Inefficiencies and Complexities of Legacy Payments Processes

Hospitality has a complex business model that relies on a multi-step distribution value chain unlike almost any other industry. From bed banks to GDS and OTAs to human travel agents,  each distribution channel has its own payment flows, terms, and challenges.

Imagine that you book a room on Expedia and select “pay at the hotel.” Historically, the reservation and payment details would be sent to the hotel via a channel manager like SiteMinder, and then transferred to a separate payments processing terminal. For some hotels, the transfer process may have even been as manual as hoteliers writing down payment details on paper then switching to the payment processor to enter card information. SiteMinder Pay’s general manager Anchal Goel illustrates, “For hoteliers, managing payments can be time-consuming, error-prone, and stressful.” These old payment processes weren’t designed to handle smooth handoffs between distribution channels and accommodation suppliers.

With SiteMinder Pay, powered by Stripe, hotels can instantly take payments and process refunds from bookings across 450+ channels and easily manage all your transactions in a single real-time dashboard.

HotelTechReport.com interviewed Don Murray, Booking.com’s senior account manager, about how the firm revolutionized its payments infrastructure in partnership with Stripe. Murray said, “In the past, Booking.com would send credit card information without validation to property managers, which resulted in declined payments for unknown reasons.”

Because of this disruptive process, some vacation rental property managers refused to continue to list inventory on Booking.com despite the potential demand.

“Booking.com now leverages Stripe to take payment while the property manager remains the merchant of record, simplifying payments reconciliation and ensures accommodation suppliers receive payment on the day of arrival. The suppliers are then invoiced monthly by Booking.com for commissions. This means dramatically less rejected payments, which is a huge win for everyone and wouldn’t be possible without our latest product that’s built on Stripe’s infrastructure,” says Murray.

It’s not just third-party OTA bookings that are constrained by legacy payments infrastructure—direct bookings are impacted too. Selfbook is one of the hottest hotel tech companies of the last decade, and its success could not have been possible without Stripe’s payments infrastructure.  Hotel websites have historically linked out to third-party booking engines using redirects that often lead to drop-offs and lowered conversion rates. Selfbook used Stripe’s infrastructure to build one of the first ever on-site hotel booking experiences, which has helped achieve significantly higher conversion rates for its hotel clients by delivering a better booking experience for guests.

"With Selfbook's booking engine and payment solution, our guests have the sensation of ease and convenience instantly," says Xavier Hue, Selfbook client and general manager of Le Pigalle Paris. "With three or four clicks, their booking is confirmed and paid by Apple Pay, Google Pay, or any credit card. I highly recommend Selfbook to anyone looking to improve the guest experience on their website."

The iconic Hotel Bel-Air’s seamless booking experience is powered by Selfbook and Stripe

Because of Stripe, hotel guests can book rooms at Selfbook customers without ever leaving their website. All payments are processed right on the website without the need for a redirect to a third-party platform, which enables hotels to benefit from Stripe’s world-class fraud and chargeback protection in real-time.

While traditional booking engines pass raw payment information to hotel payment service providers to be manually processed and reconciled, Selfbook’s integration with Stripe is built into existing processes to provide a great booking and guest experience.

Laying the Foundation for Innovation

Stripe simplifies payments for leading hotel tech companies like Mews, SiteMinder, and Selfbook so that these companies can help their hotel clients deliver better customer experiences. While Stripe provides the infrastructure and continually builds on its global coverage, hotel tech companies can focus on hospitality-specific innovation and offload the complexities of money movement, compliance, and payments reconciliation.

“Stripe has been instrumental in supporting our growth by working with us on both the business and technical implementation sides. We gather feedback from hundreds of hotels, learn about the pain points they have across their various integrations in depth, and we work with Stripe to validate technical and guest-first solutions to those problems,” says Khalid Meniri, Selfbook’s founder and CEO.

Before payments platforms like Stripe came along, a hotel booking software provider like Selfbook or a property management system vendor like Mews would need to develop between 10 and 20 different payments processing integrations in order to service their global customer base to give hoteliers optionality in any given market.  For example, if you owned a hotel company with properties in multiple markets, like Spain, France, and the Netherlands, this would have meant working with multiple payment processors for each market even within your own portfolio. Sometimes you’d have to use different processors depending on the channel of booking (offline, online, direct, or through a third party channel). This historical lack of standardization has generated massive inefficiencies, which is why many hotel tech companies have turned to Stripe.

Tailoring Payments for the Hospitality Industry

Hotel tech is still in the early stages of fintech adoption, with many advanced vertical-specific capabilities on the horizon. For example, legacy online travel agencies use costly virtual credit cards to transfer payment from their platforms to hotel tech systems. It’s not difficult to imagine a world where Stripe handles the payment on an OTA like Booking.com and automatically wires the funds into the hotel’s bank account with a direct integration into its property management system and Stripe.

Another example is small business financing. Many hotels in seasonal markets face sharp drop-offs in revenue during shoulder periods despite having to maintain fixed costs like labor and utilities. On the flipside, many of these hotels receive bookings for their peak season during the shoulder period but do not receive payment until the time of stay. A hotel tech company whose payments platform is built on top of Stripe could provide working capital financing at lower interest rates relative to competitors (e.g. regional banks) since the hotel tech systems have transparency into those future bookings.

Mews’ Senior Product Director Fintech Jelle Kaat elaborated on another opportunity for fintech innovation in hospitality. “Think about the use case where a business traveler like me who visits the same hotel in Prague every month for work,” says Kaat. “The hotel—and, in turn, Mews—knows that I’m good for the money so I’m a low-risk payment, but I go through the same flow as every other risky, unknown traveler.”

In Kaat’s hypothetical scenario, data from the property management system (i.e. historical guest records) could enable the hotel to set up special payments benefits for frequent business travelers instead of treating them the same as new guests as a lever to increase loyalty and repeat visits.

In this case, the hotel could bill the business traveler’s company 30-days from the stay to provide cash flow in exchange for loyalty or even extend a $500 daily F&B credit line to those frequent travelers. Before the combination of data in specialized hotel systems like Mews and payments infrastructure provided by Stripe, these scenarios were unimaginable.

Delaying payment on business travel is a CFO’s dream because increasing days payable helps with cash flow and profitability, and hotels would benefit from these favorable payment terms with trusted clients that could improve customer loyalty. These are just a few examples of the value that can be unlocked in hospitality through fintech innovation, but the possibilities are limitless.

Payments as the Innovation Foundation in Hospitality

Implementing next-generation payments infrastructure will be a leading catalyst for innovation in hospitality over the next five to10 years. Hotels and vertical tech companies that don’t embrace this wave will be left behind as leading hotel tech players combine modern fintech platform tools and domain expertise to unlock value for hotels and guests around the world.

Better payment workflows applied to different facets of hospitality can improve booking experiences (e.g. conversion rates and direct bookings), reduce costs (e.g. chargebacks and administration), and empower businesses to implement new business models.

From small, independent hotels to massive tech platforms like Booking.com, next-generation payments are unlocking profits across the hospitality value chain. Even for a massive distribution player like Booking.com, Stripe has been instrumental in alleviating their customers’ largest pain points:cancellation rates and card processing rejections.

Hotel operators and tech companies that serve those hoteliers should be examining their business model to identify where payments can create more value and ensure that the vendors they work with have the requisite payments technology to not only survive and thrive in the short term, but also to innovate and future-proof their businesses for years to come.

This article was created collaboratively by Stripe and HotelTechReport.com