Hotel payments: Is it time for a wake-up call?

As a hotelier, it's very likely that in recent times you've experienced a sea change in the way travelers want to book, pay for, and ultimately visit hotels.

The pandemic has accelerated demand for contactless experiences. Although interactions such as mobile checkout, keyless entry and automation were gaining in popularity in 2019 and before, the value of touchless has never been clearer than at present.

The important point to note here is that it's likely that at least some of these trends are permanent; pandemic or no pandemic, these technologies and flexible services improve the hotel experience, and pose an opportunity for hoteliers that embrace these enhancements across the value chain.

A taste of things to come

Hoteliers that can successfully identify growing trends and new customer expectations as they emerge are better-equipped to make the most of these opportunities.

Below, we explore some of the current trends that are influencing the hotel experience of tomorrow.

1. Hands-free hotels

Hotels are historically multi-touch environments that require face-to-face interaction at key points of the stay. More and more, travelers demand more control over their visit and are progressively coming to expect a personalized experience, not to mention one that (at least temporarily) avoids unnecessary contact.

Dedicated mobile applications can offer a range of benefits for guests and hoteliers alike. These digital touchpoints allow guests to engage directly with a hotel on their terms, without the need to visit a desk.

Guests can skip check-in at the desk, proceed straight to their room, use their phone to unlock the door, and even make ancillary purchases, all through the app. Check-out and payment can happen through the app as well – again, saving the guest a trip to the reception desk prior to departure. All payments can be done with one or more stored payment details, authorized with a finger print, or a smile.

Under the guise of "contactless", apps also present a massive opportunity for hotels looking to upsell ancillary services, collect all-important customer analytics, offer loyalty schemes, and send targeted promotions to encourage additional spend and repeat visits. These apps also free up valuable time for staff, enabling them to focus on guests who are less technically-savvy or who prefer the "human experience".

However, it doesn't necessarily stop there. Technology & Solution Consulting Company, AltexSoft, advises that installing and signing up on an app can still be perceived as additional friction. "One way to enable contactless experiences without app installation is to use progressive web apps (PWAs).

These applications are websites that look and behave similar to native mobile apps, but are launched from a standard mobile browser" says Andrey Chebotarov, Travel Technology Practice Leader at AltexSoft.

While contactless is clearly a priority today, mobile applications and other contactless technology can contribute strongly to the seamless hotel experience of the future.

With the potential for reduced queueing, improved customer analytics, and greater access to guest services, we anticipate the current trend for contactless is leading to new expectations when it comes to customer engagement – another "new normal".

2. Flexibility and new travel models

Flexible bookings, once a nice-to-have for travelers, are now a necessity. Rolling lockdowns, travel restrictions and strict new guidelines have led to a profound uncertainty for booking availability. Hotels that can't meet traveler needs to cancel, reschedule or move bookings at relatively short notice offer risk, while flexibility offers that all-important safety net.

"Flexcations" (Flexible vacations) and "bleisure" (extending a business trip with personal days). Buzzwords, or another emerging trend accelerated by the pandemic? Whether or not you're a fan of these portmanteaus, these two booking models highlight how the recent state of travel has influenced traveler behaviour.

The time between booking and the date of travel is averaging much shorter when compared to before the pandemic. The current risk associated with booking months before the travel date, only to discover the trip isn't possible, incurs personal cost and disappointment.

By booking just days before, this risk is greatly minimized. Combining business and leisure into one trip also minimizes personal risk for the traveler.

Getting the payment process right is crucial. Taking payments for ever-changing itineraries as well as for these "bleisure" trips is not straightforward. The booking and payment experience, as well as the support functions that back it up, have to be adapted to ensure that multiple forms of payments can be supported. They also need to work in services exceptions such as changes, cancellations, and refunds.

3. The future of fraud prevention

As mobile check-in and check-out through apps and other digital purchases grows in popularity, by default, so too will the share of online payment transactions. It's vital that hotels adjust their online security measures to ensure the risk of fraud is minimized. Efficient fraud screening tools can fend off fraud attempts already made at the booking/reservation stage.

Moving to direct online payments also makes it easier for hotels to become compliant with new regulations such as the European Payment Service Directive 2 (PSD2), which required all payment transactions to be authenticated by the card holder.

This is not possible for transactions where the hotel is using card details, they have received from travel agents and other travel distributors. Enabling mobile check-in and out can also reduce the PCI-DSS burden as no payment card details have to be stored in the hotel's environment.

4. Excellent payment experience, or most cost-effective payment workflows? Why not both?

The payment process is a fundamental part of the hotel experience. Yet, with most hotels managing the payment flow individually, the user experience is far from consistent and seamless.

Even large hotel chains are struggling to implement a consistent payment experience throughout their branded apps. Various franchise and ownership models have, so far, made it difficult to implement a centralized payment model.

A centralized hotel payment structure, however, could offer hotel brands and individual hotels a range of cost and time-saving benefits, while creating a superior all-round payment experience for their guests.

For the brands as well as the individual properties, centralising payment processing requirements allows them to tailor the payment experience based on where the guest is coming from, rather than where the hotel is based. It further facilitates reduced costs for transactions as well as for reconciliation and customer support.

For international guests this enables brands to price up stays in the local currency of the guest, including a mark-up on foreign exchange rates - a new revenue opportunity.

The model works similarly to how an OTA would operate, by facilitating the customer payments, offering all possible forms of payments, and then forwarding the funds on to the property.

Some B2B bookings employ the merchant model, meaning that the merchant of record is a distributor that has to return funds to a hotel. Most hotels still process these payments manually. The payment working group from HEDNA, the global hotelier community, propose creating a switch system for payments which would work similarly to the way channel managers work.

For individual hotels, the benefit here arrives in the form of substantial cost savings. Although a fee may be charged by the brand or intermediary to process the transactions, this is strongly offset by the savings associated with replacing individual acquirer relationships and payment ecosystems as well as reducing the workforce associated with it for customer support and financial reconciliation.

And finally, brands and their hotels can offer their guests a seamless payment experience. Receiving the same services on a global scale, experiencing a familiar, standardized payment flow and being encouraged to pay how you want, in your local currency, and with your preferred (stored) payment method, drives repeat bookings and creates loyalty.

What's the long-term impact of these trends?

Ultimately, the future of hotel payments is driven by a customer-centric experience.

Achieving this, however, requires a fundamental shift in the way hotels take and manage payments – from managing them on a property by property level to a more central, brand-based payment set-up.

This, in return, drives optimization and savings at the property level.

Is the hotel industry ready for this change? Is it time for a wake-up call? Who will move first?