Trends shift and change regularly, and perhaps no more so than in the hospitality industry. There are few industries that deal with as many currencies and payment types than this, which definitely poses a few challenges along the way. Yet, it’s one of the most profitable industries around – according to projections, the global hospitality market is set to reach $5717 billion in 2025. Yes, you read that right!
With such staggering growth, it’s quite eye-opening to understand the sheer number of problems that many hotels and other hospitality businesses face with payment processing. After all, we’re talking about huge sums here, so it’s vital to identify the best and most reliable hospitality payment solutions for you. In this guide, we’ll talk in detail about the financial challenges businesses face and what you can do to overcome them.
TL;DR
- The hospitality industry as a whole is classified as high-risk by payment processors.
- To counteract challenges, hospitality payment systems are evolving, now utilizing digital, mobile, and contactless routes.
- Hospitality businesses face high transaction fees, security issues, and increase chargebacks due to the nature of their industry.
- Artificial Intelligence (AI) is one technology that holds promise in enhancing payment solutions. This can detect fraud, improve personalization, and streamline payment processes.
- Choosing a specialized hospitality merchant account through PayCompass opens the door to tailored features that meet the unique needs of the hospitality industry.
- There are many new technologies on the horizon that may reshape payment processing. These include blockchain, mobile wallets, and biometrics, along with augmented reality (AR).
Common Payment Challenges in the Hospitality Industry
Before we can talk about solutions, we need to outline and understand the problems. We’ve established that the hospitality business is huge, and there are many different types of companies that operate within it. We can focus mostly on hotels, yet whatever the business type, the challenges tend to remain the same.
In this section, let’s explore some of the most common and troubling hospitality payment issues.
Complex Billing Across Multiple Departments
In most cases, one guest’s entire experience involves more than one department, so it’s important to sync your efforts across the entire business. This might include the reception desk, spa, housekeeping, and restaurant, and each department handles a separate aspect of the guest’s stay, leading to complicated billing.
Historically, managing charges from different areas and putting them into one invoice is not only time consuming but it’s a situation rife with the potential for errors. From this, accurate billing can be problematic, and no guest wants to stand and argue their bill at the end of a pleasant stay.
High Transaction Fees and Hidden Costs
The hospitality industry overall is classed as high-risk and this brings a range of issues from the start. Many traditional payment processors either don’t accept high-risk transactions from the start or they charge astronomical fees, along with a few hidden costs along the way. A few examples of these fees include chargeback fees, setup costs or payment gateways, and even surcharges for international cards.
All of this adds time and money to the entire process, and let’s be honest, you’re busy enough. For this reason, it’s vital to find a payment processor tailored to your needs, such as PayCompass. We offer tailored high-risk merchant accounts, designed with your specific challenges in mind.
Managing Secure and Seamless Guest Payments
It’s vital to ensure that you protect sensitive customer data, including credit card details. From this, payment security is a key aspect but it’s challenging to achieve both a seamless process and security. Your guests will no doubt expect a fast and easy process when they pay, yet it’s vital to ensure that security stays at the forefront of this.
So, what can you do? Using strong security protocols that are PCI-DSS compliant is a minimum, while staying up-to-date with new regulatory changes and technologies.
Outdated Payment Infrastructure and Legacy Systems
Unfortunately, there are many hospitality businesses out there that still have outdated payment systems and legacy infrastructure. Technology moves at breakneck speed these days, and staying up-to-date is a key responsibility. Relying on old systems means far less flexibility and an inability to integrate with new innovations, such as cloud-based options and mobile payments.
There’s another aspect to this too: customers may not be impressed if they see you’re not moving with the times. It’s a careful balance but it’s one to pay close attention to.
Difficulty Reconciling In-Person and Online Transactions
The hospitality industry has a complex blend of both in-person bookings and online ones. Although the online world is certainly taking over, that doesn’t mean that people still don’t want to book and pay in person, and it’s vital to be able to accommodate each option. However, a challenge arises when trying to reconcile two types of transactions (in-person and online) into one accurate financial record.
The differences in payment time, method, and processing can make it tricky to accurately track revenue and produce reports. Therefore, it’s essential to capture and reconcile both types of transactions across different platforms and utilize effective back-end systems.
