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Contents
1. Research Background 2. Hospitality and Lodging Industry The Basics 3. Trends and Opportunities 4. Banking Requirements 5. Solution Suite
1. Research Background
1. Research Background
In view of cash management opportunity based on two recent wins in the sector (JW Marriot Sky City and Starwood Group), this project was commissioned with the objectives to: Understand better how the Hospitality and Lodging industry operates Review major trends / issues affecting the industry Perform opportunity analysis of the top ten hotel operators in the region Design packaged solution for Hotel Operators in a combined proposition across Cash, Merchant Card Acquiring, and Personal Financial Services (PFS - Co-branded cards and ATM service) Researches comprising significant breath and depth was conducted to collate the necessary information and analysis into this Asia-Pacific Hotel Industry Cash Management Suite: Primary research, interviews with: Industry consultants Group Treasurer of the Intercontinental Hotels Group (IHG) Secondary research, information from: Hotel Groups Annual reports and press releases External reviews and analysis from various media (press, internet, etc.) Internal reviews, reports, business analysis and industry experiences
VENDORS / SUPPLIERS
CUSTOMERS
Operator Owned Hotels (5%) Operator Managed Hotels (10%) Franchised Hotels (85%)
Business
INTERNET MARKETS
Vacation
External Capital Funding Receipts from global 3rd party travel agent
Local Vendors Overseas Vendors Cost of Sales expenses Payroll Energy etc.
Fundamentally, the operating model in a cash management context is sound and runs fairly smoothly, especially at the Hotel Operator level where sophisticated cash management techniques are engaged including cash pooling arrangements with banks, internal house bank for FX management and leading/lagging and other netting techniques are employed globally
Branded hotels growing at three times the pace of non-branded hotels while bargain hunters go down value chain to look for lower tier hotels Growth in internet usage is making travel more accessible
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$2,500,000,000
$2,000,000,000
$1,500,000,000
200, 000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$1,000,000,000
$500,000,000
$0
Viet nam
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Managed hotels are typically owned by property developers who have strong existing banking relationship on a group/company level, which would not be the most effective point of entrance Franchised hotels are typically locally owned, with strong relationships with local bankers which have likely provided the financing to build the hotel initially, and breaking into this relationship would be extremely difficult, given the operators limited ability to influence Franchisees bank of choice Around 90% of franchised hotels are single-owner owned, and at onset it may seem there could be a quick win opportunity in providing a simple packaged product (such as core cash), the amount of effort and investment in educating this subset would likely significantly reduce the attractiveness of this opportunity, without consideration into the difficulties of breaking into these relationships for above mentioned reasons and franchisee owners have 100% veto towards which banks they choose as their operating bank Additionally, many managed hotels hold accounts jointly with their Operator, where the Operator, within certain limits, is able to draw out funding for fees owed in the form of franchising and overhead fees, so this could be a good relationship entry point
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4. Banking Requirements
As hotel operators run finances very centrally, payments and receipts are both fairly straightforward Payments: Tax authorities (LCY) Dividend payments mostly USD/EUR) Limited vendor payments (LCY) Payroll (LCY) PAYMENTS & COLLECTIONS Other overhead payments (LCY) Collections Managed and Franchised Hotels: Franchise fees (mostly USD/EUR) Systems fee (mostly USD/EUR) Royalties (mostly USD/EUR) Daily Revenue feeds (mostly USD/EUR) 3rd party travel agency - most hotel operators work with 1 global partner (mostly LCY) Travelers (mostly LCY) Number of transactions (e.g. incoming and outgoing TT) could be quite large in volume (e.g. with the 4000 hotels of IHG, at minimum one transfer per month or more for the different fees assessed) For the daily revenue feeds from managed/franchised hotels, all transactions are routed through back office accounting system that routes daily revenue feeds to H.O., which needs to reconcile this data on a monthly basis to incoming electronic payments. These processes are typically outsourced to shared service centers
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DOMESTIC LIQUIDITY REQUIREMENTS If hotel is new, typically cash hotel is cash strapped as it is funding debt repayments from initially building of the hotel, so first few years of liquidity management will be aimed towards lowering cost of debt, which a simple cash concentration structure can provide As hotel pays off its debts, and becomes more cash rich, focus changes to repatriation of funds to owner, or to actively manage and ensure operating funds are making a return
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5. Solution Suite
Payments at a glance
Dividends, share repurchase Tax CapEx Centralised payments Overheads Payroll Vendors Suppliers Payroll Overheads Tax
Hotel Operator
Head office are cost centers, while owned hotels are profit centers Funding and defunding between head office and owned hotels Both head office and owned hotels require various payments capabilities Payment volumes and values are higher for owned hotels Number of users will be higher for owned hotels
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Funding / Defunding
Hotel Operator
Method TT ACH
HSBC
Beneficiary Vendors
Purchasing
Suppliers
Cheque ACH
Staff
ACH ACH
Centralised payments
Vendor / Suppliers
TT Cheque RTGS
Tax authorities HO
ACH ACH TT
Funding / defunding
Owned Properties
TT Inter-account Transfer
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Payments Summary
Payment advising Hotel Operator
International Wire transfer Book transfer Domestic RTGS ACH Book transfer
Payment advising
HSBCnet is HSBCs global internet banking platform, which can be accessed across multiple geographies through internet browser Real-time information available on the platform Integration capabilities with systems such as enterprise resource planning (ERP) and treasury management system (TMS) Payments of different currencies, from different account and of different payment types all in one instruction file
