Skift Take

Most pieces of hotel research tend to look at how guests feel about staff service levels, or fluffier stuff like dining and decor, but a new psychological study commissioned by Amadeus reveals the extent to which a brand can be damaged by a poor payment experience.

Matthew Parsons

It’s just not “cool” to pay a hotel bill at the end of your stay — but it’s nothing to do with getting hit by the high bar bill (or being overcharged for bottled water.)

A new report has found that the process of paying when checking out leaves a lot to be desired. Guests feel anxious because now it’s twice as onerous compared to buying things in their everyday lives. There’s also the fact that everything needs to be paid for at the end, which means guests are left guessing how much they’ve actually spent.

The net result is more damaging to the hotel’s brand and reputation than you might think, travel technology company Amadeus has warned in a new psychological analysis. They risk losing entire markets, not just individual customers, while hotels could also miss out on the chance to persuade guests to buy more ancillaries by failing to adapt more modern payment technologies.

Heightened Anxiety

Guests experience heightened “anxiety” and “uncertainty” when paying at hotels, according to behavioural insights agency Innovationbubble, which Amadeus commissioned for the report. It interviewed hundreds of international leisure and business travelers from the U.S., UK and Brazil to uncover conscious and non-conscious perceptions.

The main problem is that travelers still typically pay for their stay at check-out using physical terminals, rather than at time of booking using modern digital systems. Hotels still mainly process payments at the desk based on their own local payment system, so the guest will never know for sure if their bank card will be accepted.

Innovationbubble said 40 percent of respondents recently experienced some kind of problem when paying at the hotel, with more than a third of respondents saying they couldn’t pay how they wanted during a recent stay. Some 66 percent said the hotel should have their payment method on file.

A minority of guests said it was such an issue that they actively prepare in advance by taking back-up payment methods to the hotel.

The Amadeus report, called “Opening the door to guest-centric payments: The opportunity for hospitality,” stated the problem is particularly acute for Chinese guests that prefer to pay with WeChat Pay, AliPay or China Union Pay cards, and are forced to pay in cash or to find alternative local methods when traveling.

Making payments at home were also twice as “cool” compared to making hotel payments, its poll (below) revealed.

The study also cited “non-conscious” analysis, and said consumers are far less likely to associate hotel payments with positive feelings like “ease” or “convenience.” As this is often the last interaction a guest has with the hotel, a bad experience will sour the overall feeling they had.

“The anxiety caused by a negative payment experience lingers in the consumer’s mind, with guests telling us it influences their overall perception of the stay,” said Jamie Halliday, strategic insights director at Innovationbubble.

Hotels may also cede business to online travel agencies.

“When it comes to payment, if the guest attempts to book on the brand.com and is faced with a cumbersome process to transfer their card details to the property, they might choose to shop with an OTA instead,” the report stated. “At a time when many brands are pushing for more direct business, an inability to take payment could undermine broader distribution objectives.”

Pay As You Go?

There was also little evidence that guests were able to pay for incidentals, like room service, “incrementally” to understand how much they had spent during the stay.

The study found 90 percent of people wanted to pay for ancillaries in the hotel’s app, which is a feature rarely available today.

As a result, there are missed merchandising opportunities. Hotel chains that pass the guest’s card details to the property miss an important chance to develop end-to-end merchandising opportunities, according to the report. Hoteliers aspire to “attribute-based selling,” where the attributes of a room and the property are categorized and merchandised to drive incremental revenue and guest satisfaction.

Hotels are also at risk of missing out on the current Buy Now Pay Later craze. Amadeus claims this is important for upselling, with 68 percent of travelers saying they would be encouraged to spend more on summer travel, and 49 percent were more likely to purchase an ancillary service, if Buy Now Pay Later was available.

Delta Air Lines, for example, recently started offering this functionality in collaboration with American Express’s Plan It tool across the airline’s website and app.

Transparent hotel pricing isn’t too much to ask, but it’s not easy to deliver.

What Can Be Fixed?

It’s a work in progress.

Amadeus points out that properties are typically owned by individuals or franchisees, with international brands supplying services like marketing, property management systems and training. But not payments.

“You have payment systems flourishing everywhere that are very local and not global,” Francisco Perez-Lozao Ruter, president, hospitality at Amadeus, told Skift in an earlier interview.