Handling International Payments and Currency Conversion
Image showing various currencies that may be used in the hospitality industry.
Source: Pexels.com
For most hospitality businesses, currency conversions are a daily reality, and one of the most common hospitality payment challenges. In many cases, guests book accommodation or activities from overseas and they might want to pay in their own currency. However, this can create extra fees for you, and if the exchange rate is unfavorable, you may lose out.
Some payment gateways might also charge extra for international payments, adding more costs on your bill. It’s vital to not only manage exchange rate fluctuations but also focus on fair and accurate billing. To that aim, PayCompass offers a multi-currency feature that cuts down on additional costs and adds seamlessness to your payment experience.
Limited Mobile and Contactless Payment Options
These days, it’s more common than ever before to pay via mobile or contactless options, yet many hospitality businesses have not adopted these choices. This can be a barrier for some customers who prefer to pay in this way, so it’s important to consider these payment options. Failure to do so can mean missing out on a large chunk of the market, especially those who prefer fast and convenient ways to pay. Of course, it may also make your business look somewhat outdated or resistant to change.
Impact of Payment Friction on Guest Experience
Hospitality payment issues aren’t just a slight bump in the road; they have a major impact on your customer’s overall experience and can dictate whether they return to you again in the future. Of course, there is also the risk of negative word-of-mouth feedback if they experience severe or repeated payment issues.
Let’s explore how these challenges affect your guests’ experiences, before we go on to talk about how you can solve them.
Delayed Check-In and Check-Out Processes
Your guests are likely to be busy people, so they aren’t going to take too kindly to delays during check-in or check-out. However, this remains one of the most common hospitality payment challenges.
Having to deal with system errors, unclear billing information, or waiting for manual verification can make the entire process extremely slow. If their card is declined for whatever reason or there is a need for extra authorization, the check-in or out time can be delayed by a considerable amount. Basically, it’s frustrating on both sides, and if your guest has a flight to catch, it could result in extreme dissatisfaction.
Errors in Billing and Refunds
When a customer notices an error on their bill it can cause friction and in some cases can result in a refund needing to be issued. Unexpected fees, mischarges, and overbilling can cause customers to feel a lack of trust in your business, and it’s extremely frustrating at best. Additionally, if the customer has already left and you notice a problem with their bill, it can take a lot of time and communication to fix the issue.
It’s important to have smooth refund processes in place to ensure that the process isn’t unnecessarily complex or slow. In many cases, the process of sorting out a problem can overshadow what was probably an otherwise positive experience, and it’s likely to result in them not returning to you.
Lack of Payment Flexibility for Guests
We already mentioned that many people like to pay via contactless options these days, and this also extends to them needing to pay in a currency that isn’t theirs. In this case, when they have no choice but to choose a payment option that they don’t particularly like, it can result in dissatisfaction. It’s vital to be flexible with hospitality payment solutions, so you can cater to as many people as possible.
Negative Reviews Due to Payment Issues
Just one negative review can have far-reaching effects for your business, and much of this is down to the online world we live in. People like to say negative things more than positive, and that comment can spread across borders thanks to social media. Negative online reviews can have a major impact on hospitality businesses, because customers want to stay somewhere they know they’re going to enjoy.
This is particularly the case if the negative review revolves around payment processing. This can reduce trust in your business and, in that case, customers are less likely to book with you.
The Evolving Ecosystem of Hospitality Transactions
The travel and hospitality industries are very closely linked and both are booming. These days, we want to travel as far and wide as possible, and that means finding hotels and establishments that suit our needs. It’s therefore no surprise that the hospitality industry as a whole is having to change to adapt to new payment solutions.
Let’s explore this in more detail.
The Rise of Contactless and Mobile Payments in Hospitality
Many hospitality businesses have noticed a big surge in people who want to pay via contactless means. We’ve briefly touched upon this already, but it’s mostly because people prefer fast transactions that also focus on health and hygiene. In this case, they don’t have to touch the card machine or cash. In effect, these payment methods are becoming the norm.
Let’s explore some options that can be utilized to meet your customers’ needs.
NFC-enabled Wearables for Seamless Guest Experiences
NFC stands for Near Field Communication technology and it can be utilized in wearable devices, such as bracelets or smartphones with NFC chips incorporated. This allows your guests to access their room, make purchases, and enjoy any add-ons just by tapping. It’s extremely convenient and certainly gaining popularity.
