Are hotels falling behind with payment processes?

(International travel is big, but hotels may need to re-invest in back-end infrastructure to avoid losing bookings to more modern competitors.)

Just the name “Airbnb” is enough to set some hotel operators off these days. Since the company barged into the hospitality space, its net worth has exploded to attain a $30-billion valuation in much the same way as the online travel agencies: by thinking of a new way of doing things without gambling on any of its own physical supply. 

Since tech giants like Airbnb and Expedia have the luxury of not needing to construct their own guestrooms (on top of other concessions, but for the purpose of this article we won’t go there), they are able to focus on a different big picture, and one way they are beating hotels is through the adoption of more nimble back-end payment processes.

Oren Levy, CEO of third-party payment solutions provider Zooz, said the entrepreneurial stars of the sharing economy owe much of their success to other like-minded startups, particularly the back end propping up the sharing economy. For these companies, third-party technology assists with everything from customer management systems, relationship management and more, and one area he said hotels need to catch up in is in payment technology.

“It’s easy to say you accept customers from all over the world, but the reality of Airbnb’s ability to accept payment methods from all over the world is a big deal,” Levy said. “Making it a frictionless process is complicated, and connecting to a single provider isn’t enough, particularly for the scale players are looking to compete at today.”

Online fraud is rampant, and some of it can be prevented thorough updated payment processes.

Lie Detector

As for how this relates to hotels, Levy said that the vast number of payment systems in use today are located within the U.S., and the growing international travel market interested in coming to the U.S. is being forced to interact with that infrastructure. “Many services based in America can provide payment services to those in China, Australia, etc., but how reliable the system is… that can be a different story,” he said.

According to Levy, the payment-processing infrastructure at work behind the scenes in many legacy hotels is outdated, and is running off of very, very old technology. The thesis behind payment processes hasn’t changed much over the past 20 years, but the concept of fraud is ever evolving, and Levy said current systems have a tendency to decline transactions too often and allow unscrupulous buyers to get away with fraud.

“Model payment providers, such as Zooz, are not a single fraud-prevention system. Instead, we are a platform with several fraud-prevention engines built directly into our operations,” Levy said. “We can look into the percentage of a chance that fraud may be occurring during a transaction, then double check our findings using other tools. This way there are a number of protections in place before the booking is even seen by a payment provider. If a fraudulent transaction is sent and it is found to actually be deception, then you have an issue, so if these measures are applied before it is sent the process is much safer.

If an international traveler has difficulty booking through traditional payment channels, they could be won over by a competitor.

Bang for Every Buck

If protecting against outside embezzlement doesn't sound attractive, Levy makes a case to update legacy systems in order to sidestep the web of fees associated with international bookings. For example, a third-party payment provider such as Zooz can process a booking from Europe as if it was within Europe in order to mitigate fees, or process a request from a Chinese traveler from within China in order to reduce the likelihood of the transaction being declined. 

It’s a concept that many operators will never see face-to-face, but with the digital age as it is curating the guest experience has already expanded off-property, and encountering difficulties at the booking stage can serve as just one more example of an industry that is lagging behind more contemporary competitors.

“If you cannot accept Paypal China at your property, there is a chance you are missing out on bookings. Your property could be missing out on new geographies just as the money is starting to come in from there,” Levy said.