So at the top level, hotel groups need to address this payment friction and invest in payment technology. Overall, 77 percent of respondents said it was the hotel’s responsibility to make payment easy.

Skift Take

Most pieces of hotel research tend to look at how guests feel about staff service levels, or fluffier stuff like dining and decor, but a new psychological study commissioned by Amadeus reveals the extent to which a brand can be damaged by a poor payment experience.

Matthew Parsons

It’s just not “cool” to pay a hotel bill at the end of your stay — but it’s nothing to do with getting hit by the high bar bill (or being overcharged for bottled water.)

A new report has found that the process of paying when checking out leaves a lot to be desired. Guests feel anxious because now it’s twice as onerous compared to buying things in their everyday lives. There’s also the fact that everything needs to be paid for at the end, which means guests are left guessing how much they’ve actually spent.

The net result is more damaging to the hotel’s brand and reputation than you might think, travel technology company Amadeus has warned in a new psychological analysis. They risk losing entire markets, not just individual customers, while hotels could also miss out on the chance to persuade guests to buy more ancillaries by failing to adapt more modern payment technologies.

Heightened Anxiety

Guests experience heightened “anxiety” and “uncertainty” when paying at hotels, according to behavioural insights agency Innovationbubble, which Amadeus commissioned for the report. It interviewed hundreds of international leisure and business travelers from the U.S., UK and Brazil to uncover conscious and non-conscious perceptions.

The main problem is that travelers still typically pay for their stay at check-out using physical terminals, rather than at time of booking using modern digital systems. Hotels still mainly process payments at the desk based on their own local payment system, so the guest will never know for sure if their bank card will be accepted.

Innovationbubble said 40 percent of respondents recently experienced some kind of problem when paying at the hotel, with more than a third of respondents saying they couldn’t pay how they wanted during a recent stay. Some 66 percent said the hotel should have their payment method on file.

A minority of guests said it was such an issue that they actively prepare in advance by taking back-up payment methods to the hotel.

The Amadeus report, called “Opening the door to guest-centric payments: The opportunity for hospitality,” stated the problem is particularly acute for Chinese guests that prefer to pay with WeChat Pay, AliPay or China Union Pay cards, and are forced to pay in cash or to find alternative local methods when traveling.

Making payments at home were also twice as “cool” compared to making hotel payments, its poll (below) revealed.

The study also cited “non-conscious” analysis, and said consumers are far less likely to associate hotel payments with positive feelings like “ease” or “convenience.” As this is often the last interaction a guest has with the hotel, a bad experience will sour the overall feeling they had.

“The anxiety caused by a negative payment experience lingers in the consumer’s mind, with guests telling us it influences their overall perception of the stay,” said Jamie Halliday, strategic insights director at Innovationbubble.

Hotels may also cede business to online travel agencies.

“When it comes to payment, if the guest attempts to book on the brand.com and is faced with a cumbersome process to transfer their card details to the property, they might choose to shop with an OTA instead,” the report stated. “At a time when many brands are pushing for more direct business, an inability to take payment could undermine broader distribution objectives.”

Pay As You Go?

There was also little evidence that guests were able to pay for incidentals, like room service, “incrementally” to understand how much they had spent during the stay.

The study found 90 percent of people wanted to pay for ancillaries in the hotel’s app, which is a feature rarely available today.

As a result, there are missed merchandising opportunities. Hotel chains that pass the guest’s card details to the property miss an important chance to develop end-to-end merchandising opportunities, according to the report. Hoteliers aspire to “attribute-based selling,” where the attributes of a room and the property are categorized and merchandised to drive incremental revenue and guest satisfaction.

Hotels are also at risk of missing out on the current Buy Now Pay Later craze. Amadeus claims this is important for upselling, with 68 percent of travelers saying they would be encouraged to spend more on summer travel, and 49 percent were more likely to purchase an ancillary service, if Buy Now Pay Later was available.

Delta Air Lines, for example, recently started offering this functionality in collaboration with American Express’s Plan It tool across the airline’s website and app.

Transparent hotel pricing isn’t too much to ask, but it’s not easy to deliver.

What Can Be Fixed?

It’s a work in progress.

Amadeus points out that properties are typically owned by individuals or franchisees, with international brands supplying services like marketing, property management systems and training. But not payments.

