Skip navigation EPAM

What OTAs Accepting Bitcoin Payments Means for Hotel Chains

Johnny Wyld

Director, Business Consultancy, EPAM UK
Blog
  • Travel & Hospitality

Tripwitz, an online travel agency (“OTA” in the industry slang), has started accepting bitcoins as of January 12th for stays in hotel chains such as Hilton, Marriott and Radisson. In doing so, they join Expedia (who has been accepting bitcoin since 2014) in using Alternative Payments as a means of attracting customers away from hotels’ own booking websites.

Bitcoin skeptics such as myself might dismiss this as merely the latest incarnation of the cryptocurrency bubble, but there is an interesting question here: why did these hotel chains not attempt to introduce this quirky flash-in-the-pan payment mechanism on their own booking websites, thereby winning the marketing kudos for themselves and avoiding losing business from die-hard bitcoin fanatics to an OTA, with its punitive commission fees?

The fact is, hotel chains are trapped in a symbiotic relationship with credit cards that is difficult for them to break out of. Credit cards enable them to accept payment details at booking, but delegate the process of actually processing the payment to the individual hotel later in the guest’s journey. This means that the hotel, rather than the hotel chain, is the merchant of record.

The guest won’t generally notice this sleight of hand, and the benefits to the hotel chains are enormous. Not being the merchant of record means they can avoid all of the operational overheads, global banking arrangements, tax implications, compliance requirements and fraud exposure that come with it. Instead, they simply get paid fees by their network of (usually franchised) hotels globally and reduce their day-to-day role to one that defines rules around brand experience for these hotels to implement.

The downside is that the hotel chain is unable to offer anything other than credit cards as a payment form, because alternative payment types, from Alipay to Zelle, all require immediate fulfilment. While every other global industry has welcomed and benefited from the improved cashflow and reduced processing fees such payments bring, hotel chains have, almost without exception, failed to do so.

This failure is especially noticeable when you consider how the market for international travelers is changing. For the last 30 years, credit cards have been popular with – and a necessity for – hotels’ target market of Western travelers. With the rise of wealthy middle classes in the emerging economies of the BRICS nations, the next generation of international travelers will have very different payment expectations. In China, eWallets such as Alipay and WeChat Pay dominate, with credit cards only accounting for 10% of eCommerce payments, and these consumers’ overseas spending power is set to triple over the next fifteen years, easily outstripping the rest of the world combined.

A revolution in payments is long overdue for the hospitality industry, and while the incumbents are failing to seize the opportunity we can expect to see more innovation – and market share – switch to the thriving OTA market where alternative payments like bitcoin are not only accepted, but embraced.

See my recent whitepaper on alternative payments in the hotel industry for more information on these challenges and how hotels can address them.

Hello. How Can We Help You?


Our Offices