A smother ride in 2019
As technology grows ever more sophisticated and its applications more focused Bill Lumley discovers technology is poised to improve both bookings and payments for B&Bs.
It is often a cliché to write in January of exciting IT developments to come in the year ahead that will have a positive effect on business, but for the hospitality sector 2019 is an exception.
The arrival of fifth generation of mobile networks, or 5G, is on the horizon, bringing with it a host of new opportunities for B&B owners. However, it is taking its time and is now not expected to arrive in the UK until next year.
In 2018, as connectivity issues rumbled on, the IT side of operations was hijacked by General Data Protection Regulation (GDPR).
CEO of POS and payments specialist Lolly Peter Moore says: “The time and financial impact of implementing GDPR compliance has almost certainly delayed the advancement of other areas of hospitality technology.”
But in the year ahead Moore says real progress will be made in the fields of payments and POS, many of which will have a real impact for smaller hospitality providers.
Perhaps the most exciting development to look forward to he says is Pin on Glass (PoG), which is expected to materialise in the first quarter of this year. The term describes traditional payment terminals that have evolved from larger models that operate using buttons, to a touch screen interface.
PoG is a touch screen, or glass-based capture mechanism that is expected to become commonplace during 2019. PoG-type products are expected to be reasonably priced, and increasing numbers of mobile apps are currently under development.
Ultimately PoG will enable entry level merchants such as B&Bs to start taking payments in more mobile type transactions direct from a phone, as opposed to needing third-party intervention, thus creating the coveted ‘frictionless’ payment environment.
Card payment evolution
Historically there has always been resistance to entering the card payment market because of the cost of entry. The first payment terminals for instance had a fixed cost of anything between £15 and £25 per month, with a minimum service charge added on top for good measure. Depending on the acquirer that can be anything from £5 to £30.
Typically, the lower the number of transactions you handle with this type of terminal, the higher the fixed costs. Obviously B&Bs fall straight into this higher cost bracket.
There followed the introduction of the micro ped, a small micropayments entry device that iphone or ipad users would use to contact the bank, used by the likes of Paypal. These do not have the tech in them but the small keypad encrypts the actual payment and card number and uses the mobile device to send it over the networks.
When these first came out they cost around the £1000 mark but now some organisations give those card readers away free of charge in return for a much higher percentage per transaction.
Typically, a B&B owner could work out that if they are paying 2.5% for the first £1,000 they take per month and then quickly work out how much they are paying for that transaction compared with the standard terminal.
However, that is all about to change with the introduction of Pin on Glass, or PoG.
There are two main concerns with mobile devices taking payments. The biggest problem is the relationship between the mobile operators and the banks, both of which want to own the customer’s details, meaning nobody has yet able to facilitate a payments device on a mobile because the mobile operators wouldn’t make it happen.
However, there is now a new encryption software that is being released into the marketplace. Worldpay will be releasing their Android Pay product by the end of the first quarter or beginning of the second quarter 2019.
A B&B owner will be able to download the app to their android phone and take payments, and the cost of the device will be zero as you will be using your phone. In return for this saving users will be paying a slightly higher percentages rate.
Peter Moore tells L:uxury Bed & Breakfast: “For the small B&B owner and their type of their customers that is the product that will be dominant in that sector within the next 18 months to two years.”
There is no question that guests are going to continue to become increasingly demanding and expect a payment terminal when it comes to checking out, he says. “As a B&B owner over the past three or four years you have been able to get away without having a card terminal. You can’t now. If you wish to take your business seriously you have to have some method of taking card payment,” he says.
He suggests B&B owners first calculate the kind of monthly revenue they are turning over before working out the split in percentage terms between cash and card. “Then work out a percentage rate and all your monthly fees for a standard terminal, then for one of the smaller terminals in the marketplace.
“If neither of those work then I’d suggest you hold off a short while because early this year they will see these new Pin on Glass applications being offered by the acquirers like FirstData, worldpay that link directly into their bank.”
The second thing B&Bs should be looking at is the open banking system, he says. “It’s becoming easier and easier just to take a payment from a customer by exchanging bank details and simply transferring their money. The cost of doing that is much less.”
Direct bank transfer
What B&B owners shod be doing in the case of any pre-booked visits, he suggests, is to present your guest with your bank details and ask them kindly to transfer the money. “That’s probably the best form of getting cash into your bank at the lowest cost, and the easiest to manage out of all the different card processes,” he says. “I’d recommend they put a template together with their standard bank account number and sort code, so that every time someone comes along to make a booking, they just send a standard email saying great can you make sure 24 hours before you arrive you make sure the money is transferred.”