“You have payment systems flourishing everywhere that are very local and not global,” Francisco Perez-Lozao Ruter, president, hospitality at Amadeus, told Skift in an earlier interview.

So at the top level, hotel groups need to address this payment friction and invest in payment technology. Overall, 77 percent of respondents said it was the hotel’s responsibility to make payment easy.

Extended-stay hotel brands have boomed in the U.S. and Asia during the past few years. But Europe has relatively less inventory for hotels that serve guests staying between a few nights and a few months.

Aiming to fill this gap is Edyn, which runs apartment hotels with eye-catching decor. The UK-based group is majority-owned by Brookfield Asset Management, which oversees more than $725 billion of assets. In the past year, Blackstone, another giant asset manager, joined KSL Capital Partners in providing more than $350 million (£300 million) in loans via a multi-asset debt facility to help Edyn grow.

“We’re taking elements of the lifestyle hotels and merging them with serviced apartments that we mostly build from the ground up,” said Andrew Fowler, acquisitions director at Edyn.

Blackstone’s support of Edyn is small when compared with its $6 billion takeover, along with Starwood Capital, of U.S.-based Extended Stay America, announced a year ago. But Blackstone, which has long invested in hotels, appears to be interested in extended-stay’s applicability in Europe, given the Edyn deal. The debt is a move supplemental to Brookfield’s backing of the group.

Edyn’s brands include Locke and Cove, with about a dozen properties and more than 2,000 guestrooms in the UK, Ireland, Germany, the Netherlands, and (soon) Switzerland. It plans to add about a half dozen properties in the next two to three years.

Money Talks in Extended Stay

Edyn targets a more boutique niche of the extended-stay segment. The gross operating profit for Edyn’s properties can reach the 65 percent range in strong markets, said Eric Jafari, chief development officer and group co-founder.

“A guest who stays between 7 and 28 days reduces all the costs related to churn, such as housekeeping and laundering the linens, compared with a guest staying just a couple of nights,” Jafari said.

That reality means the operator can afford to lower the rate it charges guests who stay longer because they’re effectively more profitable, while still providing “lifestyle” touches.

Edyn’s executives believe they can deliver a property that feels like a lifestyle hotel but runs at lower cost. A “less is more” aesthetic helps keeps budgets tight.

They claim its Locke brand has an average FF&E [furniture, fixtures, and equipment costs] of more than half that average at lifestyle hotels. The Locke brand keeps costs down by cutting out middlemen. It seeks bespoke pieces in volume deals direct from designers, such as Carl Hansen and Ozzio Italia.

Savviness about how to set rates for guests can also help support profitability.

“If you have good revenue management and you charge the right rate relative to the length of stay, you can get a very favorable GOP [gross operating profit] compared with lifestyle and luxury hotels,” Fowler said.

Competitors Eye Extended Stay Hotels

Other players offering apartment hotels with eclectic decor include Native, Zoku, Wilde, and Lakestar-backed Limehome.

Preparing a property for extended-stay guests is harder than it looks. Vacasa, which is hoping to convert some of its homes to stays for 30 days or longer, has discovered this.

“It might sound like you flip a switch,” said Vacasa CEO Matthew Roberts during a recent JPMorgan investor conference. “You don’t just flip a switch. There’s lots of compliance. There are legal constructs. There are landlord-tenant laws that kick in, in certain geographies.”

An Unlikely Bet on Asset Heavy

Edyn thinks it can compete better than most rival operators in boutique extended stay because it does everything under one umbrella in an asset-heavy model — sharply contrasting with industry trends toward asset-light approaches.

“The brand, the development team, the operations, the design, and so on is all done internally,” Jafari said. “That means you don’t have, for example, a landlord trying to squeeze every bit of profit out of the deal at the expense of the operator’s brand promise.”

By going asset-heavy, Edyn also will on focus on launching about a handful of hotels a year. This focused execution will help it keep costs down.

“We made a decision very early on not to work with hotel designers,” Jafari said. “We instead hunt for up-and-coming, food-and-beverage designers who have demonstrated they can create unique local spaces with big followings on tight budgets and small teams.”

Savviness about local rate trends based on truly relevant comparison properties can also help support profit.

“If you have good revenue management and you charge the right rate relative to the length of stay, you can get as high as 68 percent GOP [gross operating profit],” Fowler said.

