Zero or hero Can card strategy lead to hotel compliance? By Amon Cohen Share Many large families have a problem child. The enfant terrible for the family of managed travel categories is accommodation. Manifestations of its delinquent behaviour abound, not the least being lack of conformity. A marketplace of hundreds of thousands of hotels, 75 per cent of them independently owned, according to the hotel booking platform HRS, makes lodging the enemy of standardisation for procurement people and of the administrative processes to manage them. Hotels also encourage misbehaviour in others. “Research by Verizon has shown they are the number one point of sale for breaches of credit card security,” says Max Waldmann, COO of HRS Invisible Pay, the company’s bank-licensed payment off shoot. Worst of all for travel managers, hotels also foster a bad attitude among their travellers. AirPlus International surveyed 1,285 business travellers and found 41 per cent were booking accommodation outside authorised channels, either via consumer online travel agencies or directly on hotel websites. Adverse consequences of off -channel booking are legion. They can include paying higher rates than through the preferred programme; reduced spend with preferred suppliers, leading to weakened discounts; problems with obtaining accurate invoices for expense reconciliation and VAT reclamation; and, in these duty of care-conscious times, difficulty in tracking travellers in an emergency. Advantages of centralised payments for hotel bookings • Less work for the traveller: no payment process; no invoice collection; no expense reports; no waiting for reimbursement; no liability complications • Painless payment through authorised booking channels discourages use of unauthorised consumer channels • Lower rates • Line-item data • Internal company data, e.g. cost centres, to help budget holders • Compliant invoices for VAT reclamation • Reduces fraud • Pays for all travellers, not just employees with plastic corporate cardsWaldmann argues that while the payment process can be yet another part of the total hotel problem, it could prove the solution. “Payments have the potential to be anything from zero to hero for managed travel programmes,” he says. “They can be either very tedious and cumbersome or make the process efficient and streamlined.” Zero or hero? Increasingly, travel buyers and indeed the corporate payment industry itself are beginning to think the answer to that question depends on which payment type is used. If it’s through a plastic card – personal or plastic – payment is a zero. If it’s through central payment, meaning either a virtual card or lodge card (centrally billed account), it’s a hero. At present, central pay is used far less for hotels than for air. In January-September 2019, 98 per cent of the air payments accepted by AirPlus in Germany were centralised: 96 per cent through its Company Account lodge card and 2 per cent through virtual cards. For hotel, only 43 per cent were through central methods: 13 per cent via the lodge card and 30 per cent via virtual card. However, this was still an upward shift from calendar year 2018, when 36 per cent of hotel payments were lodge or virtual. Centralised payment simply means a business traveller’s employer pays directly for the transaction. The benefits are legion. “If you book and pay centrally, then when you leave you don’t have to do anything,” says Maria Parpou, chief product & commercial officer for commercial payments at Barclaycard. “I stayed at a Marriott in Paris recently. The next morning they winked at me at check-out and I was free to go.” Not having to do anything explains why centralised payment holds the key to overcoming maverick hotel buying. Time saved for the traveller is much more than breezing out of the hotel without having to queue at check-out. It also means not having to manage the hotel stay in their expense report, and not having to wait for reimbursement. Crucially, travellers can only have their hotel stay paid centrally if they have also booked centrally, either through their company’s online booking tool or travel management company. This leaves travellers with a simple choice: do they avoid all payment and expense work by booking compliantly, or do they continue to book off -piste and put up with a world of admin pain? Travel managers report that, a few hardcore loyalty point hunters aside, travellers are opting for the former – or the argument is ended by withdrawing their plastic corporate cards completely. Another reported benefit of centralisation is lower rates. HRS studied 30,000 hotel bookings by corporate clients, half before introducing a central payment process, half after. Average cost per room fell 12 per cent. HRS believes travellers book lower-priced options because knowing the company will pay directly makes them more aware their choices are being monitored. According to a travel manager interviewed for this article, hotels also fall into line and don’t charge more than the contracted rate because payment is confirmed to them up-front. Then there is the step-change in data quality. In simple terms, recent process digitisation for making centralised payments