QR Code Payments: From Menu Ordering to Room Service
QR code payments are another useful option to consider and they’re becoming more commonplace as time goes on. Again, this is contactless and means that your customer can simply scan a QR code on their phone to make a payment. This can be for their actual booking or for meals in the restaurant or treatments in the spa.
The table below gives details about the benefits and challenges of QR code payments.
| QR Code Payment Benefits | Implementation Challenges |
| Contactless transactions | User education |
| Reduced hardware costs | Reliable internet required |
| Easy integration | Security concerns |
| Faster checkout process | Potential technical issues |
Blockchain and Cryptocurrency in Hospitality Payments
Blockchain is extremely useful in many different ways across industries. In this case it can, along with cryptocurrencies, help to change payment processing for the better. These technologies are decentralized, which makes them a good choice to help you navigate the challenges of high-risk payment processing. They offer extra security, lower fees, and they’re globally accessible.
Smart Contracts for Automated Booking and Payment
Smart contracts are implemented on blockchain platforms as self-executing tools. They require no manual input after the initial set-up and can streamline your booking and payment process. Smart contracts are set up with your specific terms and they’re then written into the code so they’re only processed when the predefined conditions are met. As a result, you don’t need an intermediary, there’s less chance of an error, and it’s a much faster option.
Loyalty Programs Powered by Blockchain
Many hospitality businesses make use of loyalty programs, and this is something that blockchain can also help with. In this case, blockchain can help to create and manage clear and secure loyalty point systems, giving you accurate data on your customer’s preferences.
Artificial Intelligence in Hospitality Payment Solutions
We’re talking about technology, so of course we have to mention AI. Across all industries, AI has the power to turn payment processing on its head in the best way possible, solving many hospitality payment challenges.
One area of interest is AI-powered predictive analytics. These can sort through huge amounts of data, including historical data patterns, competitor pricing, and even outside factors like the weather or upcoming and past events. They can then help you optimize your pricing based on these factors, boosting your occupancy rates.
AI-Driven Fraud Detection and Prevention
As part of a high-risk industry, the hospitality sector understands fraud risk, and it’s this that contributes toward that risk categorization. However, machine learning can help with this, by using complex algorithms to identify and prevent fraud in real-time. These systems analyze patterns extremely quickly, detecting any anomalies. From there, transactions are flagged in the blink of an eye, allowing you to take action.
Chatbots and Virtual Assistants for Payment Support
You’ve no doubt used a chatbot or a virtual assistant for something in your personal life before, and it’s time to start considering these for your business too. AI-powered chatbots are ideal for handling any inquiries related to payments and disputes. They’re far more advanced than they’ve ever been before and can now give personalized recommendations, along with 24/7 support.
Biometric Authentication for Secure Payments
As a way to reduce fraud and boost security, we can also look at biometric authentication. This includes facial recognition, fingerprint scanning, and can even go as far as voice authentication. The security level with these types of technologies are exceptionally high, and can also make paying a lot more convenient and streamlined for your guests.
Multi-Factor Biometric Authentication Systems
Avoiding fraud is one of the most important hospitality payment issues, and multi-factor biometrics are a good answer. These systems combine more than one type of biometric data for extra accuracy. For instance, a customer could be asked to undergo both fingerprint scanning and facial recognition. This dramatically boosts security.
Privacy Concerns and Regulatory Compliance in Biometric Payments
Of course, biometrics do raise privacy concerns and this is particularly important in terms of complying with strict regulations. It’s essential to navigate the challenges around collection, storage, and use of biometric information, while still allowing your business to obtain the benefits of its use.
Using a combination of different strategies can help you here. Data minimization is the first step, ensuring that you only store the essential biometric information you need. Anonymization protocols are also useful to safeguard this data by making it untraceable. Additionally, audit trail systems are essential to give clear records of who has accessed the data and for what purpose.