The Payments Service Directive was signed off to encourage open banking. In other words, it’d transform banking into a more competitive and flexible system. Moore explains: “That ultimately means that the cost of core processing, which includes standard debit or credit card transactions, will come down. But you must consider that against the profile of the guest visiting the B&B. Increasingly they do not pay in cash, they transfer everything online and are much more digitally aware. Therefore, you have to adapt to them and change your practices to attract those customers,” he concludes
AI for B&Bs
Business development in the B&B sector – essentially attracting new guests – used to be a question of spreading a budget across such pre digital age facilities as nationwide hospitality guides and the media. In a very short space of time the way of attracting interest among potential guests is overwhelmingly focused on the internet.
Today’s B&B pretty much all have websites, all providing the same experience to every visitor, despite the diversity of guest personality, preferences and expectations.
At the same time, guest expectations of any service are soaring, whether from a high-end B&B or from Netflix or Uber.
Personalisation is therefore fast going to become key in 2019. B&Bs deliver the personal experience very well offline in their own properties, but they struggle to provide that same experience online, according to Hotelchamp founder and CEO Kristian Valk.
“Nowadays more and more the digital journey is a big part of the guest experience,” he says. “It’s no longer simply a question of providing a stunning experience at your B&B when the guest arrives, because beforehand they have already been researching the place they wish to stay to assess which one fits their preferences best.
“They want to see everything they can online about the location and what the host is about and the venue etcetera. They typically also book online. Then, during their stay, they remain online, and even afterwards when they post reviews or put online selected pictures via social media.
“The whole digital part of the guest journey has become bigger and more important, and this is where B&B owners struggle to deliver the right experience.”
Hotelchamp rose to the challenge of addressing this issue with the creation of an artificial intelligence (AI) engine trained to recognise and personalise the experience of every visitor to a hotel’s website.
Known as Autopilot, the system has taken vast amounts of data from different B&Bs guest houses and hotels all around the world, drawn them together and trained itself to deliver visitors to a B&B’s website with the best and most relevant experience depending on their needs, preferences and characteristics.
Kristian says: “We use billions of data points simply to ensure the AI engine is able to understand and provide real-time tailored interaction to website visitors based on the datasets we have learned over time.”
This saves B&B owners from doing the heavy lifting, he says. “At the flick of a switch they can unlock this technology and seamlessly integrate it within their website, booking engine or mobile website to give the best user experience to their guest without needing to build a new website, or developing new marketing content.”
The technology makes guests significantly more likely to book their property, he insists. “It also drives direct reservations so more people stay at your B&B because they have already found themselves better served on their customer journey,” he explains. “For example, I may be planning a visit to North Wales. I am scheduling my road trip and I want to stay at a couple of B&Bs. Based on the location I find a selection of B&Bs to choose from, via a combination of Google and via OTAs.
“It is very hard for a B&B owner to compete with an OTA simply because the budgets of the big guys are so much larger. Yet at the same time a lot of research shows that guests still look for the websites of the property itself for more information. This is the moment the moment the B&B owner can actually take the opportunity to show the real value of their property, why people should stay with them, and why they should book directly via them.
“You may say that If a guest books direct with you then they will get a free breakfast, or a late checkout, or a room upgrade. You can add something there without lowering your price,” he says.
But now comes the interesting part, he says. “The thing is that not only do the millions of travellers differ from each other, but so too does every person going through different stages when it comes to making a reservation. First they are in the exploration phase, later they are in the decision phase.
“What we have done using all the data we have seen is identify the different stages people go through when it comes to booking a room online. It turns out there are different critical stages, and you really cannot simply show just one message like a silver bullet to everybody. Not only do people differ, but everyone is going through different stages.
“Autopilot identifies people based on their characteristics behaviour, and with our AI we can identify just what characteristics a certain guest is looking for when trying to establish whether they want to book with that B&B other than simply price or location. It might be allergy or gastronomy or outdoor activities, for example.
“I would advise a B&B owner to bring the same level of hospitality online as they endeavour to give their guests at their own property and to use technology to achieve it. I am aware of the restrictions they face when it comes to budget or technical capability, which is why it is great there is more and more technology available to put to use at the flick of a switch to enable the delivery of a better experience online for B&B guests,” he concludes.
Payments – PSD2 Directive
The introduction of The Payment Services Directive (PSD2), which was designed to promote payments innovation, will have both a positive and negative impact on the sector. The legislation will encourage open banking, which is considered to ‘transform banking into a more flexible network of financial providers and services’.
Peter Moore comments: “In 2019 we are expecting that this directive will accelerate the faster payments system in the UK as it reduces the fees for processing PSD2 payments. Hopefully we will see it levelling the field for payments, reducing the cost and allowing hospitality providers to have more choice of how they take payments, as well as encouraging the integration of technology into businesses.
“However, there is a lack of communication for both consumers and smaller businesses about how this may benefit them, but also what any associated risks may be. I would advise hospitality businesses to do their research before jumping into any scheme. In addition, loyalty or rewards schemes are currently not as developed as those of major card or payments providers, but this is something we are expecting to change as the market grows stronger and more established over the coming years.”