Will it be cash, card or crypto for your hotel reservation? |
The first half of 2021 saw cryptocurrencies move from theoretical speculation among computer geek circles to a popular topic of conversation with a much more diverse pool of investors. Whether you view this asset class as viable in the long run or the purest form of bubble just waiting to burst, growth alone dictates that it is no longer a monetary system that you can ignore.
You have no doubt read in your time about bitcoin, ethereum, dogecoin, cardano, litecoin, filecoin, chain link and a plethora of other digital coins. Now is the time to consider how to operationalize these emerging aspects of what is called “Web 3.0”. That is, how do these parts affect your hotel? Specifically, would you accept payment for a hotel reservation in the form of cryptocurrency?
The first aspect to consider has nothing to do with day-to-day transactions per se, but with balance sheet decisions at the property level. At its core, bitcoin, the oldest and most popular crypto, is not designed to be silver but digital gold – a store of value that is left in a safe and you have it ” simply point “as a means, for example, of securing a line of credit in another liquid form. In this sense, hotel owners can make a reasonable case – in line with many other large-cap companies – for treating established cryptos like gold and allocating a portion of their cash reserves or quarterly net profits. to these assets both as an investment and as a hedge. against hyperinflation linked to the pandemic.
Second, all senior executives need to understand the technologies that power digital coins (which also helps explain why some cryptos like bitcoin are akin to digital gold and not digital silver) as they have applicability to the digital world. -beyond payments and the accumulation of wealth. Think of the loyalty program incentive and, in the era of COVID-19 madness, blockchain-verified vaccination records. A word of warning here is that understanding how these hyperledgers work – algorithmic hash calculations, mining, proof of work, proof of stake, gas costs, etc. at least intermittently, in order to have practical knowledge before it becomes necessary.
As for the third and final consideration, let’s unpack this cash versus gold utility to find out whether or not to accept cryptocurrency payments. Paper money works because it’s fast (you put it back on the spot) and portable (light and fits in your pocket), and because you inherently trust the government backing it. Likewise, a centralized credit card processor such as Visa or Mastercard has built the infrastructure over decades to be able to handle thousands of transactions per second and diligently resolve disputes, making these systems perfect for regular payments.
On the other hand, Bitcoin and Ethereum (in capitals here to denote the platforms and not the coins themselves) are set to have processing rates per second lower by several orders of magnitude. Indeed, the algorithmic calculations necessary to verify the transactions and add them to the block require enormous amounts of computational energy; it is simply untenable to keep pace with a large credit card company. The difference is that blockchains are “trustless,” which means that instead of trusting a centralized authority like American Express or the US government, each node feeding the chain must approve the transaction in order to join the new block.
Right now, the infrastructure doesn’t really exist for digital coins to be used for daily payments by the average person. Can you imagine waiting ten minutes for the next block to be added to the Bitcoin chain in order to authenticate a guest’s hotel room payment and settle their folio? This is only appropriate when the purchases are large and infrequent, such as a car or a house.
Instead, there are a handful of cryptos, stablecoins (that is, cryptos that are fixed or tied to a given fiat currency), stacking solutions (for off-ledger or second layer transactions). and central bank digital currencies (CBDCs) which are emerging as blockchain verified methods for everyday transactions. Once these are widely available, then you can expect a full range of both hardware and software merchandise that will support prompt bill payment while automatically converting the consumer’s digital coin into the desired unit of account. . At the same time, however, you can also expect some younger guests to require your hotel to allow digital transaction with coins.
So, coming back to the question posed in the title, should your hotel accept cryptocurrency payments? The short answer is not yet.
The real answer is that we are at a crossroads and there could be a strong first-come advantage for the hotel brand that decides to be the forerunner in this space. Granted, there can be backlash from people citing the energy consumption of cryptocurrencies and their contribution to global warming, as well as acrimonious remarks from taxpayers. But such a hotel organization would be appreciated by a multitude of globetrotters who also happen to be crypto investors looking for hotels that lend themselves to these alternative forms of money.
At the end of the day, what we insist is spending time learning about blockchains and cryptocurrencies. Yes, there is a lot of hype, but that doesn’t mean they’re going away. And this presents an opportunity to develop another revenue vertical ahead of the competition.
Larry and Adam Mogelonsky represent one of the world’s most published hospitality writing teams, with more than a decade of material online. As partners of Mogel Consulting Limited Hotel, a Toronto-based consulting firm, Larry focuses on asset management, sales and operations while Adam specializes in hotel technology and marketing. Their experience spans properties around the world, both branded and independent, ranging from luxury and boutique to select service. Their work includes six books Are You an Ostrich or a Llama? (2012), “Lamas Rule” (2013), “Hotel Llama” (2015), “The Llama is Inn” (2017), “The Hotel Mogel” (2018) and “More Hotel Mogel” (2020). You can contact Larry at [email protected] or Adam at [email protected] to discuss hospitality business challenges or to book speaking engagements.
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