The online payment processing revolution: Is your hotel ready?

  Posted in Resources

It’s no secret that all aspects of our daily life are being enhanced or changed by technology, but a complete digital overhaul – to the point that society becomes completely cashless – may not be too far around the corner. 

From a hospitality perspective, it offers a heightened sense of convenience for guests. Take Uber as an example. Customers get to where they’re going without having to worry about the payment at all; everything is handled digitally after the experience is complete. If the same service could be offered at all hotels, not only would guests experience less friction but hotels could potentially derive more revenue from extra bookings and amenities.

Some countries are certainly leading the way in the online payment processing movement. The top five countries by percentage of non-cash payments are Belgium (93%), France (92%), Canada (90%), United Kingdom (89%), and Sweden (89%). Asian nations are set to explode in this sphere too. South Korea is already in the top 10 and is quickly becoming almost entirely cashless. In China, purchasing is shifting from a mobile-first approach to “mobile-only”.

Many of these nations could be cashless from as soon as 2022, so hotels need to be prepared. The first step is automating your online payments.

Top 6 trends in hotel online payment processing right now

Travellers are becoming increasingly reliant on their mobile devices, and they love the convenience of paying for their goods and services online. It’s important that hotel operators monitor the rising trends in the hotel payments industry, because knowing how guests prefer to pay for their rooms is vital for maximising bookings at your property.

These are the top six trends in the hotel payments industry right now:

1. The EU is cracking down on online payment processing with SCA

As you can see, Europe’s leading the way in the cashless revolution – and this is very significant for EU-based hoteliers because legislation is tightening in the payments industry in the form of Strong Customer Authentication (SCA), which is part of the second Payment Services Directive (PSD2). SCA is a set of regulatory requirements that will take effect on 14 September 2019, designed to make paying online more secure and, consequently, reduce payment fraud. 

SCA adds an extra layer of security when customers make a payment online, and this means EU-based property owners need to take steps to be compliant, or you risk not being able to receive online payments.

Haven’t heard of SCA? Or don’t have a plan in place to become SCA compliant yet? Click here to find out everything you need to know about SCA and what it means for your property.

2. Guests crave seamless online transactions

Rather than checking-out at the front desk and physically handing their credit card to your staff member, your guests are starting to expect a seamless, ‘behind-the-scenes’ payment experience. It would be optimal for them if you store their credit card information, provide them with a breakdown of their fees prior to checkout and automatically charge their card on the last day of their stay – but this requires certain technologies to be in place at your property. This eliminates the need for them to spend more time sorting through logistics on their last day, and ultimately improves their experience at your property.

3. It is now common for payments to be integrated into the booking engine

The online payment solutions that are now available for hotel operators allow them to eliminate clunky, extra hardware and devices that were formerly used to process transactions. Rather, the payment portals are located within the booking engine. This not only benefits the guests, but the hotel staff as well. The booking engine is more intuitive, and knows more about what types of payment options are needed within the hotel industry.

4. Going paperless is now the norm, rather than the exception

Hotel guests not only prefer the convenience of electronic transaction confirmations, they also see it as the more sustainable and responsible option. Rather than printing an itemised record of all charges made during a stay, most guests are happy with an email or text containing the same information.

5. Guests are much more willing to give credit card information online

Consumers are increasingly willing and able to shop for nearly any product or service online. They trust this medium and prefer the convenience online shopping affords them. Naturally, this means that they are also more willing to provide their credit card or payment information online. This level of consumer comfort and confidence has led to a direct increase in online bookings for hotels across the globe.

6. Digital wallets and virtual credit cards are on the rise

Credit cards are still the preferred method of payment, but digital wallets (or e-wallets), such as Apple Pay, Samsung Pay, or Google Pay, are considered to be more secure and more convenient than credit cards. They are not the primary payment method of most travellers, but the number of people relying on digital wallets is rising every year.

If you distribute your rooms on Booking.com or Expedia, you might already be familiar with virtual credit cards (VCCs). VCCs are digital MasterCards that allow for easy, secure online payments, and are usually managed through a digital wallet. Each VCC has a unique card number, expiration date and CVC, and can only be used once – for every booking you receive, the OTA will send you a new one. Therefore, if someone were to compromise the hotel and steal credit card info out of the system, they’re not able to use a VCC because it was a one-time use card.

How can your hotel implement seamless online payments?

Since the rise of the digital era, the hotel payments landscape has served as one of the most complex areas for any hoteliers to navigate.

In large part, this has been due to the fact that hotel payments conceal an incredibly intricate and highly-regulated process that involves the entire hotel distribution chain; typically including an online travel agent (OTA) or booking engine, a channel manager, a property management system, a payment gateway or processor, and, of course, a hotel. Each of these parties have a critical role to play in the capture and transfer of credit card details before a payment is even made.

As technology drives the digital revolution forward, it will also allow you to be prepared for the transition. There are three main ways you can ensure your hotel is prepared for online payment processing.

  1. Online booking engine

If guests book with you online via your direct channels (website and social media pages), they need to pay online. This means you need a booking engine that integrates with a payment gateway, like Stripe or PayPal, which is a third-party payment processing tool. 

An online payment gateway will authorise credit card information of customers who want to make their reservations instantly on your website. It’s like an online terminal, allowing you to set up and charge a percentage of the reservation or a flat fee upon time of booking. Your hotel can also simply authorise complete reservation amount or save credit card profile to process it at the time of checkout or if the guest is a no-show.

