The Hotel Payment Option: Is Cash Still King?
There are about 2000 Kenyan hotels live on travel.jumia.com; a leading online hotel booking platform that gives hotel guests the option to “pay later” (at the hotel upon check in) or “pay now” (at the time of booking). While 60% of these hotels offer guests the flexibility to choose, 40% of the listed properties prefer to receive their money ahead of the check in date, with some reserving the bookings only after the payment. Both policies apply across different kinds of accommodation, with hotel owners entire making the decision on what works best for respective parties.
A common denominator, however, as Yared Kifle – the Head of Revenue Management for Jumia Travel East Africa explains, is the refund and cancellation policy; hotels are exhibiting more customer-centric approach that seek to protect the guest, without putting the hotel’s revenue at jeopardy. “More hotels now have consistent and precise rules to guide guests on no-show and canceled bookings as opposed to grey zone fine print that seemed to haunt the industry”. What this means is that if a guest fails to show up on and after the set check-in date, the hotel will charge a fine equal to the cost of the first night booked and refund the rest of the money to the guest, while a cancellation within the agreed period (usually indicated on the information listed on Jumia Travel) will attract a penalty of 25% of total cost of accommodation.
Given the two choices above, guests are then left to decide on the best option for their preferred mode of payment. With the rising popularity of online payments, it has become easier and more convenient for guests and other consumers to complete their purchase process at a single spot; sometimes just by the click of a mouse. For Jumia Travel, card payments (both credit and debit) seem to be the most favored option, with 55% of guests opting for the model. Worth of note is that, although traditionally associated with a higher risk of fraud and scam, consumers find more comfort and convenience in keying in their card identity as opposed to other traditional (bank related) modes of payments. Card payments work best for a diverse range of customers due to the unmatched global penetration.
Mobile-based payments come at a not so close albeit impressive 40%. The new wave of digital wallet is however not so popular despite the undeniable rise of the digital consumer; a major fraction of guests prefer to complete their transactions via telco-based platforms such as Mpesa and Tigopesa. Cyrus Onyiego, the Country Manager for Jumia Travel Kenya attributes this growing trend to the convenience accorded to both guests and operators by mobile money payments, “typically, the payment period is immediate”. He says, explaining further that, “for hotels and other providers, the transaction and payment processing fee is kept minimal, the risk is lowered and the speed of money transfer is immediate, thereby guaranteeing instant gratification”.
So, does this mean cash is no longer the proverbial king in the hospitality industry? Cash, as Yared explains remains an enduring and integral part of the hospitality industry. While long stay guests prefer to use cashless methods, you’ll still find the use of notes and coins in the lounge area, restaurants and even during trips to destinations that may require on-spot payments. The greatest challenge right now is creating and developing cost-effective and easy-to-operate cash management systems that ensure no discrepancies occur along the chain.
One more, and perhaps a very important point to note is that while the transaction cost on cash payment is zero, customers and guests using other methods must be wary of hidden costs that may be passed to them at the end of a cashless transaction. Again, as experience has shown me, the sight of new banknotes on the counter more often than not attracts higher discounts, than any other payment option!
This article was written by Lilian Gaitho. Lilian is the Head of Communication – Jumia Travel, Kenya.