Hotels are increasingly recognizing the need to provide seamless and convenient payment experiences for their guests, like those offered by best-in-class retailers. This shift is driven by five key factors:

• Evolving guest expectations: Modern travelers expect a smooth and efficient payment process, just like they experience in retail stores.  

• Rise of mobile payments: The proliferation of mobile wallets and contactless payments has made it easier for guests to pay quickly and securely.

• Self-service check-in/checkout: Hotels are adopting self-service kiosks and mobile check-in/checkout options to streamline the guest journey and reduce wait times.

• Integrated payment systems: Integrating payment systems with other hotel services, such as room service and spa treatments, to simplify the payment process with an omnichannel approach.

• Data-driven insights: Hotels can leverage payment data to gain valuable insights into guest behavior and preferences, enabling them to tailor their services and marketing efforts.

Payments in the travel sector are typically conducted by two main types of guests, the corporate traveler and the consumer traveling for leisure. Corporate travelers may have booked a hotel through a travel management company or online travel agency. Both, corporate and consumer travelers, may involve hotel operators or third-party players accepting payments from a myriad of different players on the travel industry value chain. This article focuses on the direct payment acceptance by hotels from corporate and leisure guests’ perspective and examines how the hotel operators can learn a lot from omnichannel retailers.

Evolving Guest Expectations

Modern travelers, accustomed to the convenience of the retail experience, expect a similarly seamless payment process when booking a hotel stay or dining at a hotel restaurant. They seek a frictionless journey from initial booking to final checkout. Travelers desire a speedy and hassle-free check-in and checkout process, often opting for self-service kiosks or mobile options. Offering a variety of payment options, including credit/debit cards and digital mobile wallets (such as Apple Pay, Google Pay, WeChatPay, Alipay, PayPal, Venmo), caters to different preferences and international travelers. For international travelers, easy currency conversion and transparent exchange rates are crucial.

While the move towards a more digital and customer-centric payment experience offers numerous benefits, it also presents significant IT challenges for hotels. Hotels often need to integrate with various payment gateways to accept different payment methods, increasing complexity. Seamless integration with the hotel's Property Management System (PMS) is crucial for efficient operations and accurate record-keeping. If the hotel has multiple outlets (bars, restaurants, spas, etc.), integrating payment systems with POS systems can also be complex. Furthermore, hotel operators and Hotel Management Companies must adhere to strict PCI DSS industry standards to protect sensitive cardholder data, which involves regular security assessments and audits. Compliance with various data privacy regulations, such as the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA), is essential to safeguard personal guest information (passport information, home address, email address, etc.). Some of this information must be captured and stored for compliance with local government and tourism rules.

Guests want to be able to collect rewards through their hotel loyalty programs without it being complex. Corporate guests often are not recognized as returning guests because the booking was made by a corporate management company or through a corporate card that is not linked to the traveler’s loyalty program. When a guest books a room through a third-party platform like Booking.com or Expedia, the hotel often doesn't have direct access to the guest's loyalty program information. Even if the guest is a loyalty program member, the points may not be automatically credited to their account, which can be frustrating.

By leveraging the expertise of payment service providers, hotels can streamline their payment processes, reduce costs, and enhance the overall guest experience. Retailers are probably 5 to 10 years ahead of the hotels in how they accept and process payments. Especially, when loyalty is seamlessly embedded into the customer experience.

Rise of Mobile Payments

Many hotels now accept Apple Pay and Google Pay, allowing guests to make quick and secure payments with their smartphones. This eliminates the need for physical cards and reduces checkout time. Hotels are also integrating with popular mobile wallets like WeChatPay and Alipay to cater to a wider range of international travelers from the East.

By adopting mobile payment technologies, hotels can provide a more convenient and efficient guest experience, ultimately leading to increased customer satisfaction and loyalty. Many mobile wallets can be integrated with loyalty programs, allowing customers to earn and redeem points or rewards directly through their mobile devices. When combined, loyalty programs and mobile wallets can create a powerful synergy. By integrating loyalty programs with mobile wallets, businesses can offer enhanced benefits and a more seamless customer experience. The Marriot Bonvoy program, for example, allows guests to earn points by Marriott hotels, booking tours and activities, and shopping with the Marriott Bonvoy American Express card. These points can be redeemed for a variety of additional services and experiences, including room upgrades, discounts, gift cards, and experiences such as concerts. The Marriott Bonvoy Member Card can be found on the Marriott Bonvoy Mobile App and can be added to Apple Wallet for easy access.

