A Hotel Payment Processing Guide

Hotels, like many businesses, handle payments daily. But, unlike most businesses, hotels face unique challenges when it comes to payments and receiving funds. For example, they collect payments through third-party channels like online travel agencies (OTAs). They also deal with things like pre-payments plus online and on-site payments, and the nature of their business makes them more prone to chargebacks. 

That’s a lot, right? And we haven’t even covered half of it. 

In this blog, we explore the ins and outs of seamless hotel payment processing—from pre-stay to post-stay. Discover why getting your hotel payment strategy right from the start isn’t just good for revenues but is the key to transforming your guests’ experience and ensuring smooth operations for your business.

 

Quick links

What is RoomRaccoon Payments

What are the main payment methods for hotels?

What are the key fees involved in hotel payment processing?

How to keep your hotel payments safe and secure

Benefits of integrated hotel payments

How to make integrated payments work for your hotel

What is RoomRaccoon Payments?

What are the main payment methods for hotels?

Popular payment methods for hotels vary based on region, market, and guest preferences. Below, we explore some commonly used options:

• Debit and credit cards
• Virtual credit cards (VCCs)
• Cash
• Digital wallet
• Point-of-sale (restaurant, spa)
• Pre-payments
• Virtual wallet

 

1. Debit and credit cards

There are three main types of payment transactions: card-present (CP), card-not-present (CNP), and contactless payments.

CP Transactions 

Card present payments mean the guest is physically present at the hotel and uses their credit card to make a payment by inserting or swiping. The guest may also be required to enter their PIN to complete the transaction.

CNP Transactions

Card-not-present payments mean the guest is not physically present at the hotel. These include online payments through your booking engine or other online platforms and MOTO (mail-order/telephone-order) payments, where the guest shares card details via email or phone.

Contactless Payments

Contactless payments allow guests to pay without interacting with the payment terminal. They simply hold their card or mobile wallet-equipped smartphone over the terminal, which securely reads and transfers the encrypted information

 

2. Virtual credit card (VCC)

A VCC is a temporary credit card number issued by a bank. It allows customers and businesses to make online payments without revealing actual card details. OTAs like Booking.com and Expedia often use VCCs to send payments to hotels. 

VCCs are issued for a specific transaction for a specific amount and have an activation date attached. 

 

3. Cash

Cash transactions have become increasingly rare in the hotel industry, yet they continue to be the favored option for some guests. For instance, a 2022 survey from Statista revealed that 48% of travelers worldwide still chose to use cash for their hotel accommodations, with even higher preferences in areas like Asia-Pacific (57%) and the Middle East and Africa (51%).  

 

4. Digital wallets

Many people are swapping physical cards for their phones, using technologies like Apple Pay, Google Pay, and Samsung Pay. A mobile or digital wallet is an app that securely stores your payment information, turning your phone into a convenient payment tool.

 

5. Point-of-Sale 

A point-of-sale (POS) system, which is often confused with a point of interaction (POI), refers to a designated area where payment transactions take place. This typically involves the use of devices like barcode scanners or cash registers. In a hotel, one example of such an area is the front desk during checkout.

A POI, on the other hand, is a payment device that facilitates communication between a cardholder’s card and the device, utilizing technologies such as magnetic stripes, chips, or mobile apps.

 

6. Pre-payments

Receiving payments upfront helps improve cash flow and reduces the risk of last-minute cancellations or no-shows. Hotels that capture bookings through their website enjoy these benefits by charging either the full or a partial amount at the time of booking.

 

7. Virtual wallets

Booker profiles are a treasure trove of guest details, from booking history to personal preferences. Now, with virtual wallets, they can also securely store deposits for future bookings.

 

Online payments are changing the way hotels operate, making it easier, faster, and safer for guests to book their stays. While convenience has its costs, it is a small price to pay for the seamless experiences that payment services offer. 

Behind the scenes, a network of dedicated players collaborates, each contributing their expertise to ensure our financial interactions are smooth and efficient.

There are 3 main types of credit card processing fees:

1. The interchange rate is a fee imposed by your guest’s issuing bank for each credit card transaction. This fee is conveyed to your payment processor, who then charges you, the merchant, based on a calculation that includes a percentage of the sale and fixed fees. The amount is non-negotiable, representing a cost associated with accepting credit card payments. In essence, you pay the price for the convenience and security of processing credit card transactions in your business.
2.  An assessment fee is a payment that credit card networks charge for services related to network operations. These services include ensuring PCI compliance, among others. The fees are passed on from the credit card networks to you, the merchant, and are calculated based on several factors. These fees contribute to the framework that allows your business to securely accept credit card payments.
3. Payment processor and gateway fees refer to service providers’ costs for processing electronic payments. These fees include monthly and per-transaction fees, and providers may also charge additional fees for setup, terminal rentals, and processing chargebacks. While some flat fees may be negotiable, monthly and per-transaction charges are usually fixed. These fees reflect the expenses related to using the infrastructure and services provided by payment processing entities.

 

How RoomRaccoon Payments keeps hotel transaction fees flexible

 

Blended VS Interchange Plus Plus

RoomRaccoon Payments provides two widely used payment pricing models, Blended Rates and Interchange Plus Plus. The main difference between the two is the level of transparency in the billing process. 

