handling
  https://www.visa.com/globalmerchantservices

• Mastercard Rules & Security Standards — Merchant compliance, fraud management, SCA guidance
  https://www.mastercard.us/en-us/business/overview/rules.html

• PCI Security Standards Council — PCI DSS levels, card data handling requirements, and assessment frameworks
  https://www.pcisecuritystandards.org

• U.S. Department of Commerce – International Trade Administration (ITA) — Digital payments, cross-border commerce, and global travel insights
  https://www.trade.gov

• World Travel & Tourism Council (WTTC) — Travel industry spending, growth forecasts, and global trends
  https://wttc.org

• U.S. Census Bureau — E-commerce and economic activity relevant to payment volumes
  https://www.census.gov

• U.S. Chamber of Commerce — Fraud, cybersecurity, and digital business compliance reports
  https://www.uschamber.com

• Bank for International Settlements (BIS) — Global payment trends, settlement systems, and cross-border transaction research
  https://www.bis.org

• Europol / European Commission – Payments Security — SCA (Strong Customer Authentication) rules and PSD2 updates (for EU travellers)
  https://commission.europa.eu

• International Organization for Standardization (ISO) — ISO 20022 and other global payment messaging and settlement standards
  https://www.iso.org

• Antravia – Travel Finance Insights & Merchant of Record Guidance
  https://antravia.com

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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