Are we gaining or losing foreign currency due to

increase in credit card settlements?

Contents
Modes of payment used by hotels
Why are credit cards so popular?
Foreign tourists in India
Credit Cards and hotels
Why are credit cards beneficial for hotels: A case study
Scenarios, Illustrations and Examples
A Survey Conducted by us
Conclusion


Modes on Payment used by
hotels
Cash : A convenient mode of payment, preferred by
guests staying for a short period of ti,e

Credit Card: The most popular form of payment
today. The receptionist needs to take an imprint of
the guests credit card. Popular brands are:
American Express, Diners Club, Visa, MasterCard

Travellers Cheque: This is a fixed amount cheque
which allows the guest to make an unconditional
payment to the hotel since She/he has already paid
the issuer

Bill to Company : Here the guest need to settle the
bill since it is sent to the company the guest belongs
to
80% of People prefer Credit cards over
other methods of paymentWhy?
Flexibility of use

Lets you buy whatever you want, whenever you want

Security and privacy

Emergency spending

Ease of keeping records

E-commerce
Foreign Tourists in India
In 2010 the total number of Foreign tourists according to the
customs survey was 5.78 million tourists

In 2011 that number grew to 6.29 million, an increase of 8.9%

Foreign Earnings have gone up from Rs 5724 Crore in April
2011 to Rs 6745 crore in April 2012

Popular tourist destinations : Kerala, Goa, Kashmir, Rajasthan,
Sikkim

Popular business destinations: Mumbai, Bangalore,
Hyderabad, New Delhi, Gujarat


Credit Cards & Hotels
Credit Cards are the most popular method of bill settlement
today, and are related in several ways to hotels

Offers and tie-ups with credit card companies: For exclusive
guests who use a particular type or brand of credit card. A
good example of this is the Starwood-Amex credit card

Frequent flyer miles: Guests with frequent flyer miles can
redeem it at your hotel using credit cards, or vice versa




Credit Cards are BENEFICIAL
to HOTELS
A case study of The Park Hotel, Chennai: For
setting up of credit card equipment

EPCG(Export Promotion Capital Goods Scheme) reduces
customs duty on equipment, software systems, spare parts at
very nominal rates

Custom rates for such equipment is usually at 23-25% but as
per EPCG you can purchase it at almost 0-3.09%

This had saved almost 20% of duty charges while importing
equipment
A few Scenarios, illustrations and
examples
Scenario I : Advantage for the hotel
Foreigner paying by Cash in Foreign Currency
The hotel bill is 100$
Todays buying rate is Rs 49.05 for $1 and Selling rate is Rs.55 for 1 $
Hotel gains 3.5% of the total transaction value which is 3.5% of Rs.55
X 100/- = Rs.192.50

Scenario II : Disadvantage for the hotel
Foreigner paying by Credit card in Foreign Currency and the
settlement happens by way of an EDC machine.
The hotel bill is 100$ - Rs.5500/-
The credit card commission(from 1% to 5%) is borne by the
Establishment(Hotel)






Scenario III : Advantage for both the guest & the hotel

Foreigner paying by Credit card in Foreign Currency and the settlement
happens by way of an DCC machine.
The hotel bill is 100$ - Rs.5500/-
The DCC commission (from 0.5%) is borne by the Establishment(Hotel).
The Guest benefits as he pays in his home currency and gets more
rupees per unit of his home currency. The hotel gains as they will pay
less commission as compared to the transaction done by a Credit card
EDC machine.

Scenario IV: Disadvantage for the hotel

when an Indian transacts on his Amex /Visa/Master card ( not Indian
companies) in India, precious Foreign exchange goes out as
commissions to be paid ( 1% to 5 %).
A Survey Conducted by us
We used SurveyMonkey to create our own survey and get the
views and opinions of people in the Industry

The list of questions and data recieved is shown in the next few
slides

Professionals who have replied:
1. Tanish Gulati, Reservations Manager, Swissotel Kolkata
2. Pankaj Dubey, Resident Manager, Sun n Sand Hotel
3. Abhijit Rege, General Manager, CLASSIC CITI INVESTMENTS PVT.
LTD
4. Swarup Datta, GM, Apeejay Surrendra Park Hotels Ltd
5. Varun Sharma, Director Rooms, Apeejay Surrendra Park Hotels
Ltd. - The Park Chennai
6. Stephen Beale, COO, The Windflower Resorts and Spa

First Hand data
We conducted a simple survey and took in the opinions of
professionals in the Industries

We asked critical questions such as:
1. What is the percentage of guests using Credit cards in your
hotel?

2. Popular method of card swiping (EDC or DCC)

3. Which mode of payment is more beneficial to the hotels
bottom line?

And others
Responses received
Up to 80% of hotels prefer CASH over CREDIT CARD to settle
bills

100% of hotels prefer EDCs as their credit card machine

100% of leading managers agree that Credit Card settlements
bring in Foreign exchange

20% of managers say that 10% - 25% of guests pay by credit
card , another 40% claim that its 25% - 50% pay by credit card
and the remaining 40% say that 51% - 75% guests use a credit
card

Conclusion
Recap

Credit Cards do bring in Foreign exchange as was seen in the Foreign
tourists in India slide and in our Survey

India also loses a lot of Foreign exchange due to commission payouts of
foreign credit card companies, although Rupay is now the solution to the
commission payout problems, which is similar to MasterCard and Visa only
it is Indian

It also varies as per the billing system used (EDC or DDC)

The Scenarios, Illustrations and Examples slide showed various situations
and the amount of foreign exchange different modes of payment brings in

And finally the views of Hospitality professionals to affirm the conclusion

We would also like to hear your views


Thank You
We would love to answer any questions or doubts