The table below outlines some of the most common biometric payment methods, along with their advantages and privacy considerations.
| Biometric Payment Method | Advantages | Privacy Considerations |
| Facial Recognition | Fast, contactless | Data storage and consent |
| Fingerprint Scanning | Highly secure | Potential for misuse |
| Voice Authentication | Natural interaction | Voice data protection |
| Palm Vein Scanning | Difficult to forge | Invasiveness concerns |
Navigating Hospitality Payment Challenges
We’ve talked about the fact that the hospitality sector is high-risk and that creates a range of payment processing challenges. In this section, let’s understand exactly why and what you can do about it. Of course, the first and most important step is choosing the right high-risk merchant service provider, and PayCompass is designed to help you overcome many of your industry-specific challenges.
Mitigating Chargeback Risks in the Hospitality Sector
One of the biggest issues in the hospitality industry is chargebacks. These can be for a variety of reasons, but they’re often about no-shows, cancellations, or customer dissatisfaction.
There are many methods you can use to help reduce chargebacks, but it’s important to remember that you can’t stamp them out completely. Choosing a hospitality merchant account from PayCompass is a solid first step. Our accounts are designed for high-risk businesses and include chargeback prevention tools.
However, you can also make use of other technologies alongside. Let’s explore these now.
Real-Time Chargeback Alerts and Prevention Systems
Advanced alert systems are a powerful tool in the battle against chargebacks. As the name suggests, they alert you in real-time about a transaction that is likely to be problematic, giving you time to be proactive in your approach.
Customer Education and Clear Communication to Reduce Disputes
Clear communication may sound simple but it can go a long way to reducing disputes and potential chargebacks. Make sure that your policies are clear every step of the way and that you communicate these clearly to your customers. This also includes transparent and clear billing, so they know exactly what they’re going to pay and how. Information around service expectations, cancellation policies, and payment terms are particularly helpful here.
Transparent policies, clear communication, and guest education play a crucial role in minimizing misunderstandings that can lead to chargebacks. By proactively informing guests about payment terms, cancellation policies, and service expectations, businesses can significantly reduce the likelihood of disputes and chargebacks.
Navigating Cross-Border Payments and Currency Conversion
We’ve already mentioned that hospitality businesses will often accept bookings from customers in other countries. Many of those customers will want to pay in their own currency to avoid charges. However, that’s not the only challenge that arises in this subject area. Exchange rates are known to fluctuate, sometimes wildly, and there are also international banking regulations to take into account.
Let’s explore some effective ways to handle these challenges.
Dynamic Currency Conversion (DCC) Services
DCC stands for Dynamic Currency Conversion, which allows customers to pay in whatever currency they prefer. This is useful because it reduces any confusion about exchange rates and the final cost, boosting customer satisfaction. For this reason, offering DCC is a solid first step, including implementing real-time exchange rate calculation algorithms. If your interface is well-designed, it will prevent DCC options very clearly, making it easier for your customers to choose their currency.
Multi-Currency Pricing Strategies for Global Markets
The latest technology is now creating sophisticated pricing systems that can dynamically adjust prices based on market conditions and local currencies. These are an excellent choice for the hospitality industry due to its global reach and increased seasonal demand.
Algorithms can target specific locations and display prices in the local currency, making the whole experience easier and more transparent for your customers. Multi-currency revenue management dashboards are also helpful as they track your revenue across different regions.
Of course, the challenges associated with accepting payments in multiple currencies are evident, and that’s where PayCompass is an excellent choice. We offer multi-currency payment processing services and we have a record to back up our claims, with $3 billion processed globally so far.
Specialized Hospitality Merchant Accounts
Choosing a tailored hospitality merchant account with PayCompass puts the control back in your hands when it comes to your payment processing. These are designed specifically for high-risk industries, and in this case, for the hospitality industry in particular.
Let’s take a look at how they can benefit you and make your processes much smoother and far less stressful.
High-Risk Merchant Account Solutions for Hotels and Resorts
Screenshot of PayCompass’ merchant account homepage.
The larger number of chargebacks, high transaction volumes, and extended booking windows are some of the main reasons why the hospitality industry is classified as high-risk. However, specialized hospitality merchant accounts are designed to counteract these problems and create a smoother experience for everyone.
To reduce the impact of these problems, it’s a good idea to consider a tiered pricing model that is based on detailed risk assessment and transaction volume. Customized fraud scoring algorithms are also a positive addition. These focus on specific transaction patterns within the industry and work to boost fraud detection and prevention.
