Will hoteliers take a bite out of Apple Pay?
Will hoteliers take a bite out of Apple Pay?
12 NOVEMBER 2014 10:23 AM
Apple’s introduction of Apple Pay has hoteliers contemplating the viability of near-field communication technology at the point of sale. 
REPORT FROM THE U.S.—A guest arrives at a hotel to check in, but instead of handing over a credit card to cover incidentals, he holds up his iPhone and asks where he can “tap” the device. These scenarios might happen more often in the near future if Apple’s influence over merchant transactions mirrors the company’s impact on how consumers purchase music.
The arrival of Apple Pay in September pushed all industries, including travel and hospitality, to look more closely at a technology called near-field communication. Though not new, NFC is installed on the new iPhone 6 and allows users to simply tap, wave or hold their smartphone or other device to an electronic reader at a point-of-sale terminal and automatically transmit their payment information, relieving the user from carrying a credit card.
Samsung Android smartphones have had NFC technology since 2010 using Google Wallet platform as the payment interface. NFC, however, has been implemented at fewer than 10% of retailers, according to a Wall Street Journal report. In addition, Walmart, Best Buy and other retailers have rejected the technology due to POS terminal upgrade costs and instead opted for their own smartphone wallet application, CurrentC, which works with existing hardware and will launch next year.
Google Wallet and other mobile payment platforms also offer an online-only functionality for paying through websites and apps, without involving an NFC reader. This Google Wallet feature has been more widely adopted by hoteliers, including chains such as Best Western International, Hilton Worldwide Holdings, La Quinta Holdings and Omni Hotels & Resorts. 
While Apple Pay also offers online-only transactions, hoteliers might face complicated and expensive upgrades on property if the NFC functionality emerges as a must-have for POS.
“It comes down to the relationship they have with either their point-of-sale company or their property-management-system company or their credit card processor, depending on whose stuff they’re using,” said Robert Cole, founder of hotel marketing strategy and travel technology consulting company RockCheetah. “They could charge them an arm and leg to swap out these terminals.”
Reducing the friction
While NFC acceptance by hoteliers might be uncertain, the growth of consumers using mobile devices for purchases is undeniable. Overall commerce conducted through mobile devices, (smartphones and tablets) is expected to reach $110.1 billion in the United States by year-end and climb to nearly $380 billion by 2019, according to Euromonitor International, a market research firm. Similarly, during a 2014 investor presentation, Marriott International reported it surpassed $1.3 billion in mobile sales. 
To capture this growth, hoteliers must expedite mobile transactions by reducing manual data entry on the devices, ideally while protecting guests’ and customers’ financial and personal information.
“Any additional step you have to take on a mobile interface usually means that you’re at a higher risk of losing that transaction because people will get frustrated and go somewhere else,” said Michelle Grant, travel and tourism manager for Euromonitor. “It’s important for hotel companies to offer a very good mobile experience, and whether that includes an app linked to loyalty program or digital wallet, it’s crucial that it be easy to use and well designed.”  
Improving that mobile experience is one of the reasons Best Western included Google Wallet and MasterPass, a mobile payment platform from MasterCard, in the new version of its mobile app, Best Western-To-Go, released in April 2014, says Felipe Carreras, the company’s director of e-commerce.  
“What we wanted to do was to make the booking process as friction-free and as easy for our users as possible,” he said. “We know not everyone has Google Wallet or MasterCard, but by putting both of those options out there, we’re hoping to address the needs of more of our users.”
Integrating Google Wallet and MasterPass with the company’s app took several months, primarily coordinating the development stakeholders including Google, the merchant gateway, payment processor and banks, Carreras said.
The addition of NFC readers at Best Western properties is less certain. Like many hotel companies, properties are independently owned and managed, so the growth of Apple Pay or similar NFC payment platforms would have to make a compelling business case before the company would recommend implementation to its members, Carreras said. 
“We have no firm plans of integration of (Apple Pay), but we’re looking at it and seeing what the adoption of it will be,” he said. “Because, really, there’s not a clear leader in this space and there’s not high market penetration of mobile payments today. But we’re looking at it to see if that’s something that could change with Apple throwing their hat  in the ring.”
Apple piggybacking on EMV standard?
Adding NFC readers to point-of-sale terminals might be moot point, at least in the U.S., because an industry-wide upgrade is already underway to accommodate the new EMV chip cards, which will become mandatory in October 2015. 
Widely adopted outside the U.S., EMV (which stands for Europay, Visa, MasterCard) chip cards have a tiny microprocessor that stores and protects the cardholder’s information and are reportedly more difficult to duplicate than magnetic strip cards. Some EMV cards require a personal identification number at the POS, while others require a signature.
“If a retailer hasn’t upgraded and fraud happens that could have been prevented by the chip-based card, then they are liable for that fraud,” Grant said. “We’re going to see these terminals change over and that is an obvious point to add NFC capabilities. So there are a number of factors coming together here.” 
Start small
As NFC payments gain traction, some major hotel operators might test the option at their smaller brands or at properties that serve a predominately younger consumer and monitor usage before implementing or recommending it companywide, Cole said.
“They could treat it as a Petri dish to test it and see what works and what doesn’t,” he said. “With the newer hotels, this should be pretty easy, but the older companies may struggle.” 

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