I'm not going to top what my colleague from the Canadian Restaurant and Foodservices Association just said about small profit margins; however, I believe that the members of the joint committee, mainly those from the Industry Committee, can understand how tough times are in our sector.
What I can say is that the hotel sector is probably the one most dependent on payment by credit card, which is increasingly the operating method. Credit cards are mandatory for reserving rooms at hotels, and 95% of reservations are made by telephone or over the Internet. The balance of a stay is paid by credit card in 85% of cases, followed by debit cards and cash.
Visa and MasterCard believe that controlling 94% of the market isn't a problem since there is enough competition from other forms of payment such as debit, cash and cheques. Well, I can tell you that there is no such competition in our sector: credit cards are an integral part of the way we operate. That moreover is the case around the world. The hotel business can't survive without them.
The Quebec Hotel Association would like to tell you about the consequences of increased fees charged to merchants by Visa and MasterCard in our sector. I would like to draw your attention to one example, on page 14, of a rate structure that we have to deal with. This is a structure for one company. There's a different one for the other one. We went from a single fixed rate to an average of six variable rates depending on the type of card used, that is individual consumer, corporate, worldwide or premium, and the type of transaction, standard or electronic.
A number of our clients use a company or worldwide card, which involves higher fees. The majority of transactions are billed at the standard transaction rate, that is the highest rate, because the hotelier doesn't have the client's credit card in hand at the time of the reservation, which is done, once again, by telephone or over the Internet. The card is processed by a management system of the property. In our sector, this is a very common operating method that makes it possible to inform various services at the hotel which client has arrived. The system ensures high-quality client service.
At the end of the day, the various rates thus do not allow the hotelier to determine the amount to be allocated to the payment of transaction fees, since there is no tool for determining what type of transaction card was used. These various rates represent an average increase of 11.5% to 17%, as shown on page 15. For a single hotel, these fee increases represent additional costs varying between $11,000 and $55,000 a year. Hoteliers currently pay these fees out of their profits, and increasingly out of reserve budgets. These fees cannot be indefinitely absorbed by the hotel; they will be passed on to consumers, whether or not they are the holder of a costly card.
Apart from the increase imposed on the client, we feel that the entire operational system in a business environment and key sector of the tourist industry is being affected and taken hostage. The hotel industry would like to live without it.