Finally, reserve account management systems are a solid step. These help to reduce risk for payment processors by setting aside a portion of funds to cover any disputes or chargebacks.
Advanced Fraud Screening Tools for Hospitality Bookings
Along with dedicated hospitality merchant accounts, advanced fraud screening tools are a necessity. These use the most sophisticated technology to boost security and prevent fraud. They do this by using neural network models which are excellent at recognizing patterns in booking behaviors. From there, they flag any unusual signs that could point toward fraud.
You can also consider device fingerprinting techniques which can identify and then track any devices with fraudulent potential. However, there is nothing more effective than having a comprehensive risk assessment in place that is updated regularly.
Customized Underwriting Processes for Seasonal Businesses
Choosing a hospitality merchant account also means that you gain access to customized underwriting processes. These tailored approaches take into account the seasonal fluctuations that punctuate the hospitality industry, giving appropriate credit limits across the year. This helps to support your cash flow during your busy and quiet periods.
Emerging Technologies Shaping Hospitality Payments
Technology is forever shifting and changing and there are some very promising advancements on the horizon. These are likely to make payment processing in the hospitality industry easier and more streamlined. They include things like voice-activated payments and augmented reality experiences. Let’s explore these in more detail.
Voice-Activated Payments in Smart Hotel Rooms
Smart hotel rooms in themselves are at the forefront of technology, but when you add voice-activated payment systems, everything goes up a notch. These can change how guests interact with your hotel services, allowing them to make purchases or pay bills just by speaking.
Wake word detection plays a key role here, ensuring that the system activates as soon as it hears a comment. That way, false alarm activations are far less, which could become a headache for your guests. Of course, security is an issue here, and voice biometrics are a good answer, ensuring that only the authorized guest can use the system.
Natural Language Processing for Multilingual Payment Support
NLP, or Natural Language Processing, is a key driver in boosting multilingual payment support via voice-activated payment systems. This means that guests can speak in various languages and the system will accurately understand and process the command.
This goes even further with context-aware language, which ensures the system not only recognizes but also interprets expressions, adapting to various cultures.
Augmented Reality for Interactive Payment Experiences
Augmented reality, also referred to as AR, is also opening our eyes to new experiences, including in payment processing. The rise of AR-enhanced menus and virtual concierge services is certainly exciting, effectively blending together the digital and physical worlds.
AR-Enhanced Digital Menus with Integrated Payments
AR menus allow guests to have a truly immersive experience. This helps them “see” the dish in 3D and then make a payment within the same systems. Of course, the main advantage here is that customers can “see” what they’re getting and won’t be disappointed, boosting customer satisfaction. Secure payment gateways built into the AR menu system can also make paying for meals much easier, all within just one transaction.
Virtual Concierge Services with AR Payment Integration
Another technological and exciting development is the possibility of virtual concierge services integrated with AR payments. In this case, service recommendations can be integrated into payment options that are totally secure and convenient. Guests can then head out and explore attractions and enjoy hotel amenities and receive personal suggestions based on what they like and where they are. From there, they can purchase services via a connected digital wallet.
All-in-all, it makes the customer’s experience more streamlined and easier, while boosting payment processing effectiveness and security.
Learnings Recap
By now, it’s clear that while the hospitality industry is certainly profitable and booming, it faces many challenges in terms of payment processing. This is down to the high-risk classification that many payment platforms place upon it. However, it’s not all doom and gloom. There are many technologies and new hospitality payment solutions to consider.
Mobile and contactless mobile payments are at the forefront of this payment revolution, including NFC-enabled wearable devices and QR code payments. All of this makes payments faster and more convenient on both sides. We can also highlight blockchain and cryptocurrencies here, useful due to their decentralized nature and high transparency.
The list of technologies goes on, including AI and biometric authentication. However, the fact remains that the hospitality industry is known for a higher number of disputes and chargebacks. So, what can you do to solve that? Opt for a hospitality merchant account through PayCompass.
Our accounts are designed with the very challenges you face in mind, including chargeback prevention and helpful tools. With fast acceptance and virtual cards to consider, the list of benefits continues. The point here is simple: our high-risk accounts help you overcome the things that cause you the biggest headaches right now. Once those issues are managed, you’re free to focus on what you’re best at – serving your customers and growing your hospitality business.
