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Hotel Credit Card Processing
Hotel Credit Card Processing

Why would a hotelier pay a percentage of revenue for a service that does not increase revenue? Especially a percentage which they had on control over, could not negotiate rates with and was with a company that they had no hand in selecting?

There are several property management systems using a pricing model requiring properties to utilize a specific credit card processing service. Let's discuss how that works.

The property management system has an agreement with a credit card processor that all of their clients will process all credit cards with them. The PMS system may sign an agreement that maintains the processors percentages and fees or they may have the credit card processor increase the fees. The PMS system gets paid monthly on all transactions processed.

Let's look and see what that looks like in the real world. Let's say you have a 60-room property. Let's say you average 60% occupancy year-round. Let's estimate the PMS company is getting .25% as their take. Let's also assume your ADR is $100 year round. That means that the PMS company is making $33,850 a year from you. And, of course, they are also charging you a fee for the property management system. Plug in your own numbers and see what you come up with.

Is this a bad thing? Not if you are getting the best rate available for your credit card processing. But are you? We have not found this to be true. And why should you tie your credit card processing to your PMS? What if suddenly you have issues with your credit card processing? Can't you just changed to a different company? No, you can't. You are contractually obligated when using that PMS to use a specific credit card processor. If a company knows that you are locked in there is no incentive to give you the best rate or the best service.

How do you find out if you're getting the best rate? Obviously you need to shop around. Take your last three credit card processing statements and ask for comparisons. ask your bank for a quote. Ask other hotel years who they're using. And if you'd like to talk to a specialist that works with a lot of hotels, will be glad to point you in that direction.

OpenHotel was founded 22 years ago by a hotelier and her son. One of the reasons was that booking engines back then charged a percentage of bookings. We hate percentages that are just arbitrary and especially one that do not increase revenue. OpenHotel does not want to get into your business – we want to make your business easier.

 

 

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