Each model has its own unique benefits, which we will delve into below:

 

Interchange ++ 

 

The Interchange Plus Plus pricing model offers transparency by separating the card processing charge into three distinct fees. This enables hotels to clearly understand the charges they are incurring:

• Interchange fee: During card transactions, the cardholder’s bank charges the acquirer or the merchant bank for processing the payment. 

• Card scheme fee: Card schemes (Visa or Mastercard) charge the merchant bank a fee for the use of their systems and networks.

• Processing fee: The processing fee is the cost that the payment service provider charges to the business for using their services.

 

Blended Pricing

 

The blended pricing model includes the three types of fees we’ve discussed above, seamlessly merging them into a singular cost. This means that a hotel won’t be able to tell exactly how much they’re paying for the individual interchange, card scheme, and processing fees.

However, it makes it easier for the hotel to predict their expenses for a specific type of transaction and plan their monthly budget. The pricing model can either charge a fixed fee per transaction or give different rates depending on the type of payment card being used or the number of transactions processed. Blended rates are also more cost-effective for hotels processing many international payments.

How to keep your hotel payments safe and secure

 

According to Adyen’s 2024 Hospitality Report, 72% of guests worry about the risk of fraud when booking and 50% of hotels have reported an increase in payment fraud attempts over the past year. 

With its high-value transactions, the hotel industry is a prime target for fraudsters and cybercriminals skilled at breaching basic online defenses. 

To ensure the safety and security of your hotel payments, it’s recommended to use a hotel payment processing system that adheres to industry security standards and incorporates the latest fraud protection tools, including:

• PCI Compliance: Ensures that the system meets the Payment Card Industry Data Security Standards, safeguarding cardholder data.
  
• Payment tokenization: Replaces sensitive card information with a unique identifier or ‘token,’ reducing the risk associated with data breaches.
  
• 3D Secure 2.0: Adds an extra layer of authentication for online transactions, helping to prevent unauthorized payments
  
• Chargeback dashboard: Provides tools to manage and dispute chargebacks effectively, minimizing potential revenue loss.
  
• Pre-authorization: Allows for the temporary hold of funds to verify the availability of sufficient balance, ensuring payment security.
• Secure guest payment links: Generate secure payment links for bookings or extra charges, reducing the need for guests to share card details.
• Integrated payments: Consolidate payment processing directly into your PMS. This reduces potential security vulnerabilities associated with data transfer between platforms.

 

Learn more about hotel payment security with RoomRaccoon.

Benefits of integrated hotel payments

31% of hotels report that reconciliation and related administrative tasks are hindering their business ambitions. Many hoteliers still continue to grapple with disconnected operational systems, especially when payment solutions and property management systems (PMS) fail to work seamlessly together.

This lack of integration forces them to spend excessive time reconciling payments, making it impossible to offer a seamless, connected guest experience in which payments are effortlessly integrated into the guest journey.

How can integrating your hotel payments transform your business?

Let’s explore the key benefits of integrated hotel payment systems:

 

1. Delighting guests

Amadeus’s study highlights that flexible payment options significantly boost guest satisfaction. With integrated payments, you can seamlessly incorporate payments into your unique guest journey. No front desk? Add a secure payment link to online check-in instructions for smoother stays and fewer hassles. Do you deal with many guest inquiries? Send a booking proposal document that’s automatically synched with your reservations calendar, and as soon as payment is received, the booking becomes confirmed.

 

2. Faster, frictionless payments

When your payment processing system isn’t integrated with your PMS, guests may encounter inconvenient payment processes, such as being redirected to third-party sites. This creates a disjointed experience and potential delays. An integrated solution also captures and stores payment details during check-in or booking securely. This streamlines future payments and enhances the experience for both guests and staff.

 

3. Fewer data entry errors 

Manually entering card details increases the chances of making mistakes and results in higher fees and chargebacks. On the other hand, an integrated payment processing system minimizes errors in data entry and calculations, freeing up staff from the burden of rectifying issues. As a result, reports generated by the system can be relied upon for their accuracy.

 

4. Streamline reconciliation to save time

With integrated hotel payments, reconciliation becomes effortless. Payments are automatically matched to a guest’s profile in your PMS, so there’s no need to manually transfer data or create invoices. Everything is connected, making it easy to track transactions and solve payment issues in one place. This means less time spent on admin and more time to focus on running your hotel.

 

5. Reduce costs and maximize revenue 

While credit card processing fees may seem like an added expense, they’re often outweighed by the revenue gained from meeting guest preferences. With 68% of guests choosing online payment methods, offering integrated solutions helps you capture more bookings and revenue. Additionally, a seamless payment process can encourage guests to spend more on extras like upgrades or add-ons, further boosting your revenue.

 

How to make integrated payments work for your hotel

 

Not all accommodation businesses do things the same way… and that’s okay! The beauty of indie hotels is that you don’t have to follow the crowd.

Yet, it’s important to have the flexibility to choose payment channels that work for your unique guest journey. Relying on one payment channel can make your business vulnerable to disruptions.

