Money in the Bank

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Money in the Bank

By George Koroneos, Contributing Editor - 11/01/2005

In the hospitality industry, a hotel operator traditionally publishes a property's rates in only one currency, usually that of the host country. For guests booking rooms from a foreign country, converting prices and applying an exchange rate can be a tedious game of guesstimation. Enter dynamic currency conversion (DCC), the ability to sell a product in different currencies. By adding international currency pricing, hotels stand to grow their international sales by 50 to 200 percent.

"Hotels have always dealt with tour operators in other countries," explains Daniel Darayre, director of product strategy at Accovia ( "So they were never faced with the reality of currency conversion. From their perspective they were selling everything in US dollars. That pattern changes when you're on the Internet, because you are addressing the client and their currency of choice." Larger chains have had to deal with the aspect of DCC earlier on, and small to mid-size hotels are now playing catch up in the Internet sales arena.

Direct implementation

In North America, DCC is a new trend, but the technology has been available in Europe for 10 years. The implementation of DCC in the United States is due largely to Visa and Mastercard having modified transaction rules a year and a half ago. Now the credit card companies have created specific mandates requiring that the merchant and its processors provide a choice to the consumer at the point of sale. All POS systems, websites and front desk/property management systems must offer a choice of currency. The customer must also be provided with a retail receipt of folio that lists the actual cost of service in the currency they requested.

For example: An international guest arrives at the front desk and uses their Visa or Mastercard at the hotel's POS system. When swiped, the account number relays to the system that the issuing bank is located in the UK. The receptionist then asks the guest if they would like to have their transaction continue in US or UK funds. At check-in, the registration card discloses that the guest chose to have their card charged in a particular currency and that the foreign exchange rate applied to that transaction would be determined at check-out. Their folio lists the total US amount, the total foreign exchange rate applied at checkout, and the pound sterling amount. The folio also states that the pound sterling amount was the transaction currency chosen by the customer.

The transaction is authorized in the foreign amount and when the settlement amount is processed through the transaction processor, the US dollar amount, the foreign exchange rate and the pound sterling amount would follow the path of the domestic transactions. The transaction would be split in half with the American transaction going to the US card company and credited to the hotel in US dollars, and the international cost transferred to the foreign bank and charged to the customer in their currency.

"It's all about choice and customer satisfaction," says Charles Fillinger, vice-president of First Data International ( "In the past they would not be given a choice. The transaction would be processed and transmitted to the processor who sent it to the credit card issuer, who convert it at undisclosed exchange rate and added fees to the transaction. When the cardholder received their statement they would see an amount that they had no knowledge of previously."

Business travelers would either have to wait a month to file expense reports or calculate what they thought the exchange rate was at that day. "The reason we call it dynamic is because we perform the currency conversion right at the point of sale offering a competitive exchange rate," Fillinger says. Knowing the exact exchange rate at the point of sale is making FX Now from Chase Merchant Services a growing trend at rental car companies, hotels and casinos. "When we offer the process, the cardholder knows exactly what is being charged," says Joe Leija, senior vice president international services, Chase Paymentech Solutions.

To implement a DCC solution, a hotel would have to upgrade to a module that includes DCC capabilities. Fillinger says, "We have some hotel chains that are in the process of upgrading over the next six to 12 months."

The same aspect applies to Internet transactions. When the customer goes onto the website, they have several opportunities to make a currency choice as long as the site allows the user to print up a receipt.

The only downside to DCC is the training aspect. "The initial acceptance rate when a hotel launches a DCC solution might be somewhat lower, but it ramps up with reinforced training and feedback," Fillinger says. "When you have an Internet site, the acceptance rate is much higher because the consumer gets that choice every time they go to the payment page."

"DCC is not plug-and-play," Fillinger adds. "It requires integration and an investment from the merchant to upgrade their system. After implementation, it might take 60 days for certification and training before roll-out."

Multi-Currency Conversion

While multi-currency conversion (MCC) is similar to DCC, there are some important differences. Typically, direct currency conversion takes place at the end of the transaction when the buyer inputs the credit card information and the software determines from what country the card was issued. "What we do is provide the merchant with the tools to detect what country the customer is coming in from and convert that currency up front so that their shopping experience is in that person's currency," explains Mike DeSimone, SVP at E4X (

Customers who visit a hotel's website integrated with the E4X software, are immediately prompted to choose a currency. The customer is guaranteed the cost that is presented in their currency, and the hotel is guaranteed the same amount noted on the back-end. The software is actually integrated into the background of a website, specifically as a plug-in to the pricing engine. The program can convert approximately 150 currencies into about 14 settlement currencies.

"As long as the hotel property has a credit card processor that can accept the currency, we can support the hedging that goes along with it," DeSimone says. "The card holder doesn't have to wait 30 days for his account statement to see how much he was charged, and the hotel doesn't take any risk that the currency rate might change between the time the card has been authorized and when it's settled."

Installation of the program is rather painless according to the vendor. If the property has its own dedicated IT resources, it's possible to have a MCC system up and running in approximately four weeks. With E4X's system there is no investment. In a typical cross-border transaction the card association and the bank that issued the card charge the foreign exchange margin or fee to cover the cost of the conversion. MCC shifts the cost of that fee from the card association to themselves and share the charge with the hotel. "What we are doing is taking revenue away from the bank that issued the card and we are shifting it to ourselves and giving the hotel the option of regaining approximately one-percent of the transaction total," says DeSimone.