A Hotel Payment Processing Guide

Hotel payments are anything but straightforward. A guest might book through an OTA, pay a deposit a month in advance, and settle the balance at check-in—while another pays in full through your hotel’s booking engine or charges extras to their room during their stay. Managing these transactions without the right system can quickly turn into a headache, leading to cash flow delays, reconciliation issues, and lost revenue.

A secure and flexible hotel payment processing system ensures every transaction—whether it’s a pre-authorization, direct booking, or OTA payout—flows smoothly, keeping hotels in control of their revenue.

How does hotel payment processing work?

Every time a guest pays, their money doesn’t magically appear in your account. There’s a whole process happening behind the scenes:

1. Guest payment: The guest enters their card details online or taps/swipes their card at the front desk.
2. Payment gateway: This acts as a security checkpoint. It encrypts the guest’s payment details and sends them to the processor.
3. Payment processor: The processor works with the guest’s bank (or card provider) to approve or decline the transaction.
4. Hotel’s bank: If approved, the money is transferred to the hotel’s merchant account (although it may take a day or two to settle).

Now, here’s where it gets interesting—not all hotel payment systems are created equal.

Integrated vs. non-integrated payment systems

One of the biggest decisions a hotelier makes is whether to use an integrated or non-integrated payment system. Let’s break it down:

Common payment challenges in hotels

Processing payments isn’t always smooth sailing. Here are some of the biggest headaches hoteliers deal with when it comes to payments:

1. Transaction fees – Every payment comes with processing fees, and they add up fast! Hotels often pay higher rates due to the acceptance of international cards, higher volume of chargebacks, and card-not-present (CNP) transactions. 
2. Chargebacks & fraud risks – A guest disputes a charge, and suddenly, you’re on the hook for proving it was valid. Fraudulent bookings and stolen credit cards can also lead to unexpected losses. Learn more about effectively handling chargebacks and disputes. 
3. Handling multiple currencies – If you welcome international guests, accepting different currencies and dealing with exchange rates can be a hassle (and expensive).
4. Delayed payments and authorization issues – Pre-authorizations, booking channel payments, and refunds can take days to process, affecting your cash flow. Some payments get stuck due to authorization failures, and OTAs collect payments from guests and transfer them to hotels after the stay, causing cash flow issues that can affect daily operations.
5. Complex reconciliation – Each VCC is usually created for just one transaction, meaning hotels end up with a lot of different card numbers. This can make it harder to keep track of payments, requiring extra time and effort to match each VCC to the right booking. Check out our quick guide to managing VCCs in the hotel industry. 
6. Integration with PMS, booking engine, and POS – If your payment system doesn’t talk to your property management system, booking engine, and point-of-sale, you’re stuck manually entering charges, leading to errors and wasted time.

Each of these challenges can slow down operations and create friction for guests. The good news? The right hotel payment processing solution can help solve these issues.

Key features of a good hotel payment processor

1. Secure & fraud-proof transactions

No one wants to deal with chargebacks or fraudulent payments. A solid hotel payment processor should come with built-in security features like PCI compliance, encryption, and tokenization to protect guest payment data. The less risk of fraud, the better for both your hotel and your guests.

2. Fully integrated with your PMS, booking engine & POS

A good payment processor talks to your Property Management System (PMS), booking engine, and point-of-sale (POS) system. This means guest payments are automatically linked to reservations, restaurant bills, and room charges—no manual entry, no mistakes, and no wasted time.

3. Accepts multiple payment methods

Today’s travelers pay in all sorts of ways—credit cards, debit cards, mobile wallets, even alternative options like PayPal or Apple Pay. Your payment processor should be flexible enough to accept whatever method your guests prefer, so you don’t lose a booking because of payment limitations.

4. Handles pre-authorizations, deposits & refunds with ease

Hotels deal with pre-authorizations for security deposits, partial payments for bookings, and refunds when plans change. A good processor handles these seamlessly without tying up funds for days or making it a nightmare to process refunds.

5. Transparent pricing (no hidden fees!)

Payment processing fees can add up quickly if you’re not careful. Look for a provider with transparent pricing—one that uses a clear model like Interchange++, so you always know exactly what you’re paying without any surprises.

6. Reliable support with chargeback assistance

When something goes wrong (because let’s face it, sometimes it does), you need a payment processor that has your back. Look for one that offers chargeback support, helping you handle disputes efficiently and protect your revenue. The right provider should make it easy to challenge unfair chargebacks.

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.