Hotel Front Office Management, 3rd Edition

COMPONENTS OF THE REGISTRATION PROCESS 187CREDIT CARDSCredit cards are grouped according to the issuing agency. The major groupings arebank cards, commercial cards, private label cards, and intersell cards. As their namesuggests, bank cards are issued by banks; Visa, MasterCard, and JCB are three bankcards. Commercial cards are issued by corporations; Diners Club is an example. Privatelabel cards are generally issued by a retail organization, such as a department store orgasoline company. Their use is usually limited to products sold by the issuing organization,but they may be acceptable for other purposes. Intersell cards are similar to privatelabel cards but are issued by a major hotel chain. This type of card is acceptable at allproperties of the chain and any of its subsidiaries.Each of these issuing agencies has verified the credit rating of the person to whom thecard was issued. This enables the hotel to extend credit to the person who offers the creditcard for future payment; this is a very important option for hotels. Hotels extend creditto guests as a basis for doing business. Without this preestablished certification of credit,a hotel would have to develop, operate, and maintain a system of establishing customercredit. Hotel chains that accept intersell cards have done this, as have smaller hotels thatare willing to bill to an account.All credit cards are not equal from a hotel’s financial point of view. The hotel mayhave a standing policy to request a bank credit card first or its own intersell card andthen a commercial credit card. The reason for this is the discount rate, a percentage ofthe total sale that is charged by the credit-card agency to the commercial enterprise forthe convenience of accepting credit cards, the issuing agency requires. The discount ratedepends on the volume of sales transactions, amount of individual sales transaction, expediencywith which vouchers are turned into cash, and other factors. Each general manager,in consultation with the controller and front office manager, works with each creditcard–issuingagency to determine a rate that is realistic for the hotel.The commercial credit card may require a 10 percent discount of the sale to be returnedto the credit-card agency, while one bank credit card requires 4 percent and another bankcredit card requires 3 percent. The effect on the profit-and-loss statement is shown in thefollowing illustration:Commercial Bank Card 1 Bank Card 2Guest bill $200 $200 $200Discount rate .10 .04 .03Amount of discount $20 $8 $6Guest bill $200 $200 $200Amount of discount 20 8 6Hotel revenue $180 $192 $194Even though Bank Card 2 seems more profitable, it may not be the credit card preferredby the hotel. The Bank Card 2 credit-issuing agency may stipulate a seven-day turnaroundtime, so that the hotel will not have access to the money until seven days have passed.Bank Card 1 may give the hotel instant access to the money on deposit of the vouchers.TLFeBOOK