RoomRaccoon Payments offers a range of ways to collect payments at every stage of the guest journey. Take a look at the options.

 

1. Hotel website

RoomRaccoon’s Booking Channel Report 2024 says over half of all bookings come from hotel websites. As more travelers prefer to book directly, it’s vital to process hotel payments through your website. It also happens to have many benefits:

• Improved cash flow with prepayments
• Higher guest spending on add-ons and special packages.
• Increased revenue from money saved on commissions.
• More control over the guest experience and guest data.

 

Take an interactive tour of RoomRaccoon’s booking engine to experience effortless payments in action.

 

2. Online check-in and check-out

Online check-in is a must for modern hotels. It’s vital for aparthotels and serviced apartments without front desks. This process allows for the straightforward capture of guest details and payments before arrival.

With RoomRaccoon, you can also streamline departures with an automated check-out process. Guests receive a secure payment link to settle any outstanding balance before they leave.

Plus, RoomRaccoon takes online check-in to the next level. It allows you to upsell extra services via a digital guest service menu. This unlocks new revenue and improves the guest experience.

 

3. On property

The majority of hotels continue to accept on-property payments, offering guests the flexibility to settle their bills during their stay. However, payment methods are shifting to digital options like mobile wallets. 

To accommodate guest preferences, the RaccoonCardMachine offers tap-and-go, Samsung Pay, and Apple Pay. It’s also fully integrated with RoomRaccoon’s PMS, so manual entry is a thing of the past. 

Another major payment processing hassle for hotels is managing payments from spas, restaurants, and other points of sale. Guests expect to settle everything in one easy bill. RoomRaccoon’s Integrations Hub lets you connect with major POS providers. This integration lets you post charges from other facilities guests enjoy into your RoomRaccoon PMS. Simple and efficient! 

 

4. Digital payment links

A digital payment link is a secure, clickable link sent to your guests, allowing them to make payments online quickly and conveniently. It eliminates the need for in-person card swipes or manual bank transfers. You can share the link via email, SMS, or WhatsApp, giving guests the flexibility to pay from anywhere.

 

5. Request for proposal (RFP) document

While online bookings dominate, hotels still receive occasional phone or email inquiries—especially for special bookings like group reservations or events.

That’s where an RFP (Request for Proposal) comes in. An RFP is essentially a provisional booking, allowing you to send a customized proposal to the guest. To confirm the reservation, you include a secure payment link in the proposal, making it easy for the guest to pay and finalize the booking.

Learn more about how to turn inquiries into direct bookings with RoomRaccoon.

 

6. Virtual wallet

The Virtual Wallet is a standout feature of RoomRaccoon’s integrated payment processing system, designed to simplify handling prepayments and advance deposits. Here’s how it helps:

For wedding locations

Managing large prepayments from wedding couples can be challenging, especially when the funds aren’t immediately tied to a reservation or exceed the booking total. With the Virtual Wallet, you can:

• Securely collect these funds via RoomRaccoon Payments.
• Manually add received bank transfers for accurate tracking.
  This ensures all payments are safely recorded and ready to allocate when needed.

For corporate agreements

Hotels often enter into corporate agreements where companies pay a lump sum upfront to be used for bookings throughout the year. With the Virtual Wallet, you can:

• Easily track how much credit remains for each corporate client.
• See the remaining balance directly in the booker profile and link it to individual reservations.

Refunds on cancellations

A common scenario for hoteliers is when a guest cancels a prepaid booking, and instead of issuing a refund, the hotelier offers the prepayment as credit for a future stay.

 

7. Virtual credit cards (VCCs) dashboard

Using a native payment system like RoomRaccoon Payments has powerful benefits. It integrates seamlessly with your channel manager and other systems. One standout feature is the VCC Dashboard, designed to simplify handling virtual credit cards (VCCs) from OTAs.

With RoomRaccoon’s intuitive VCC Dashboard, you can:

• Instantly view reservations, expiration dates, associated booking channels, and payment amounts in one place.
• Virtual credit cards are safely imported by the channel manager and stored for easy access.
• Schedule automatic charging of VCCs on their activation date, ensuring payments are processed on time without manual effort or missed deadlines.

 

8. Chargeback dashboard

Chargebacks are an unfortunate reality, but managing them doesn’t have to add to the hassle. With RoomRaccoon Payments, you gain access to a Chargebacks and Disputes Dashboard designed to streamline the process and ease the burden.

Here’s how it helps:

• Respond to chargebacks efficiently with all the necessary tools in one place.
• File documentation seamlessly without the need for back-and-forth emails or manual submissions.
• Monitor the progress of your disputes and stay updated on their status at a glance.

 

9. Cash

To accommodate guests who prefer cash payments, RoomRaccoon Payments includes a cash drawer feature, which enables hotels to easily track and record cash transactions within the system.

 

10. Refunds

Quick and hassle-free refunds leave a lasting good impression on your guests. System inefficiencies can cause delays and frustration. An integrated system makes refunds seamless. Simply navigate to the guest’s reservation, click the “Refund” button, and select the amount to process. It’s that easy!