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HTNG Forms Workgroup to Focus on Payment Systems
and Data Security for the Hotel Industry
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CHICAGO (August 15, 2007) – Hotel Technology Next Generation (HTNG) announced the formation of its newest workgroup, which will focus on payment systems and data security for the hospitality industry.   Several leading hotel companies, payment system providers, and other companies have already applied to participate, and other interested parties are welcome to join the effort.
 
“As an industry, we need to establish a more effective way for hotels to handle payment data efficiently and securely,” said Barry L. Shuler, President of HTNG.  “Additionally, we need to help hotels understand and comply with increasingly complex and stringent payment card security requirements,” said Shuler.
 
The new workgroup will focus not only on credit and bank cards, but on other types of payment cards and devices, including gift cards, loyalty cards, contactless smart cards such as Hong Kong’s ubiquitous Octopus card, and non-card devices such as mobile phones.
 
“Hoteliers and technology providers from across the industry have faced enormous challenges in this area,” said Douglas C. Rice, Executive Vice President and Chief Executive Officer of HTNG.  “We need common answers to some very tricky questions, and once we have those, we need common solutions to the problems so that all hotels and vendors can get the functionality they need, provide protection for their customers’ sensitive data, and avoid unnecessary cost and risk.”
 
Rice also noted that the breadth of interest in payment systems crosses more  types of technology products and services than perhaps any single previous HTNG effort, with significant opportunities for property management systems, point-of-sale systems, reservation systems, activity booking systems, loyalty programs, gift card vendors, card associations, merchant processors, merchant gateways, compliance auditing services, currency conversion services, banks, acquirers, device manufacturers, online travel agencies, mobile phone services, and others.
 
The workgroup’s deliverables will be prioritized by the members, but are likely to include:
  • Definition of best practices, business processes, and technical approaches for use and processing of payment cards in the hotel industry
  • Educating hoteliers and vendors on best practices and compliance requirements for data security 
  • Developing improved approaches to integration, including the adoption, refinement, or (if required) development of technical standards 
  • Defining and implementing hospitality-specific functionality 
Because many hotel companies operate globally, and because the issues vary significantly across world regions and specific countries, the scope of this effort will be global.  Depending on the interest of participants, the workgroup may choose to focus on specific geographic areas or regional issues at various points of time, or in the context of regional teams or sub-groups.
 
Background

Payment systems encompass a wide range of software, hardware, and protocols that are utilized to facilitate the electronic transfer of funds between buyers and sellers of merchandise and services. The most common instances of payment systems are those that support the use of credit and debit cards.

Payment systems include, but are not limited to, those operated by merchants (typically point-of-sale devices and software), payment gateway processors, merchant bankcard processors, credit card associations, banks, and non-bank card issuers. They can also include systems operated by:

