Starwood Billing In Guest's Currency

Starwood Asia Pacific Hotels and Resorts last month began rolling out dynamic currency conversion capabilities, allowing guests to receive hotel bills at the point of sale presented in their local currency when they use Visa or MasterCard.

Tom DeLuca, senior vice president of corporate development for Long Island, N.Y.-based point-of-sale currency conversion provider Planet Payment, with which Starwood partnered to offer the service, said the deal signified the first time a hotel company elected to enable dynamic currency conversion capabilities across all properties in an entire region. DeLuca said more than 70 Starwood properties in the Asia/Pacific region will be up and running late next year, beginning with properties in Hong Kong.

Through dynamic currency conversion, currencies denoted on hotel folios automatically are converted for cardholders staying abroad. According to a white paper from Planet Payment, such technology "identifies foreign-issued cards in the hotel's property management system and converts the transaction from the hotel's currency into the cardholder's local currency," bypassing similar services—as well as their associated charges—widely offered by charge card companies.

While hotels get a percentage of the conversion fee when converting currency at the point of sale, DeLuca said hoteliers in foreign markets are latching onto the concept as a way to personalize services for international guests and frequent business travelers.

"The reason hotels began doing this was to bring in additional revenue. Now, they're doing it from a customer-service point of view," DeLuca told Business Travel News. "Just as travelers have the option of a smoking room or nonsmoking room, they now increasingly have the choice of what currency they want their bill in."

Dynamic currency conversion processes enabled through the Planet Payment partnership with Starwood only work with cards on the Visa or MasterCard networks. DeLuca said American Express—which is the dominant player among corporate card providers—has yet to enable the process.

DeLuca said hotels participating in its program are required to ask hotel guests at the point of sale if they want their charges automatically converted to their native currency. Hotels must also disclose any fee associated when currency is converted at the point of sale, which DeLuca said typically comprises about 3 percent of the transaction cost.

Starwood's partnership with Planet Payment comes amid a backlash against currency conversion fees—or the lack of their disclosure—levied by payment card companies, manifesting in several lawsuits, most of which have not favored the card providers.

American Express cardholders early this year received notice of a class action settlement in which the corporate card giant will refund up to $75 million in currency conversion fees assessed between March 1997 and October 2004.

Meanwhile, if a California judge gets his way, MasterCard International and Visa U.S.A. cardholders will get a refund for every foreign-based transaction made since February 1996.

Pending appeals by Visa and MasterCard, a ruling last year concluded the card associations were deceptive in disclosing currency conversion fees and ordered the networks to refund fees charged to customers, which could total up to $800 million. The judgment applies to all Visa cardholders—since Visa is based in California—while MasterCard only would have to pay restitution to cardholders in California.

Visa in a statement acknowledged such alternatives as dynamic currency conversion and told consumers, "Visa requires that you are provided a meaningful choice at the point of sale and you have the right to buy your purchase in the local currency so that you do not incur any additional fees the merchant may assess. Visa also requires merchants offering this service to inform you of the exchange rate including any applicable commission being charged."

DeLuca said currency conversion fees represent $4 billion in annual revenue for card companies. Through fees levied by card networks and issuers, cardholders can pay in excess of 3 percent of the total charge for currency conversion services. The American Express cardmember agreement states that charges made overseas "will be converted into United States dollars on the date it is processed by American Express or our agents at a rate set by us, based on inter-bank, tourist or official rates by up to 2 percent." Visa and MasterCard both charge a foreign currency conversion rate, plus a 1 percent fee to issuing banks. The banks, which many times add their own fees, then pass on the charge to cardholders: JP Morgan Chase said it charges a 1 percent flat fee on the transaction amount and U.S. Bank said the charge is 2.5 percent. Citibank said the card network determines its rate and GE Capital would not disclose its fee, saying that it varies by country. Diners Club, meanwhile, charges 2 percent of the transaction cost.

While dynamic currency conversion could be more costly to cardholders than the cost assessed by card issuers, proponents said the process offers visibility of charges made in foreign countries and the ability to enter expenses more easily.

While such expense reporting system providers as Concur Technologies and Necho Systems offer currency conversion components through their automated platforms, many companies still are left doing the math, since paper- or Excel-based expense reporting systems still dominate corporate practices. The lack of penetration of electronic folio transmission also has made line-item details difficult to break out and convert into the correct currency.

"I know how challenging it can be to reconcile my own expenses at the end of the month. We have seen increased demand for this solution and the retail sector has already taken significant steps to provide its international customers this benefit," said Chris Scheidt, vice president of Starwood Asia Pacific's Six Sigma Organization.