Since December 2017 the total market capitalisation of cryptocurrencies such as Bitcoin has been valued at over 600 billion USD and Crypto markets are currently processing over 500 billion USD per day in Bitcoin transactions.
So how can the hospitality industry leverage the meteoric rise of cryptocurrencies and why is it important? Let’s take a walk through the how, why, opportunity and risk of using cryptocurrency in the hospitality industry.
How can Hotels utilise Cryptocurrency?
The most obvious way for hotels to utilise cryptocurrency is to offer payment for rooms with popular cryptocurrency coins like Bitcoin, Ethereum and Litecoin.
Hospitality organisations that have relationships with enormous monolithic solution providers are unlikely to see any enthusiasm for this being implemented in their providers Booking Engine software due to the risk involved so this provides an opportunity for more agile, progressive hospitality organisations to work with like-minded technical partners who can create flexible solutions and get ahead of the curve.
There are many technical solutions in place to receive cryptocurrency payments like Bitcoin and many providers currently offer a stable platform to accept payments like Coinify, BitcoinPay, and coinpayments.net. Stripe recently removed Bitcoin from their offerings but this does not preclude them from accepting other crypto coins in the future.
What are the opportunities and risks in this approach?
It’s important to recognise the value of being first. People are still talking about The Waldorf Astoria (NYC) being the first hotel to offer room service.
Being first on board with a new concept or technology provides boundless publicity opportunities. This can create a jumping-off board for unique press releases that are more likely to be picked up by larger news organisations that align with buzz around current news topics.
Being established early in an emerging market can also provide insights on learning how to deal with the complexities of new technology and implementing it in the real world. This means your organisation will have a head-start on other adopters later down the line.
Crypto coin holders are also seeking real-world opportunities to spend their currency. Hotels can set themselves up on the receiving end of this wave and enjoy an increased market share.
Cryptocurrency markets like Bitcoin are notoriously unstable with huge gains and losses happening every single day. There are steps that can be taken to mitigate some of the risks, for example, many payment providers offer facilities to automatically convert cryptocurrency coin into fiat currency like USD, EUR, and GBP as soon as the transaction takes place.
However, your organisation will still be at risk from large downward tumbles and will need to scrutinise their payment provider’s policy/exchanges closely. They need to ensure that they can insulate themselves against making losses on exchange rates that result in a significant decrease in revenue.
Additionally, some countries and states have rules that outright prevent currencies like Bitcoin and Ethereum being used in their economy. For example:
- In Russia Bitcoin is not illegal
- But it it is illegal to pay for any goods and services in currencies other than the Ruble (Bitcoin’s Legality Around The World, Forbes, 31 January 2014)
This would make cryptocurrency a no-no for any hotel chain with their financial base in Russia looking to court mainly domestic visitors. This would apply to other countries with strict fiat-currency requirements too.
In many countries the legal status of cryptocurrency coins are still being decided upon. For example:
- In the UK no direct legislation regarding Bitcoin or it’s tax implications have been implemented as it seems their revenue and customs department assume it’s covered by existing legislation
- The USA have explicitly changed their tax law to remove loophole tax breaks on cryptocurrencies for 2018
All of this means your organisation’s accountancy department will need to be on their toes about the tax implications and legality of processing transactions in crypto coin currencies as the situation seems to remain fairly fluid.
On top of this at the time-of-writing, there are 1384 cryptocurrencies that hotel guests can potentially be trading in all jostling for dominance. There are currently some clear winners scaling up to the top of the exchanges but this is still a young technology in a state of flux. Maybe in 12 months Bitcoin will have been toppled and a new coin king will take its place.
There could be huge opportunities in this field for innovative small disruptive players in the hospitality industry to reap many benefits. However, they will need to balance this against their appetite for risk and the reality of needing to create many safeguards to protect themselves against loss.
Above all, be prepared for change.
Are smart contracts going to turn the hospitality industry upside down? Our next article will investigate the exciting new possibilities in this field.