Expert’s Voice: How online payments encourage more guest spend

by | 18 Dec 2020 | Opinions, People

Switching to digital payment methods can boost hotel revenues while reassuring guests worried about Covid19, argues Larry Mogelonsky, principal of Hotel Mogel Consulting.

Now that Covid has forced hotels to adopt touchless or cashless payment methods, it’s worth a bit of a history lesson on why these upgrades may actually be unconsciously cajoling your guests to spend a bit more with your hotel. Knowing the underlying psychology, you can then develop methods to maximise revenue capture.

First, let’s backtrack a bit and look at what the pandemic has wrought. With the implementation of viral safety measures such as plastic barriers at the front desk, queue markers on the ground for socially distanced lineups and mandating all employees (and possibly guests) to wear PPE in the lobbies, this creates an inherent sense of anxiety that will negatively halo onto any transactions.

Just imagine yourself staying at a hotel where it’s a chore to throw on a mask and gloves just to leave your guestroom. Then, upon arriving at the lobby, it exudes an intensely distressing feeling with all the new social-distancing and sanitisation measures.

You’ll unconsciously want to get in and out as fast as possible, and you likely won’t be in the right frame of mind to consider an upsell or additional amenity purchase introduced by one of the staffers. In other words, these Covid safety protocols are creating an obtrusive point of friction that will inhibit you from maximising RevPAG (revenue per available guest).

Why is this significant? Start by looking at the dawn of credit cards themselves in the latter half of the 20th century. Compared to credit cards, when we hand over physical cash or coins to pay, there is a stronger sense of pain because we see and feel corporeal objects leaving our possession.

If we were still dealing in gold and silver ingots, this painful feeling would be even more pronounced than with representative bank notes. This is, in other words, a point of friction. Swiping a card and signing a receipt diminishes this mental impression because we are not giving up anything in the material world before our own eyes; it’s all abstract with a subtraction from our coffers that we must calculate in our heads.

Tap credit cards or phones with NFC-enabled payment apps go a step further by disposing of the swipe and signing actions, further reducing the element of touch and how long our minds linger on any singular payment. Then, of course, the pinnacle of this is online shopping whereby the person-to-person physicality of the interaction has been totally excised from the transaction process, minimising the pain a customer feels in paying. Just look at Amazon’s stock price to confirm this underlying psychology.

Online shopping and internet-based transactions are as ‘frictionless’ as they get because any points of friction such as touching paper money, tapping some plastic onto an NFC terminal or dealing directly with a hotel staffer have been removed from the psychological equation. While hotels must do their post-pandemic due diligence in upgrading their in-person touchless payment options to facilitate the use of NFC payment terminals, moving as many transactions as possible online has clear benefits above anything that’s face-to-face.

In the same vein as why guest-messaging apps are vital moving forward, for a guest to receive an email containing a private payment portal is far less stressful with the virus still around than having to interact with a hotel employee even when the necessary precautions are taken.

Next, every payment app or POS (point of sale) requires a tonne of work to set up the interface and automatically connect it to a property’s accounting systems, whereas a web-based gateway can be agnostic for any software interactions. Lastly and critically, ecommerce makes paying more abstract to thus encourage additional spending by the guest.

For these reasons, as you explore all the many ways to make your guest experience more contactless, it is worth taking a second look at what digital tools you can deploy to heighten the frictionless nature of any and all payments. Consider moving towards an in-person-supported online shopping model to achieve better RevPAG in order to help compensate for a lack of occupancy in the near term.

This is an edited version of an article that appeared on Hotel Online.

Larry Mogelonsky
Larry Mogelonsky

Principal of Hotel Mogel Consulting

Larry Mogelonsky is the principal of Hotel Mogel Consulting, a Toronto-based consulting practice, where he assists independent luxury hotels in order to meet their goals and also helps technology companies understand how their solutions work in the hospitality field.