Avoiding expensive hotel designers is another Edyn tactic.

“We made a decision very early on not to work with hotel designers,” Jafari said. “We instead hunt for up-and-coming, food-and-beverage designers who have demonstrated they can create unique local spaces with big followings on tight budgets and small teams.”

U.S. Brands May Struggle in Europe

Edyn’s leadership claim that U.S. companies — such as Marriott International — have struggled in the past 15 years to export their extended-stay brands to Europe as fast as they had hoped.

The owners, developers, and operators working on big brand projects often stumble on the customizations required to adapt to local market regulations, tastes, and pricing, the executives claimed.

“We learned the hard way in building our Locke brand that different cultures have different expectations about extended stay,” Fowler said. “In each market, it can take at least six months to learn the local regulations, for example.”

All the local quirks can imperil brands seeking to impose global brand standards, Edyn’s executives claimed.

“In Paris, it’s long-established that a 25-square-meter unit is massive,” Folwer said, giving an example. “But in the UK, corporate travelers traditionally get a 41-square-meter unit. In Milan, the minimum square footage regulatorily allowed for an apartment with a kitchen is about 28 square meters. In Zurich, we discovered that, according to local code, half of our units couldn’t have kitchens. In some markets, you have to be a derivative of a residential product, while in others, you have to be a derivative of a commercially based product. And on and on.”

Social Programming in Extended Stay

Remote workers and frequent corporate travelers often battle loneliness. Edyn aims to address this with what it calls social programming. While many lifestyle hotels talk about creating activities and experiences, Edyn says it’s easier to engage guests when they’re staying at a property for longer, as they do in extended-stay properties.

The Locke brand of properties holds weekly workshops and activities, such as wine tasting, food masterclasses, mini-concerts, collage, yoga, running, and terrarium building, that are curated by the local team. None of this programming is standard in traditional serviced apartments. Edyn’s executives believe that social programming, and perks such as free access to co-working spaces on a first-come, first-served basis, can help the brands stand out in the market and earn repeat business.

Edyn plans to open a half-dozen Locke-branded properties in the next few years. That might not sound like much, but because the group is asset-heavy and takes all the revenue, it could earn a multi-billion euro valuation within a couple of years, executives said. No wonder Blackstone has shown interest.

Extended-stay hotel brands have boomed in the U.S. and Asia during the past few years. But Europe has relatively less inventory for hotels that serve guests staying between a few nights and a few months.

Aiming to fill this gap is Edyn, which runs apartment hotels with eye-catching decor. The UK-based group is majority-owned by Brookfield Asset Management, which oversees more than $725 billion of assets. In the past year, Blackstone, another giant asset manager, joined KSL Capital Partners in providing more than $350 million (£300 million) in loans via a multi-asset debt facility to help Edyn grow.

“We’re taking elements of the lifestyle hotels and merging them with serviced apartments that we mostly build from the ground up,” said Andrew Fowler, acquisitions director at Edyn.

Blackstone’s support of Edyn is small when compared with its $6 billion takeover, along with Starwood Capital, of U.S.-based Extended Stay America, announced a year ago. But Blackstone, which has long invested in hotels, appears to be interested in extended-stay’s applicability in Europe, given the Edyn deal. The debt is a move supplemental to Brookfield’s backing of the group.

Edyn’s brands include Locke and Cove, with about a dozen properties and more than 2,000 guestrooms in the UK, Ireland, Germany, the Netherlands, and (soon) Switzerland. It plans to add about a half dozen properties in the next two to three years.

Money Talks in Extended Stay

Edyn targets a more boutique niche of the extended-stay segment. The gross operating profit for Edyn’s properties can reach the 65 percent range in strong markets, said Eric Jafari, chief development officer and group co-founder.

“A guest who stays between 7 and 28 days reduces all the costs related to churn, such as housekeeping and laundering the linens, compared with a guest staying just a couple of nights,” Jafari said.

That reality means the operator can afford to lower the rate it charges guests who stay longer because they’re effectively more profitable, while still providing “lifestyle” touches.

Edyn’s executives believe they can deliver a property that feels like a lifestyle hotel but runs at lower cost. A “less is more” aesthetic helps keeps budgets tight.

