Choosing the right payment processor is crucial for hotels aiming to provide seamless transactions for their guests. With the hospitality industry evolving rapidly, the payment experience can significantly impact guest satisfaction and operational efficiency. While it’s essential hotels, B&Bs or motels are gratifying guests, it’s also important to focus on the financial health of the business. One way hospitality businesses can cut down on overhead costs and improve their offerings is by choosing the right payment processor.
What Should My Payment Processor Offer?
To accept different forms of payments, the hotel, motel or B&B must work with an outside payment processor, also known as a third-party processor, that handles the transactions. Third-party payment processors enable vendors to accept card payments without having to first set up a merchant account at a bank. Setting up an account with a third-party processor or a payment processor is a quick and simple option compared to opening a merchant bank account.
When choosing a payment processor, the third-party vendor must do more than just process payments. Choosing a payment processor for a hotel is no easy task. Before committing, look for a third-party vendor that has three main components:
- It accepts different payment methods,
- It provides transparency to its types of fees and transactions, and
- It offers exceptional customer service.
Different Payments
An ideal payment processor should offer a variety of payment methods that enhance convenience for guests but still contribute toward the hotel’s profit. Ensuring the payment processor supports major credit and debit cards, as well as alternative methods like digital wallets (e.g., Apple Pay, Google Pay) and mobile payments is essential. In the hospitality industry specifically, there are many international guests, so it’s necessary to cater to those customers through a wide variety of credit cards.
Credit cards are one of the most used instruments of payment today. While more people use debit cards over credit, the purchase volume is higher. Americans spend $700 billion more on credit cards than debit. Specifically, credit cards are used more often in the hospitality industry due to its simplicity and high security while reducing the risk of carrying cash. Many credit cards also offer rewards when used like points to reduce traveling rates, incentivizing customers to use them more often. With credit cards being the highest form of payment in the industry, it's extremely important the hospitality industry is using a payment processor and understands the different fees associated with processing credit card transactions.
Transparent Fees
Some payment processors tag along tricky fees and chargebacks that negatively impact the business. Establishing a transparent and trusting relationship with the third-party payment processor will ease the stress of financials and help with the bottom lines. There are a few different credit card fees involved that business owners should be aware of:
- Merchant Account Fees: Merchant account fees are charged by a payment processor for maintaining the merchant account, required to accept credit card payments. These fees can include setup fees, monthly fees and transaction fees.
- Interchange Fees: Interchange fees are charges set by the card networks (Visa, Mastercard, etc.) and represent a percentage of each transaction. These fees go to the issuing bank and cover the costs of processing the transaction. The average interchange fee is 1.18 percent but can be as high as 3.5 percent.
- Assessment Fees: Assessment fees are charges set by the card networks and represent a small percentage of each transaction. These fees go towards funding the operations and services provided by the card networks.
- Processing Fees: Processing fees are charged by the payment processor and include a combination of fixed fees and percentage fees. The fixed fees cover the costs of maintaining the payment infrastructure, while the percentage fees are a percentage of the transaction amount.
- Additional Fees: There can also be additional fees that payment processors have to charge that vary depending on the different terms and conditions of the merchant account. Those include monthly minimum fees, chargeback fees and PCI compliance fees.
The most common fee used in the hospitality industry is the interchange fees. When choosing a payment processor, delve into the different fees associated with them and choose which is best for the business.
Customer Service
While the hospitality industry works to uphold excellent customer service for its guests, a payment processor also needs to offer a high standard of customer service and support to the hotels or businesses it’s working with. Effective customer service ensures timely resolution of issues related to payment processing. Whether it's a declined transaction, a billing discrepancy, or technical difficulties with point-of-sale terminal systems, prompt and knowledgeable support can prevent disruptions to business operations and maintain customer satisfaction.
Smooth and reliable payment processing enhances the overall customer experience for both the business and the customer. When payments are processed seamlessly and efficiently, it can make customers feel valued. Positive experiences also contribute to word-of-mouth referrals and positive online reviews, which are increasingly influential in attracting new customers.
Customer service teams trained in fraud detection and prevention play a crucial role in safeguarding payment transactions. They can quickly identify suspicious activities, address security concerns and assist merchants in securing their accounts. Proactive communication about security measures also reassures merchants of their financial safety.
The importance of selecting the right payment processor lies not only in accepting various forms of payment but also in managing costs effectively. A suitable processor should offer transparency in its fee structures, ensuring hoteliers understand and can budget for merchant account fees, interchange fees, assessment fees, and processing fees. This clarity helps in maintaining profitability while meeting the diverse payment preferences of guests, including major credit and debit cards, digital wallets, and mobile payments.
While payment processing may seem like a technical aspect of hotel operations, its implications are far-reaching. From financial management to guest satisfaction and security, the choice of payment processor can significantly influence a hotel's reputation and bottom line. By prioritizing transparency, reliability, and exceptional customer service in their selection criteria, hotels can ensure they are well-equipped to meet the evolving needs of their guests and maintain a competitive edge in the hospitality industry.
Austin Mac Nab is CEO and co-founder of VizyPay.