Kessler Collection Chief Financial Officer Fravy Collazo said he pushed his company to begin accepting cryptocurrency payments because he believes it will become more prevalent in the larger economy and it paves the way for a more streamlined payment process for high-net-worth cryptocurrency investors.
Earlier this month, executives at the luxury hotel collection, which includes high-end spas and art galleries, announced the properties now accept payments in cryptocurrencies, including Bitcoin, Ethereum, Dogecoin and various others. Collazo said he’d been intrigued by the prospects of cryptocurrency payments but wanted to first address possible risks before employing them at the hotel. Finding a payment partner that essentially assumed the risk on the hotels’ behalf made the process simple enough to deploy.
“I wanted to know what was the demand, what was the cost and what are the risk factors in holding this currency,” he said. “The biggest worry for me was the rate fluctuations in all these currencies. They fluctuate every minute really, and they don’t follow the market. So I started researching and found out [payment servicer] Bitpay takes on all that risk on our behalf.”
In announcing the move, Kessler executives noted they believe it's the first luxury hotel group in the country to accept cryptocurrency payments. The company has 12 hotels concentrated in the Southeast U.S.
That’s in large part because Kessler itself is never a holder of cryptocurrency. While guests can pay in those various currencies, the hotels receive the payments in dollars, essentially taking the currency fluctuation risk out of the equation.
Prior to making the deployment, Collazo said Kessler didn’t have a demographic profile to know what kinds of travelers make the most use of cryptocurrencies other than understanding there is a significant population of wealthy individuals who want to pay without having to convert into dollars first.
“These guys want to spend from their digital wallets rather than bring it into traditional banking,” he said.
The change also simplifies things for international travelers.
“I truly think this is becoming our first universal currency since gold and silver,” he said. “It opens up the market to international travelers who don’t want to go through currency exchanges along with those more tech-savvy travelers that we cater to up [in] the upper-upscale and luxury space.”
Collazo said cryptocurrencies can be used for everything at a guest's hotel stay, from covering room rates to meals at restaurants and treatments at spas to even five-figure art purchases from their galleries.
“You can [use it to pay for anything], but the settlement process is a little different,” Collazo said. “It’s part of the check-out process. If you go to the art gallery to buy a painting or go to the restaurants or spas, that will go through the front desk.”
Billing guests in cryptocurrency means basically sending them an email invoice that is settled immediately through their cryptocurrency payment provider, he said.
In addition to giving guests more options, there are various accounting and operational benefits for the hotels.
In particular, it could eliminate some of the fraud and chargeback concerns with credit cards.
“All the fraud goes away with blockchain technology, along with all the credit card risk,” Collazo said. “And the payment processing fee is lower. On average we’re saving two points on transactions.”
He said there are also fewer data privacy concerns, because the hotel is not handling any of the guests’ sensitive data when they’re making cryptocurrency payments. On top of all that, the hotel receives payments from its cryptocurrency payment provider faster than through credit card companies.
“Payments are settled on a wire transfer the next day, which is even faster than credit cards, because those aren’t batched every day and you get the funds every three or four days,” he said.
In general, Collazo said the integration of payments with hotels' existing property management software and other systems has been simple.
“We set it up as a separate payment method in our PMS, and those are settled into a pseudo-house account,’ he said. “It was a very simple integration. From a startup perspective, the hardest part was just setting up the new bank account to accept those payments.”
He views this as an area of significant growth in the future, and while Kessler is the first in its space to accept these payments, he doesn’t expect the company to be the last, especially as various other companies from Tesla to Amazon accept it and make it more mainstream.
“The more options guests have, the better it will be and it will be more widely accepted,” Collazo said. “But we’re probably at least two years away” from most companies adopting it.