Some booking engine providers even offer an in-built payment solution, which makes it even easier for you. You should also make sure your booking system can handle multiple currencies to make the process easier for guests and give yourself a better chance of capturing more bookings. It must also integrate with your channel manager to allow for a completely seamless experience at your property.

Read our blog on booking engines to learn more.

  1. Channel manager

A channel manager is critical in facilitating online bookings, and therefore online payments. OTAs offer different payment structures, depending on whether they operate on a merchant or agency model.

A guest booking via an OTA will either have to pay upon booking (merchant model), or at check-in (agency model). In the case of the merchant model, virtual credit cards are a common payment method, as we touched on earlier.

However, in the OTA world it’s not that simple when you consider the different businesses in the industry and their model and revenue mixes. This leads to complex payment processes and agreements between hotels and OTAs, related to timing, PCI regulations (how credit card information is saved and stored), PSD2/SCA (online payment regulation in Europe) and more.

Let’s use Expedia as an example. Expedia Traveler Preference combines both agency and merchant revenue models. When the merchant model is used, the charge is made up front: when a guest elects to pay upon booking, funds are collected via the Expedia Collect merchant model. Expedia charges the customer’s credit card and then pays the merchant the agreed upon amount once the stay has been completed at the hotel. Profits can reach up to 30%, depending upon the travel market, inventory/availability, and seasonal fluctuations.

Should a customer opt to pay at in-person at the hotel, Expedia’s Hotel Collect agency model is used, with or without a deposit requirement. Commissions – typically between 20-25% – are paid to Expedia by the hotel following payment receipt from the customer.

However you need to accept payment from an OTA, the payment and guest information needs to be transferred securely and seamlessly from the booking site to your hotel’s front desk (and vice versa in the case of cancellations and refunds). A channel manager automates this process for you.

Read our blog on channel managers to learn more.

  1. Two-way PMS integration

A property management system is also key to streamlined online payment processing. A PMS is fantastic for automating all the processes involved with collecting, storing, and communicating guest information. If you don’t have one already, look for a PMS that offers an in-built booking engine, channel manager and payments solution (check out an all-in-one solution like Little Hotelier if your property has less than 30 rooms). Otherwise, check that it offers integrations to these systems. That way, any booking and payment information is transferred directly from the place of booking (whether that’s your website or an OTA) straight to your front desk.

How to avoid hotel credit card scams

With so much travel now being booked online, the opportunity for hotels to increase sales is getting bigger all the time. However, it also creates challenges in making sure customer payment data is protected and that no breach occurs at the hands of hackers or fraudsters.

The vast majority of security compromise occurs at point-of-sale (POS) systems and is most often Card Not Present (CNP) fraud. Because CNP transactions are so prevalent in the travel industry and much information is exchanged between hotel and customer, it’s important to know when you might be at risk and how to prevent any data breaches from happening. Since guests expect a hotel to be a safe place to escape to, even a single instance of failing to protect a customer’s data could have huge ramifications on your reputation and finances.

Here’s what to look out for:

  • Hurried purchases – It’s common for fraudsters to contact you in a panic, wanting to rush to set up their accommodation. It’s important you don’t get flustered. Take the adequate time to verify their credit card, passport details, and other relevant documents to make sure they’re genuinely are who they say they are.
  • First-time guests – It makes sense to be more cautious of people who haven’t booked with you before. With regular customers you can build a relationship and learn their purchase habits. Be aware of a first-time customer who contacts you online to make a large purchase. Collect all the necessary verification information. For greater security, adopt a payment solution that is designed to capture transaction data in an intelligent manner.
  • Purchaser location – These days many fraudsters have become adept at hiding their true location and stopping themselves being tracked. If you do have suspicions about a customer, do everything you can to verify their legitimacy, including calling and emailing them to collect data and confirm their identity.
  • Inconsistent addresses – One of the biggest warnings that everything is not what it seems is when someone wants to use different addresses for billing and shipping, which may not apply as strongly to hotels but is very relevant for the travel industry in general.

5 best practices for keeping your hotel’s online payments secure:

  • Use systems that can secure your customers’ cards – You need to use an online payment system (ideally integrated into your PMS or booking engine) that can send and receive card authorisation digitally and store it all securely in one place.
  • Inform all managers and employees of company policies – Every employee should know the policies at your hotel regarding compliance and safe handling of customer information. They all should be trained on the software you use and have a consistent process to follow each time a purchase is made.
  • Protect your POS systems – Make a point of investing in the latest cyber security tools including encryption, anti-virus software, and firewalls to safeguard against POS attacks and other malware hackers may target you with.
  • Comply with PCI security – The PCI Security Standards Council fights hotel credit card fraud by maintaining global payment card industry standards. Ensure your hotel is committed to PCI compliance.
  • Vet third parties – Your hotel may often deal with airlines, car rental companies, retail organisations, hotel technology providers, and other suppliers. Make sure all these partners – which become access points – are committed to information security best practices just like you.

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Key takeaways

  • Europe is leading the way with cashless payments – and regulation is getting tougher for hoteliers with Strong Customer Authentication coming into effect on 14 September 2019
  • If you distribute your rooms on OTAs, get familiar with virtual credit cards (VCCs) as these are only going to become more prevalent
  • You need the right technology to enable seamless online payment processing – invest in an online booking engine, channel manager and a PMS if you don’t have one already (and make sure they’re all integrated with each other!)

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