Background
The point of this article is to share an experience I had relating to a business of one of my clients. For the sake of this post, I will refer to said client as "The Hotel" and will refrain from using specific monetary figures as to ensure confidentiality of client information
The Hotel operates a hospitality business located on the African continent in a country that is often considered to be politically unstable. They have been operating for more than six years now, showing growing popularity in both the local and international market and frequently maintain occupancy rates that are well above what could be considered average in the industry
The service that I provide consist of operational and administrative optimization. I look at how the business operates as well as how documentation and accounting flows from start to finish, identify areas of inefficiencies and recommend improvements. These improvements often lead to a direct financial benefit to the business (like claiming tax benefits that were previously not claimed due to the owners not knowing about it or were unable to implement a system whereby they would have sufficient documentation at hand to be able to claim the benefit) as well as indirect benefits (like spending less time on certain tasks due to a more efficient process)
The Hotel
The business was already operating very well before my services were requested. Small adjustments were made to their payroll and expense capturing processes that resulted in direct and indirect benefits that were noticeable but not necessarily significant
Another area of focus was on their income side. Apart from the local travelers enjoying the stay at The Hotel, they also get a lot of European and UK travelers. They obviously value any customer they get, but international customers from the aforementioned areas usually have a lot more money to spend on the activities, the restaurant and the bar located at The Hotel, so it's important for them to keep attracting these customers
The Issue (the area of inefficiency)
They receive bookings and deposits for said bookings via one of the following channels:
a) the customer books directly with The Hotel by sending an email or calling to make the booking
b) the customer makes a booking and deposit through a third party, contracted by The Hotel to advertise the accommodation on their various websites
The first option is preferred seeing as the third party in the second option charges a high fee for having the booking made through them. It ranges, but a whopping 17% fee on the booking value isn't uncommon
Over time they have been able to get more and more local customers to book directly with them instead of through a third party, especially the more recurring customers. Resulting in much higher gross margins for them from the local market
They would need an international bank account for different currencies if they wanted to do the same for the international travelers and the additional costs and effort (as well as a little more accounting and tax administration) made them decide to just stick with the third party and bite the 17% fee bullet. To their credit, they have increased the listing prices on the third party's website to make up for the fee and this doesn't seem to slow down the bookings coming in, so they have countered the fee by increasing their prices listed by the third party, but it doesn't eliminate the issue itself, which is the high fees being paid
The Recommendation
At the time (well over a year ago) I suggested they start accepting deposits from international customers via Bitcoin. It seemed like a credible solution to the issue as it would:
- eliminate the need for more bank accounts and banking fees (with minimal lightning fees)
- systematically eliminate the 17% fee charged by the third party by having recurring customers book directly with them, gradually increasing gross margins on those customers significantly
- simplify the accounting treatment as they would only have one "foreign currency" to account for
- make the funds available to them a lot faster than through the third party, which processes payments only once a week or every two weeks
- allow them to, if interested, to retain a portion of income in a currency that is neutral to the volatile political environment of the country in which they operate
It is also worth noting that there are several exchanges registered in the country in which The Hotel operates that would allow them to convert acquired Bitcoin to their native currency if they prefer not to hold on to said Bitcoin, so being "stuck" with Bitcoin instead of their native currency isn't a problem and the fees relating to these conversions range, in total, from 3 to 7 percent, so it's not for free, but a lot better than the current 17% charged by the third party
Conclusion
The Hotel was reluctant to integrate Bitcoin into their income process. To remain professional, I only suggested it twice because the agreement is that I would make recommendations and if they are not willing to implement them then that's that. It's their business after all and they are still doing very well for themselves regardless. They don't need Bitcoin at the moment, but it would have complimented their business model in a nice way, in my opinion
If they had implemented it, the outcome would depend on various factors that are difficult to determine, like how many people would actually make deposits/payments with Bitcoin if they have that option? How many of the recurring clients would open a lightning wallet so that they can make bookings directly with The Hotel if they did not have a wallet before and how much of a discount to the listing price with the third party would The Hotel have to give for the direct booking to incentivize people to book directly?