to hotels has created a two-way electronic flow: payment in, digitised invoices out. “We reach out to the hotel to get the invoice and we extract the line-item data,” says Waldmann. “This is the Holy Grail of managed travel. It allows corporates to understand what is happening at the hotel and to reclaim the VAT.” One company I work for got rid of its plastic cards because it doesn’t need them any more for big items... it’s all done through centralised paymentSebastian Von Stein, Senior Travel Manager and Travel Consultant Digitisation is also helping to make centralised payments much more reliable. Virtual cards, where a one-time card number is generated and sent to the merchant, have been around for a decade. They have made good progress but there is still occasional non-acceptance by hotels. Hotel booking platforms, TMCs and others cannot e-mail virtual card numbers to hotels because this is not compliant with international payment protocols. Instead, somewhat astonishingly, virtual numbers are often communicated by fax instead (which is compliant) – but sometimes those messages don’t make it to the front desk, or are disbelieved by untrained hotel staff. A variety of digital solutions have arrived in recent months, including creating virtual cards in travellers’ mobile phone wallets, much like Apple Pay or Android Pay, which are now well understood by merchants. Virtual card technology provider Conferma Pay has also introduced mobile wallets, but it is going direct with hotels as well. “We have built tools which pump the information directly into hotels’ property management systems, making this challenge much smaller than it used to be,” says director of hotel products Dave Wood. The other sector hot on improving the process has been the hotel booking platforms. Booking.com for Business and Germany’s Corporate Rates Club are among those to have launched initiatives, as well as HRS, building on their existing direct reservation connections to hotels to facilitate payment. In this scenario, the platform pays the hotel with a virtual card, and in turn the corporate customer pays the platform, either with a virtual card as well or through its lodge card for later settlement. “We might have a corporate client which wants to use a lodge card to optimise cashflow and for us to pre-fund the transaction,” says Waldmann. “We’re flexible on that. We get charged a transaction fee by our bank, so we pass that on.” Along with the impending move to Strong Customer Authentication (see p1-3), these digital improvements portend big changes. “As central payments become more efficient, we will see a decline in the use of both private and corporate cards to pay for the hotel stay,” says AirPlus UK managing director Paul Spelman. Finally, the hotel category is growing up. While time will tell if Trip- Actions Liquid can wrest any significant turf from legacy corporate card programs, the company isn’t shy about its ambitions, which is no surprise given the compelling reasons for that confidence.WHY WE SWITCHED TO CENTRALISED HOTEL PAYMENTSSebastian Von Stein, Senior Travel Manager and Travel Consultant, Von Stein ConsultingI have moved a company I work for in Munich to centralised hotel payment and I am in the process of doing the same for another company in Essen. There are many advantages. You can be 100 per cent sure the invoice is accurate. You can block charges like mini-bar or pay TV, which the traveller has to pay for privately. Only what was allowed in advance is invoiced to the hotel booking platform. The platform’s service charge to the client is a few euros but you save so much time on checking invoice addresses and handling expense claims that I think it’s worth the money. The transaction goes into the traveller’s expense report but there is no need to check in detail because it has been approved. The company in Munich got rid of its plastic cards because it doesn’t need them any more for big items like air, rail, hotel and car rental. It’s all done through centralised payment. This is another advantage because you no longer have to distribute cards to new employees or get them back from employees who leave. It’s a bit difficult to set up because there are so many interfaces to connect – online booking tool, hotel platform, card, expense tool and accounting system – but once done it works very well. UK-based travel manager who requested anonymityWe moved to HRS for our hotel content at the end of 2018. Six months ago we started paying for hotels with a lodge card. One of the main drivers is to take the onus off the travellers. We are trying to reduce the amount of items on their expense claim. It also improves our spend with the card company, because our payment method is not mandated and previously employees would pay with their own cards. That gives us better rebates. The third reason is it drives down the rate at the hotel. Sometimes travellers book a room for €100 but when they get to the hotel it charges them €120. The virtual card number tells the hotel it is going to bill us €100, so now that can’t happen. Employee feedback has been good. A few didn’t like it because they were getting miles on their plastic card, but most love it.