Payments in hospitality—from credit cards to crypto

By Jed Danbury

With people returning to travel for work and pleasure, there is no better time than now to explore the different payment options that hotels can consider for their guests and their business. Let’s take a look at some of the choices available.

Credit cards and contactless options
Not surprisingly, when it comes to online payments, hotels still predominantly use credit cards for booking, due to their practical authorization function. Major hotel brands also offer private label rewards cards branded in their names and with rewards programs targeted at enthusiastic travelers. In the hotels themselves, contactless payments with a card or smartphone wallet, while not standard today, should be because these are faster and more hygienic ways to pay. In the longer term, the point-of-sale terminal will become obsolete when the payment is transmitted directly from the checkout or booking system to the smartphone via an NFC signal.

Omnichannel solutions
With cross-channel payment options, hotels can better consolidate and evaluate the transactions of their guests. Properties that process online and offline payments separately can usually only allocate revenue from hospitality when the bill is posted to the room. With true omnichannel payments, which are transferred via a single payment platform, card transactions from the restaurant or the hotel store can also be linked to the guest account. This provides a holistic picture of guest turnover. On an international level, this also works with local payment methods such as debit cards or wallets, in all currencies. Loyalty cards can also be included.

Born out of the idea of creating a currency that is independent of national borders and regulation by central banks, cryptocurrencies—first and foremost Bitcoin—has been the latest buzzword that has received a great deal of attention over the last couple of years. But for a currency to be accepted by society, it needs trust from a broad base. No cryptocurrency has yet reached this level. Due to the strong price fluctuations, however, they are quite popular among investors willing to take risks as an object of speculation.

This does not yet make cryptocurrencies a useful currency for the hotel industry. At the moment, the number of guests who own Bitcoin or similar is simply too small in relation to the total number of potential customers. And the fact that they own them does not mean they also want to pay with them. Adding to that, the obvious risk to hotels is the loss of value if they were to accept cryptocurrencies as a form of payment. In the hotel business, where margins are often low, a 5% drop in the exchange rate would be enough to make the booking unprofitable.

In addition, for hotels to accept Bitcoin as a form of payment would require significant effort. With the enthusiasm for the technical concept of Bitcoin, it is often forgotten that it is not just another payment method. Cryptocurrencies are transferred directly between the wallets of the payer and the payee, in this case, the hotel. These wallets are usually free of charge. However, commissions are incurred if the service also includes the exchange into real currency. The cryptocurrency platform Coinbase, for example, charges a 1% transaction fee for corporate customers; the conversion into real currency is then free of charge. This is cheaper than typical credit card transactions, but cryptocurrency payments are always executed immediately and booking functions like reservations and later bookings can only be done via service providers for additional fees—and then the already mentioned exchange rate risk takes effect again.

At best, an opportunity lies in winning very specific target groups. But the effort involved with accepting cryptocurrencies as a form of payment in the hotel industry currently exceeds the benefits.

Determining the next steps for your business
There is a lot to consider from the payment options above. With regards to omnichannel payment platforms specifically, there are many factors in play from a cost optimization point of view, particularly for international hotel groups. A distinction should be made between payment service providers with their own acquiring, which often do not allow the connection of external providers for regions or sectors in which they are active themselves. Here, hotels, as well as merchants, run the risk of lock-in, which makes competition for the best conditions impossible. Therefore, care should be taken to ensure that the payment platform considered is acquirer-neutral and enables a quick and smooth change of provider.

Jed Danbury is VP at Computop, a leading global payment processor.

This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.