How hotels are picking payment methods in 2025
Each year, the global hotel industry loses an estimated $1.5 billion due to inefficient payment reconciliation processes. Clearly, while a huge amount of progress has been made from the old days of block billing and paper cheques, more can be done to bring the quality of payments up to Five-Star standard.
So, what does that look like in practice?
In this blog, we’ll be looking at:
- The complex evolution of hotel payments
- Payment acceptance: a strategic transformation
- Operational efficiency: the hidden value of modern payments
The complex evolution of hotel payments
Not long ago, hotels would negotiate pricing with distributors for entire seasons. A typical transaction might involve a travel agent purchasing accommodation, collecting payment from a traveller and invoicing the hotel weeks or months later. Today those payments have evolved from simple, drawn-out transactions into a strategic tool for improving guest satisfaction, increasing conversion rates, boosting revenues and cashflows and building long-term customer loyalty.
One big change hotels face today is in managing payments across many more channels – whether via direct bookings or through Online Travel Agencies (OTAs) or other intermediaries. This is a reflection of the complexity of the market and the structures of hotels, booking engines and OTAs, rather than any intentional diversification.
The merchant model preferred by some travel agencies allows for collection of payment from the end traveller in any form, along with greater flexibility in commercial terms, pricing and promotions. The agency model, meanwhile, allows agents to sell rooms on behalf of a hotel without processing elements of the booking such as payment. Many hotels and agencies blend these models, while large chains or franchises varying their inventory management on a hotel-by-hotel basis, even before you consider local booking preferences and payment standards that can change nationally or even regionally.
How hotels are approaching payments in 2025
The fact is, the modern hotel payment journey can be remarkably complex, with a single room booking potentially triggering multiple payments across different businesses within a chain. Scale this up across the many ways to book a room and the result is a tangle of payments processes for hotels – no surprise that there is a cost attached to that.
But beyond a desire to simplify, what is driving the greatest change in hotel payments is an emerging focus on centralised, guest-centric systems that aim to enhance operations and revenue specifically through a focus on the customer experience.
These systems may include supporting multi-currency transactions, automating manual or lengthy tasks or providing robust data that can drive discounts, loyalty schemes or other commercial activity.
The challenge hotels face is how to improve their operational efficiency while broadening their payment acceptance and capitalising on the potential of these integrated, real-time and guest-centric payment systems. Getting it wrong could add more cost and administration to an already complex process. Getting it right, though, offers the potential to deliver more personalised, lucrative and secure experiences within low-friction buyer journeys – delighting customers and shareholders alike.
Payment acceptance: a strategic transformation
One of the biggest hurdles for hotels is integrating payment systems seamlessly with their existing technology stacks. Property Management Systems (PMSs), booking engines and revenue management systems all need to work together to provide a unified payment experience. Without integration, manual handling increases the risk of errors, delays and costs, especially around reconciliation, and misses opportunities to gather valuable commercial data while automatically making, receiving and reconciling payments (explored in detail below).
Preferred payment methods
While cheques remain a surprisingly resilient B2B payment method in the travel sector, virtual cards dominate among the more modern methods of payment, and cards in general remain a favourite for travellers booking directly.
This is because cards offer benefits like rapid payment, reliable infrastructure, automated reconciliation and multi-currency and dynamic currency capabilities – useful for an industry reliant on a global customer base. For hotels, accepting virtual cards can also offer access to increased listings and visibility within large travel agencies – boosting potential reach and revenue.
What’s more, virtual cards – particularly single or limited use varieties – are a reliable and trusted payment method both for payee and payer, with hotels using virtual cards reporting a 95% reduction in chargebacks compared to consumer cards.
Five key benefits of virtual cards for hotels
- Faster settlement than typical invoicing process
- Potential to decrease fraud risk
- Reduce manual processing and risk of human error
- Eliminate under-invoicing
- Lean into customer’s preferred payment methods
Customised guest experiences
Whether physical or virtual, through a B2B channel or on a guest’s own private card, the opportunities around uniquely identifiable cards are offering hotels something new and exciting in their payments.
Unlocking insights into guest preferences and spending patterns enables hotels to personalise services. Mobile payment options and tokenization means guests can enjoy seamless, frictionless transactions throughout their stays. Real-time data lets hotels offer targeted upsells like room upgrades or exclusive dining deals, potentially increasing revenue per guest.
Operational efficiency: the hidden value of modern payments
Real-time analytics from embedded payment technology can equip hotels with actionable insights into trends, such as booking patterns and profitability by channel. By leveraging this data, hotels can refine pricing strategies and optimise distribution.
With old-fashioned invoicing, each of the many steps from guest check-out to the hotel being sent funds introduce the potential for a break-down in payment. Add that to the potential delays and costs from reconciliation across a fragmented acquiring relationship and the inefficiencies of manual payments start to mount up.
Some hotels are pushing to automate B2B payment processes in response to these burdens, with reconciliation, direct bank connections and invoice processing some of the most prominent areas of development.
Automating payment processes can dramatically cut reconciliation times, reducing the burden on finance teams. Again, virtual cards can make an impact here, allowing precise pre-authorization of funds, even in last-minute booking changes or cancellations.
Impacts on treasury
Virtual card payment has also been identified as one way for hotels to significantly reduce bad debt and the time spent in tackling it. Cashflow remains a daily consideration in hotels, especially in smaller properties. Delayed payments from OTAs and travel agencies as well as the inherent seasonality of the industry can have dramatic impacts on revenue and liquidity, with eNett calculating in 2019 that a 30-day delay on a single $500 payment cost $3.70 for a hotel with a typical weighted average cost of capital.
For hotel chains working with international partners, the ability to process multi-currency transactions has become crucial, but FX rates represent another area of risk where payments can have a substantial impact. Dynamic Currency Conversion or DCC, where payments can be made on international purchases in a home currency, can potentially mitigate on certain FX rates, as well as earn hotels a rebated commission on qualifying transactions.
The Modulr difference
For hotels and indeed many travel businesses, automated, flexible payment systems are more than operational tools – they are strategic assets. They allow businesses to move beyond transactional efficiencies, improving cash flow, reducing risk and unlocking new opportunities for growth. Whether it’s multi-currency support for international transactions or automation to reduce manual effort, Modulr’s technology is designed with the unique needs of the travel sector in mind.
At Modulr, we work with businesses across the travel industry to offer:
- Comprehensive payment options (including virtual accounts, cards and account-to-account transfers)
- Dynamic currency conversion support
- Automation at scale
- Enhanced security and fraud prevention
- Local-level payment customization
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Sources:
- VCC Acceptance & Surcharging – Hotels, Airlines, Edgar, Dunn, and Company 2018
- Payments trends and future best practices in the hotel sector, Hedna 2017
- B2B Payments in Travel, Modulr, 2024
- It pays to know, eNett, 2019