Time-of-sale currency conversion makes foreign travelers feel at home: "Dynamic" Currency Conversion service allows hotel guests to pay bill in their home currency; creates new revenue source for hospitality industry

Hotel & Motel Management, Jan 12, 2004

An increasing number of hotels have discovered an innovative way to increase revenues while simultaneously providing their customers a more personalized shopping experience. A new point-of-sale technology called time-of-sale, or "dynamic," currency conversion (DCC) is rapidly emerging as a popular way for merchants in the hospitality sector to earn additional revenue on existing transactions, while providing a valuable service to their foreign guests. Among the hotels that are including DCC within their product offering are Aspen Ski Company and Grand Hospitality, operator of the stylish SoHo Grand and Tribeca Grand Hotels.

Offered by industry leader Planet Payment, DCC identifies foreign-issued cards at the hotel's property management system and converts the transaction from the hotel's currency into the cardholder's local currency, in real-time at the time of check-out. The guest gets the benefit of transacting in his own currency, at a final price that is competitive to that which would otherwise have been charged by his card provider.

Historically, a foreign customer paying with a credit card could only pay in the merchant's currency, with the customer's credit card provider performing the conversion after the transaction is completed, at an exchange rate not known to the customer. However, most consumers would prefer to pay in their home currency. According to The Nilson Report, a credit card industry trade journal, 90 percent of cardholders would pay in their home currency if offered the choice. As a result, it is not surprising that most hoteliers recognize the clear benefit of allowing customers to view and checkout in their home currency.

However, while the cardholder appreciates the "personalized touch" from the merchant, dynamic currency conversion also offers a significant new revenue opportunity to hoteliers. The conversion is done at a rate of exchange, based upon the prevailing rates of the credit card providers, that typically allows for a margin on the conversion, which is shared by the hotelier, the DCC provider, and the hotel's credit card processing institution. For hotels with even a modest percentage of international guests, this currency conversion revenue can easily add significant dollars to the bottom line.

As a result, it is clear why many hoteliers have identified DCC as a key revenue and customer service opportunity to be pursued in 2004.