Fight inflation with flexible payment options for hotel guests


As more people began to feel safe enough to travel again and hotel owners were ready to welcome back guests and make up for lost business due to the pandemic, the worst inflation in over 40 years has hit American consumers and driven price hikes around the world. So while the pent-up demand for travel and hotel stays is real, the obstacle of higher prices is also a reality.

The creative thinking of the hospitality industry can help people overcome the price hurdle while enabling businesses like hotels to accommodate budget-conscious travelers. With flexible payment options such as ‘buy now, pay later’ (BNPL), holidaymakers can book a vacation stay today and pay for it in installments over time. . It’s analogous to the concept of “layaway,” where consumers pay for big-ticket items over time and pick up their purchase later when paid, except BNPL provides more immediate gratification.

Flexible payment options in the hospitality industry
Most hotels have yet to embrace flexible payment options. Like many organizations, they tend to follow the lead of customers, waiting to invest in technology to support new consumer preferences and buying habits until they are sure the investment will pay off. . But the problem with this strategy is that companies that follow it lose first-mover advantage, giving up a chance to stand out from emerging preferences, generate more revenue, and increase customer loyalty.

Starbucks is an instructive example of how a business can gain an early advantage by embracing digital-first processes, including new payment options. When the company first rolled out its app to enable mobile ordering and payments, it wasn’t a common way to pay for most Starbucks customers. A few years later, at the start of the pandemic, around 80% of customers were using the app to order and pay, which gave the coffee chain a leg up on its competitors when consumers started giving the prioritizing low-contact customer experiences in 2020.

Thanks to companies like Starbucks and other digitally-minded organizations, people expect digital processes and simple, frictionless payment choices, making options like BNPL increasingly popular. According to a Reuters article, BNPL is one of the fastest growing segments of consumer credit, reaching $120 billion last year after accounting for $33 billion in 2019.

Omnichannel support eliminates friction
It’s always a good idea to remove barriers to a purchase, making it easy for customers to pay for rooms and extras. A frictionless shopping experience will generate more sales, which is why hotels should consider an omnichannel payment medium that simplifies the guest journey, including for guests who wish to pay through the BNPL model.

As the Starbucks example illustrates, customers want payment choices. When businesses offer them, even before significant demand arises, they can build more customer loyalty. Hotels that offer omnichannel payment support can not only eliminate purchase friction, but also make it easier to book and pay across multiple devices.

The ultimate goal for all types of businesses, including in the hospitality sector, should be to make payments as transparent and invisible to the consumer as possible. That’s why automakers are rolling out features such as in-vehicle touchscreen fuel payment options, allowing drivers to purchase fuel without using a physical card by enabling mobile wallet functionality for purchases. .

In hospitality, omnichannel support and full functionality across all platforms could allow customers to start a reservation on a laptop and pay with a mobile wallet using a smartphone. In an effort to take the friction out of processes like booking rooms and paying for accommodation and incidentals, omnichannel support meets customers where they are. This includes the growing number of consumers making purchases through a BNPL arrangement.

Operation of BNPL within the financial system
Although BNPL’s position may change, the function generally operates outside of the current traditional payment ecosystem, including the credit system. Most BNPL suppliers do not perform a thorough credit check before authorizing a purchase, so it generally does not affect the buyer’s credit score. If the buyer pays on time and the credit issuer reports it to the credit bureaus, this can help the buyer build credit, while failure to make payments on time can negatively affect the score. credit, as with any other type of payment arrangement.

Usually, BNPL purchases are broken down into four installments that are spread over a few weeks. The adoption of BNPL payment options opens new pools of potential customers for high-end hotels. Guests who may not have the cash for a stay at a luxury hotel to celebrate a special occasion, explore a new city, or visit a scenic resort town may be willing to make that commitment if they can pay in installments. time.

From the merchant’s perspective, a BNPL transaction is treated as an initial cash payment, less any fees charged by the BNPL provider. So if a hotel guest books a stay worth $1,000 in a BNPL transaction, the hotel receives the $1,000 minus the transaction fee. BNPL could increase average ticket spend by 30-50% and approximately 60% of consumers surveyed have made a BNPL purchase, so acceptance is increasing among potential customers.

Operational and technical challenges with flexible payment options
It’s important for hotel managers considering offering guests flexible payment options to understand the full scope of operational and technical challenges that need to be addressed before the program rolls out. Adopting flexible payment options like BNPL is like setting up a new payment method, which can be complex.

Many guests book a hotel stay either online through a third party or through a hotel-internal centralized reservation system. Hotels can work with a flexible payment partner to enable options such as BNPL and other types of tenders (crypto, for example), but acceptance may be limited if guests go through third parties that do not offer flexible options for booking a stay.

Technical issues are relatively easy to overcome if the hotel partners with the right flexible payments provider, and if third-party bookings ultimately follow consumer trends. Operational issues will be unique to the hotel and may include the need to develop new policies and provide training to staff so they can manage the new payment options seamlessly. For example, when guests pay with a credit card, hotel staff typically swipe the card and hold it open until check-out in order to pay incidental charges to the room.

With a flexible payment option like BNPL, room charges would typically be paid upfront, so the hotel would need to develop processes to handle additional charges like room service. All-inclusive stays (such as those offered by some resorts and cruise lines) would be one way to handle this scenario, but it may not work for all hotels. Alternatively, hotel management may require a credit card swipe upon check-in to ensure they have a means of receiving payment for the additional charges.

What to look for in a flexible payments provider
As hotels look for ways to increase revenue in an uncertain economy where many people struggle with inflationary pressures, flexible payment options and omnichannel payment processing capabilities can serve as a market differentiator. It’s a way to provide more payment choices to customers and remove friction from the booking and payment process. When hotels offer options like BNPL, flexible payment options can broaden the customer base, allowing people who otherwise couldn’t afford to book a stay and pay for it on their own terms.

That said, it is important to understand the technical aspects involved in deploying new types of payment tenders, the costs incurred by the hotel, as well as the training and process changes required by the new payment methods. payment. One of the most critical decisions for the hotel will be selecting the payment provider. Hotel executives who want to explore flexible payments should analyze the experience of potential vendors in the hospitality industry to ensure their partner understands the industry challenges.

Hotel managers should also consider the level of support offered by vendors and payment platform integration capabilities, such as point-of-sale software integration. It is also a good idea to seek out supplier companies with a history of innovation. Consumer expectations around payments are constantly reset as new transaction technologies emerge, and partnering with a provider who can help the hotel stay current as payment options evolve is crucial. .

Creating a seamless customer experience is the best way to attract customers and generate recurring business. Consumer demand for flexible payments is growing and hotels that adapt first will have an advantage. After all, it was customary for guests to pay cash for a hotel stay, and payments will continue to evolve. Hotels that keep pace with options such as BNPL can help customers fight inflation while creating a new generation of loyal customers and increasing revenue at the same time.


About Author

Comments are closed.