Some seasoned experts in the hotel sector believe in the removal of guest payment entirely from the hotel’s operation. This will mean in the future, in five to ten years, guest payment will not be at a single point of interaction using a traditional payment card or digital mobile wallet, instead guests will use their biometric identity – such as a fingerprint or facial recognition – as the only means of the point of interaction between the guest and the hotel. We will keep a watchful eye on that possible innovation.

Self-Service Check-in/Checkout

The trend of self-service in the hotel industry mirrors similar developments in grocery retail. Both industries aim to provide customers with a seamless and efficient experience. Self-service checkouts in grocery stores and self-check-in kiosks in hotels allow customers to bypass queues and complete transactions quickly.

Customers accepted self-service kiosks as easy to use, fast, and fun to operate, but there is a lack of human interaction and there can be language issues. This would be an issue for a luxury-branded hotel. A customer at the luxury watch retailer Rolex, for example, would not be expected to use a self-service checkout, unlike a Uniqlo customer who is more likely to use self-service checkouts when purchasing fast fashion items.

Kiosks have been emerging as self-service technologies in hotels and play a key role in reducing bottlenecks in hotel operations. Moxy, Yotel, Aloft Hotels, CitizenM and many other hotel brands have deployed self-service check-ins/outs, and the anxiety associated with this technology is expected to continue to fade gradually. The financial feasibility and the level of adoption will depend on the level of operations and the demographic characteristics of guests. By embracing innovation and focusing on the guest experience, new self-service technologies are redefining the way we think about hotel stays. We would not expect self-service check-in to be adopted at the Burj Al Arab, Dubai, often referred to as the world's only seven-star hotel.

Integrated Payment Systems

Hotel payment processing and acceptance is not just a transactional necessity. Guests expect to use their preferred payment methods at the hotel for their spend at the bar, at the spa, and the hotel’s restaurants. Payment is an integral part of the guest experience. Retailers have positioned payment acceptance at the heart of their operation and have spent the last few decades introducing operational and cost efficiency. By embracing the retailer’s omnichannel payment strategies, hotels can streamline processes, reduce costs, and enhance the guest experience. The move towards automated and online payments reflects the industry’s shift to more guest-centric and efficient operations. Integrating these systems allows for a unified payment platform that can handle all aspects of hotel financial transactions, from check-in to checkout and beyond, with lower commissions and improved security.

Adyen, Checkout, FreedomPay, Planet, Paysafe, and Stripe are just a few examples of the payment partners that hotel companies are turning towards to leverage best practices from the retail sector and apply them to hotel operations.

Data-Driven Insights

Retailers analyze purchase frequency, average transaction value, and product preferences to identify loyal customers and target them with personalized promotions. Hotels can do the same. Both retailers and hotels can track seasonal spending patterns to optimize inventory, staffing, and marketing efforts. Hotels can use payment data to recommend specific room types, dining options, or spa treatments based on a guest's previous stays and preferences.

Both retailers and hotels can use data-driven insights to set optimal pricing strategies and maximize revenue. By effectively leveraging payment data, businesses in both the retail and hospitality industries can gain a competitive edge, enhance customer satisfaction, and drive revenue growth. The challenge is often where there are numerous legacy systems and back-office applications unable to collate data centrally. Only the best retailers have developed a centralized depository of consumer and transaction payment data. Hotels have a long way to go to achieve this.  

In summary, EDC can provide a range of services to help hotels optimize their payment processes, reduce costs, and enhance the guest experience. This involves evaluating the most suitable payment methods for the hotel's target market, including credit cards, mobile payments, and digital wallets, and identifying and implementing the best payment gateway (or an orchestration layer) to ensure secure and efficient payment transactions. Hotels are often overwhelmed by IT complexity, hindering their strategic focus. A structured approach, breaking down large projects into smaller, manageable steps, can help them regain control. Hotels can benefit from expert advice, technological solutions, and best practices to improve their payment operations and enhance the overall guest experience.

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The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).