Людмила Чмуневич
Редактор раздела "Туризм"

Hotels need to be where the consumers are. Offering digital and alternative payment options is key to benefitting from current trends, and this means working with fintech players that are able to offer these services by integrating into hotel tech systems. — Wouter Geerts Skift Pro subscribers exclusive extract from the latest Skift Research report. Get the full report here to stay ahead of this trend. 

The payments sector is generally typified as an “enabler” of doing business. But while credit cards still rule the world in terms of volumes of transactions, the entire payment landscape and the tech involved has become much more complex. The digitization of payments has far-reaching impacts in terms of payment habits and fraud management, and hoteliers will need to educate themselves about the opportunities and pitfalls of these shifts.

In our recent report The State of Hotel Payments 2021, we set out how payment habits are changing, provide an overview of the payment ecosystem related to the hotel industry with the important players and tech vendors, and discuss a number of trends which will shape the industry moving forward. Below is a short excerpt from this report, exclusive to our Skift Pro subscribers.

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The Pandemic Pushes Modernization of Payments Infrastructure

Fast changes in the payment landscape spare no industry, and the current COVID pandemic has provided an added boost to hoteliers’ willingness to change their operations and systems.

The understanding and acceptance (or even expectation) from consumers for new technologies in the hotel industry has grown considerably over the past year. In 2020 and 2021, Skift and Oracle Hospitality undertook two surveys which measured consumers’ expectation of technologies present in hotels. All tech had a higher rate of expectation from consumers in 2021 than in 2020, including self-service check-in, mobile keys, and contactless payment options, with the latter up 15 percentage points.

Expectations of Altered Hotel Experiences Post-COVID

Expectation 2020 2021 Increased frequency of cleaning and disinfecting procedures 60% 66% Guest areas/public spaces arranged for social distancing 39% 60% Contactless payment (no physical handling of credit cards/money) 35% 50% Temperature checks of guests entering the property 33% 48% Room keys/locks activated by a smartphone 26% 38% Self-service check-in via kiosk 23% 35% Digital messaging services to avoid physical contact with staff 20% 31% More frequent communication of policies and procedures 20% 27% Expanded room service options 20% 36% Temporary suspending some hotel services (spa, casino, restaurants) 9% 20%

Source: Skift and Oracle Hospitality. July 2020 and August 2021. N=5,000. Question: “Which of the following changes to the hotel experience (if any) do you hope to see from hotels once you’re willing to travel again?”

Hoteliers are listening. In the above mentioned Skift and Oracle Hospitality survey, 67 percent of hotel executives agreed that the pandemic had accelerated their adoption of new technologies.

As Jeff Edwards, senior vice president property, owner and enterprise products and platforms at InterContinental Hotels Group (IHG) told us: “Guests expect contactless as an option now – it’s no longer a question. … One of the ways we addressed this was introducing digital check-in and checkout, which allowed guests to streamline their experience, making it easier for them to pay for their stay and spend less time at the front desk.”

This is a true step change for an industry which in large parts has held onto the idea of the ‘human touch’, and has seen the front desk and other face-to-face interactions as an extension of that. But as Mark Rademaker, global head of hospitality at Adyen, noted: “Especially luxury properties are now inclined to agree that it’s okay to offer both a high touch and a low touch experience within the same walls. Where hotels used to always bifurcate that, and separate those experiences based on brand, they’re recognizing that there is guest demand for both within the same property.”

We have spilled considerable ink on the plethora of legacy systems that characterize the hotel tech landscape (in reports like Property Management Systems Landscape 2020). The industry is highly fragmented, both in terms of the types of accommodation providers and geographical idiosyncrasies, which has resulted in disparate tech offerings, with many hotels working with anywhere from 30 to 70 tech vendors to manage all aspects of the hotel operations. Payments impact, straddle, and interact with many of these vendors, but the tech setup is different for each hotel.

The hotel industry also stands apart from many other industries in its customer journey, and how payments fit within this. As Eric Liebman, former head of travel at Ingenico (which was acquired by Wordline in 2020) said: “At booking you have the pre-authorization, and then there’s authorization at time of check-in. Then there are incremental authorizations throughout the stay, and then there’s settlement, and sometimes even post-stay settlements. You’ve got five distinct junctures within the journey from reservation to stay that have to be managed.”

With such a fragmented industry, with disparate tech stacks, it is almost impossible that this system would work efficiently from the get go. Payment infrastructure and protocols mainly came into existence over time, using the technology present at particular points in history.

To make things even more complicated, the hospitality industry tends to deal with high volumes of international customers. While cross-border trade is becoming ever more seamless, the hospitality industry has always had to deal with cross-border payments, and credit card networks were by far the best to manage this.

Over the timespan of many decades, credit card companies have been extremely successful in making themselves the best option for cross-border payments, by offering near-universal acceptance and added protection which is appreciated by travelers spending large amounts of money on their hotel bookings. However, the importance of a payment infrastructure that allows for a diversified acceptance of payment types, and a seamless integration with hotel systems has become more evident during the pandemic.

Contactless tech has not only been pushed to the fore, hoteliers also had to fight for every dollar they could get. With average daily room rates (ADR) levels considerably down for most of 2020, revenues from ancillary services became more important, as also highlighted by the Skift and Oracle study. Whether it is upselling before or during the stay, a seamless payment system is important to make this as attractive to hotel guests as possible.

Up to 2020, payments were far from the number one priority for hoteliers, they were simply an enabler of doing business. As Ingencio’s Liebman put it: “I think payment processors were more of a necessary function of the whole reservation ecosystem.” But the convergence of the pandemic and growth of alternative payment types , the BNPL and A2A trends, and increased regulations have pushed payments to the top of many hoteliers’ agenda.

Integrating the Payments Ecosystem into Hotel Tech

Hotels need to be where the consumers are. Offering digital and alternative payment options is key to benefit from current trends, but this does mean working with fintech players which are able to offer these services by integrating into hotel tech systems.

The card payment process as explained earlier in this report also counts for payments in the hotel industry, with the hotel acting as the merchant. However, the situation is slightly more complicated, as the payment process needs to be integrated into the tech systems used by the hotel industry.

To be able to operate the hotel efficiently, almost all hotels have a property management system (PMS) in place, which collects all information about bookings made through different channels, as well as other charges incurred as part of upsell efforts from the hotel or through the consumption of room service, restaurant meals, the minibar and the like.

All charges are collected in the PMS on what is called the folio, and using the guest’s payment card details, the hotel will request payment authorization.

Since the hospitality industry works with a large number of disparate tech systems there is also a growing number of connectivity, or middleware vendors. These come in the form of players which sit between the PMS and other hotel systems, providing data flows into the PMS. Vendors like Impala or Hapi provide this service (discussed in depth in our PMS report). There are also connectivity vendors which focus on connecting disparate systems to the payment processor or gateway. These include vendors like Shiji Payment Solutions or SmartCONNECT by SmartHotel.

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