HSBCnet provide a single log-in to ALL payment types for ALL countries Flexible payment authorisation matrix can be set up for control purpose Remote payment authorisation capability to give convenience HSBCnet also provides access to other value-added services like Cheque Outsourcing Service and Payments Advising
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COS delivers:Cheque items printed with company logo Payments warehousing, allowing payments to be futuredated
Automated accounts payable reconciliation Comprehensive online enquiry capabilities An online stop-cheque service subject to local regulations
3. Processing
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Payment Advising
Delivering comprehensive information to your suppliers, vendors and employees
Hotel operators makes a significant number of payments to suppliers and vendors for their goods and services HSBCs Payment Advising solutions ensure delivery of comprehensive information to your beneficiaries
Short Advice
Payment Amount Charges Details Value Date Remitter Remitting Bank HSBC Transaction Reference Other Reference
Payments Advising offers:Customised advices incorporating enriched remittance information Multiple invoce advising to support delivery to multiple recipients (3-6 advices per transaction) Real-time advice issuance via email (fascimile and mail) Benefits
Long Advice
Additional payment details in free text or tabular format
Better credit relationship with suppliers and vendors Goods and services forwarded earlier Reduce time spent on answering payee queries on payment status
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Australia Bangladesh Brunei China Hong Kong India Indonesia Japan Korea Macau Malaysia Mauritius New Zealand Philippines Singapore Sri Lanka Taiwan Thailand Vietnam
Collections at a glance
External Capital Funding Receipts from global 3rd party travel agent Customer receipts (Tourists / Companies) Local travel agents Rental Fees (Shops)
Head office has simple collection requirements it receives mainly electronic payments from various parties Owned hotels, as profit centers, have more complex collection requirements receipts predominantly cash and credit cards
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Collections type Management Fees Royalty Fees System Fees Global Travel Agent Receipts
From Managed / Franchised hotels Managed / Franchised hotels Managed hotels Global Travel Agents
Method TT TT TT TT
HSBC
Cheque Pick-up / Deposit
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Credit card / Cash / Cheque Card acquiring Cash / cheque deposit Business travelers Operator-owned hotel Travel agencies Electronic payments (e.g. ACH) Credit card / Cash (Cash / cheque pick-up)
Cheque
Your collections a/c Electronic payments (e.g. ACH) Shops (within the hotel)
Account Reporting
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Card Acquiring
Leading Asia Pacific merchant acquirer with world-class infrastructure expertise
HSBC provides Credit and Debit Card Acceptance & Point-of-Sales solutions World-class, web-based card payments processing platform to be deployed across the Asia Pacific region Internet-enabled chargeback management system Online reporting tool for merchants card activity Highly secure with real-time fraud monitoring system
India Country Australia Bangladesh Brunei China Hong Kong Card Acquiring
-
-
Indonesia Japan Korea Macau Malaysia Mauritius New Zealand Philippines Singapore Sri Lanka Taiwan Thailand Vietnam
-
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Paper-based Collections
Extensive branch and alliance network coverage in the region
Alliance Outlets 800 784 75,700 906 14,201 458 30 290 1991 145 10,601 9,385 812 32 Country Australia Bangladesh Brunei China Hong Kong India Indonesia Japan Korea Macau Malaysia Mauritius New Zealand Philippines Singapore Sri Lanka Taiwan Thailand Vietnam Branches 24 9 10 67 143 47 14 6 11 3 40 12 4 8 11 14 33 1 1
Convenient cash / cheque deposit to the nearest branch / HSBC alliance collection points
Cash / cheque pick-up arrangements available, subject to client requirements & security considerations
Courier Pick-up
A value-added service for those out of reach
HSBC also offers courier pick-up services for hotels situated in places where there is no HSBC branch / alliance nearby Subject to customer requirement and security considerations
Courier Pick-up Country Cash Australia Bangladesh Brunei China Hong Kong Cheque
Conditional -
Conditional
N/A
Referral only Referral only
Referral only Referral only
Branch
India Indonesia
Hotel
-
-
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eChannel
YOUR NEEDS OUR SOLUTION - HSBCnet
Operations in different locations across various time zones would lead to information gaps Funding and liquidity mismatches might be caused A good Management Information System is needed so that quantum and timing of funding can be determined accurately Tools to operationalise the decisions
A secured banking platform which provides multiple levels of accessibility, visibility and control over the accounts of different stakeholders (e.g. owned / managed / franchised hotels) in different countries All information on one single platform to achieve global monitoring, regional oversight and local control Access to cash management services for execution of time-critical decisions Flexible configuration (e.g. authorisation level) at global / regional / local level Easy access via Internet
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Liquidity Management
The Challenge
Due to business nature, hotels have large fluctuation in cash flows (highly dependent on number of visitors in different seasons)
Revenue
Time
A full range of investment services for domestic or offshore deposits Consolidated enquiry and reporting to provide visibility at a liquidity management level
Also, the geographic spread and time zone difference of hotels make control and monitoring at head office level difficult
Visibility and control Idle funds at different locations minimised Excess surplus concentrated for better management Debit interest costs reduced Investment of surplus funds to maximise yield
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Summary
HSBCs offering
Payables
Flexible, automated and scalable end-to-end payments solutions across the region, enabling prompt electronic payments, payment advising, and outsourcing of cheque payment issuing.
Collections
With more than 100,000 collection point, extensive courier and card acquiring service in the region, HSBC fully supports every collection needs of hotel clients.
Channels
HSBCnet provides real-time visibility of accounts and transactions, with secure access/control from any computer across the globe.
Liquidity
Effective use of surplus cash via in-country and cross-border liquidity management. Real-time visibility offered by HSBCnet enables optimal investment decisions to be made.
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