Loyalty programs, in cases (for example) where loyalty points can be redeemed online or through transactional systems for goods and services.
Gift card issuers, including hotel brands, individual hotels, and third parties. Hotels participate in this process as merchants, through contracts with merchant bankcard processors, payment gateway processors, and other parties. However, hotels have a number of unique or unusual aspects that cause them to use payment systems quite differently from other merchants.
Guarantees: Most hotels accept credit and debit cards to guarantee reservations. A transaction amount may or may not be authorized, but is in any case not actually charged unless the guest fails to show. This type of transaction is not common among non-hotel merchants.
Time Lapse between Authorization and Draft Capture: Hotels typically authorize credit cards at guest check-in, in order to set appropriate guest credit limits. The actual charge (draft capture) is not made until later, when the guest checks out or when an intermediate folio settlement occurs. This requires a balancing act between overauthorizing (which deprives the guest of available credit) or underauthorizing (and risking that sufficient credit will not be available when the guest departs).
Reauthorizations: Hotel regularly review and resubmit authorizations for guests approaching their credit limits. A few other merchant types face similar issues, but few need to deal with them multiple times per day, as may be the case for certain hotel guests. Card associations in different regions allow different variances between authorized and settled amounts before there is a negative impact upon interchange. Interchange is the major underlying cost component for the acquiring bank, and can affect merchant service fees to the hotel.
Deposits: Hotels may accept deposits, with contractual restrictions that govern whether and how much can be refund in the event of cancellation. In the case of large groups, these deposits can be very large.
Third Party Processing: In the case of both guarantees and deposits, hotels may use agents (such as chain reservation systems) to collect the card information and/or to debit the funds. These agents may use different merchant accounts, or may store and forward the card information to the individual hotel, in a transaction that occurs outside the normal bankcard processing network but that carries card details.
Multiple Currencies: Hotels may set their rates and collect deposits and settlements in non-local currencies, and they may accept cards issued by foreign banks and charge them for local currency amounts that have been converted to the issuing bank's native currency.
Geographic Diversity: Hotel companies may have properties in dozens of different countries, each with its own regulations, business practices, currency restrictions, taxation issues, payment products, and software and service vendors. Lack of international standards makes systems integration very costly for hotels and product vendors alike. In some parts of the world, property management and point-of-sale systems are not integrated with payment gateways at all, due to vendor capabilities or infrastructure, or due to policies of acquiring banks. In these locations, standalone swipe terminals must be used, with resulting operational inefficiencies and dual data entry.
Regional Payment Products: There are numerous regional credit and debit card products that have nonstandard technical requirements and a narrow range of local or regional acquirer support. Examples of these might include China Union Pay, Switch and Solo.
Summary Transaction Information: Hotels must submit summary stay information to card processors that has no counterpart with most other merchants. The nature of the summary information required may vary by card type and world region.
Expense Reporting: Guests, particularly business travelers, often use payment card data feeds to simplify expense reporting. This process is widely implemented for airline tickets, car rental contracts, limousine services, and other travel-related services and provides significant back-end savings to corporate travel departments. For hotels, however, line-item folio detail is required because reimbursable and nonreimbursable expenses, as well as items with varying tax deductibility are intermixed on one folio. Hotels have been working for years to provide such a data feed in order to gain competitive edge in corporate contract negotiations.
Inquiry Handling: Hotels frequently receive inquiries through charge companies from guests querying an additional charge that did not appear on their folio. While many of these charges are legitimate, it is often more expensive for the hotel to research and justify them within the timeframes mandated by the merchant agreement, than to simply write off the amount in question. When they do research it, manual culling of restaurant or room service checks from paper files may be required in order to provide supporting evidence.
Hotel Systems Diversity: Hotels typically operate heterogeneous sets of systems, several of which may require access to payment systems interfaces. These include property management, restaurant point of sale, and retail point of sale. They may also include accounting systems, activity systems, reservation systems,
high-speed Internet systems, video-on-demand systems, and others. In some cases the data interfacing requirements for payment processing may exceed the capabilities of the vendors of certain systems that could benefit payment systems access.
IT Skills: Because few hotel companies are able to standardize all of these systems at every hotel, the ultimate integration must generally be accomplished by IT staff at the individual hotels. Few hotels can provide sufficiently skilled resources to do this, yet failure to do it can cause the hotel to face large fines under the Payment Card Industry/Data Security Standards (PCI/DSS) initiative.
For these and other reasons, payment processing for hotels, particularly those operating globally, is perhaps best described as a bunch of disparate systems held together by chewing gum and baling wire. It is very difficult to provide a clean, accurate, and timely set of relevant information to the guest, and hotels face increasing compliance costs as well as large and increasing liability for security breaches. Every player in the process faces high development costs and operational inefficiencies.

The full charter of the workgroup can be viewed on HTNG’s website at http://www.htng.org/workgroups/payments.htm, where HTNG members can also apply to participate.  Applications are currently in an open signup period, which will run until at least September 15, 2007.  Non-members of HTNG who are interested are welcome to apply for HTNG membership prior to that date to ensure acceptance.  Once the workgroup has held its first meeting, additional companies may be admitted by vote of the workgroup members.
 
About Hotel Technology Next Generation
 
The premier technology solutions association in the hospitality industry, HTNG is a self-funded, non-profit organization with members from hotel and hospitality companies, technology vendors to hospitality, and other industry members including consultants, media, and academic experts.  HTNG’s members participate in focused workgroups to bring to market open solution sets addressing specific business problems.   HTNG fosters the selection and adoption of existing open standards.  Where necessary, it also develops new open standards to meet the needs of the global hospitality industry.
 
Membership in HTNG is open to hotel and hospitality companies, technology vendors to hospitality, consultants, academics, press and others.   Currently nearly 400 corporate and individual members from across this spectrum, including most of the world’s leading hotel companies and technology vendors, are active HTNG participants.  Workgroup proceedings, drafts, and specifications are published for all HTNG members as soon as they are created, encouraging rapid and broad adoption.  Specifications are released to the public domain when the workgroup has completed its work, typically after no more than 18 months.  For more information, visit www.htng.org. 

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Contact:

Hotel Technology Next Generation
Douglas Rice, Executive Vice President & CEO
+1 847 303 5560
www.htng.org 
 

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Also See: Accomplishment Wrap-up - HTNG's Third Annual Members' Meeting; Marriott International's CTO Barry Shuler To Succeed Nick Price as HTNG President / March 2007
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