They claim its Locke brand has an average FF&E [furniture, fixtures, and equipment costs] of more than half that average at lifestyle hotels. The Locke brand keeps costs down by cutting out middlemen. It seeks bespoke pieces in volume deals direct from designers, such as Carl Hansen and Ozzio Italia.

Savviness about how to set rates for guests can also help support profitability.

“If you have good revenue management and you charge the right rate relative to the length of stay, you can get a very favorable GOP [gross operating profit] compared with lifestyle and luxury hotels,” Fowler said.

Competitors Eye Extended Stay Hotels

Other players offering apartment hotels with eclectic decor include Native, Zoku, Wilde, and Lakestar-backed Limehome.

Preparing a property for extended-stay guests is harder than it looks. Vacasa, which is hoping to convert some of its homes to stays for 30 days or longer, has discovered this.

“It might sound like you flip a switch,” said Vacasa CEO Matthew Roberts during a recent JPMorgan investor conference. “You don’t just flip a switch. There’s lots of compliance. There are legal constructs. There are landlord-tenant laws that kick in, in certain geographies.”

An Unlikely Bet on Asset Heavy

Edyn thinks it can compete better than most rival operators in boutique extended stay because it does everything under one umbrella in an asset-heavy model — sharply contrasting with industry trends toward asset-light approaches.

“The brand, the development team, the operations, the design, and so on is all done internally,” Jafari said. “That means you don’t have, for example, a landlord trying to squeeze every bit of profit out of the deal at the expense of the operator’s brand promise.”

By going asset-heavy, Edyn also will on focus on launching about a handful of hotels a year. This focused execution will help it keep costs down.

“We made a decision very early on not to work with hotel designers,” Jafari said. “We instead hunt for up-and-coming, food-and-beverage designers who have demonstrated they can create unique local spaces with big followings on tight budgets and small teams.”

Savviness about local rate trends based on truly relevant comparison properties can also help support profit.

“If you have good revenue management and you charge the right rate relative to the length of stay, you can get as high as 68 percent GOP [gross operating profit],” Fowler said.

Avoiding expensive hotel designers is another Edyn tactic.

“We made a decision very early on not to work with hotel designers,” Jafari said. “We instead hunt for up-and-coming, food-and-beverage designers who have demonstrated they can create unique local spaces with big followings on tight budgets and small teams.”

U.S. Brands May Struggle in Europe

Edyn’s leadership claim that U.S. companies — such as Marriott International — have struggled in the past 15 years to export their extended-stay brands to Europe as fast as they had hoped.

The owners, developers, and operators working on big brand projects often stumble on the customizations required to adapt to local market regulations, tastes, and pricing, the executives claimed.

“We learned the hard way in building our Locke brand that different cultures have different expectations about extended stay,” Fowler said. “In each market, it can take at least six months to learn the local regulations, for example.”

All the local quirks can imperil brands seeking to impose global brand standards, Edyn’s executives claimed.

“In Paris, it’s long-established that a 25-square-meter unit is massive,” Folwer said, giving an example. “But in the UK, corporate travelers traditionally get a 41-square-meter unit. In Milan, the minimum square footage regulatorily allowed for an apartment with a kitchen is about 28 square meters. In Zurich, we discovered that, according to local code, half of our units couldn’t have kitchens. In some markets, you have to be a derivative of a residential product, while in others, you have to be a derivative of a commercially based product. And on and on.”

Social Programming in Extended Stay

Remote workers and frequent corporate travelers often battle loneliness. Edyn aims to address this with what it calls social programming. While many lifestyle hotels talk about creating activities and experiences, Edyn says it’s easier to engage guests when they’re staying at a property for longer, as they do in extended-stay properties.

The Locke brand of properties holds weekly workshops and activities, such as wine tasting, food masterclasses, mini-concerts, collage, yoga, running, and terrarium building, that are curated by the local team. None of this programming is standard in traditional serviced apartments. Edyn’s executives believe that social programming, and perks such as free access to co-working spaces on a first-come, first-served basis, can help the brands stand out in the market and earn repeat business.

Edyn plans to open a half-dozen Locke-branded properties in the next few years. That might not sound like much, but because the group is asset-heavy and takes all the revenue, it could earn a multi-billion euro valuation within a couple of years, executives said. No wonder Blackstone has shown interest.