Hotel Payment Processing: Overview and How to Reduce Fees

Aug 19th, 2024

ChargebacksPayment ProcessingInterchange

When it comes to hotel payment processing, every business requires a personalized touch to help them reduce fees in their setup. If you manage or own a hotel, motel, resort, or bed and breakfast, you might be spending too much on your payment processing solution without even realizing it. 

What should you know about the finer points of your payment processing agreement and how to save more money with the same transactions? Here are five tips that can help you keep money inside the business instead of flowing freely to credit card companies.

What to Know About Hotel Payment Processing

Before getting in too deep with ways to reduce the fees you encounter with running independent hotels or bed and breakfasts, property managers should be aware of the importance of payment processing. This describes your ability to accept payments (or refund them). Most hotels, motels, or resorts will want to accept credit and debit cards, though ACH or e-checks are also on the table and can help keep more money in your pocket.Some businesses even want the ability to accept cryptocurrency payments.

Independent hotels, motels, bed and breakfasts, and resorts all need a very specific solution when it comes to managing incoming payments. Not all payment processors are created equal. 

Some of the services required to run your business efficiently include flexible payment method options, book now and pay later, and the ability to deal with complex cancellation policies. Of course, all of this should be done with local and state regulations in mind. 

5 Tips to Reduce Hotel Payment Processing Fees and Costs

Payment processing is essential for your business as an independent hotel owner or manager, but it’s not free. Your payment processor deserves payment for their services, after all.

That said, how they take their cut can significantly impact your bottom line. Some payment processors will also offer you money-saving services that can reduce your fees overall, saving you money despite what your processor takes in payment.

Here are a few ways that you can reduce your hotel’s payment processing fees.

1. Be the Merchant of Record

Being the Merchant of Record (MOR) for your business sounds complex but could save you tons of money if you are willing to take it on. The MOR is the business that holds the merchant account with the processing bank, enabling easier deposits right into the business checking account. 

There are several benefits to becoming the MOR for your hotel, motel, or other rental business. You can have more customizable rates and you also get direct access to the processor in the event of an inevitable chargeback. Plus, you get all the security compliance necessary to manage your money. 

The bottom line is that you get control over the funds that flow in and out of your hotel.

2. Look for Interchange Plus Pricing

Another way to save money on your payment processing is by implementing interchange plus pricing. Instead of a card processor charging you a flat rate for all transactions, they charge you directly for the interchange (the bank fees and card brand fees) plus a small fee known as basis points which is how the processor is paid. 

While it can be difficult to predict exactly what interchange plus pricing will cost you, many hotels and bed & breakfasts find that they save more with this method. Reward cards, corporate cards, and credit cards may all have higher rates than debit cards, so paying closer to the exact interchange rate can cut your costs compared to a flat rate across the board. 

With the transparency of interchange plus pricing, it’s easy to see what you’re spending on processing. You’ll quickly see that you’re paying less on cards with lower interchange rates, effectively putting more money in your account.

3. Ask About Net Billing

Inevitably, your hotel will eventually come up against a need to refund a guest for their stay, even if it's not your fault. The problem is that you paid an interchange on that transaction which means you may be on the hook for some of the cost even though you no longer have the booking. 

If you have net billing, you might be able to recoup some of those costs. 

There are so many unpredictable situations that could lead to an influx of cancellations. With our net billing policy, the negative interchange might be greater than your regular sales interchange, allowing you to keep money in your account even in dire circumstances.

4. Implement Compliant Surcharging

To offset the cost of accepting credit cards, it may be wise to look into compliant surcharging. A surcharge is simply a small fee that you add to each booking that assists in covering the costs of accepting that card, usually calculated as a percentage of the final bill. 

Keep in mind that there are some rules to compliant surcharging. You cannot include surcharges on debit or prepaid cards, and some states may have more restrictions. Refunds can be a bit more complex and there are limits to what you can charge (they can’t go over 3 percent). 

Don’t forget that you do need to disclose this to the consumer when it comes time to talk about payment methods. It should be crystal clear on the first page referencing credit cards, at the point of sale or transaction, and should be broken out on the receipt.

If you’re worried about the rules of compliance, work with a payment processor that has experience in the matter, like Ascent. Our 100% compliant solution, AscentZeroCost, can help you reduce your fees as much as possible while still leaving the payment method in complete control of your customer.

5. Have a Chargeback Plan

Inevitably, all businesses will be faced with a chargeback at one point or another. Having a plan in place when you open the doors to your hotel, motel, or bed & breakfast is essential. Your payment processor will play a crucial role by advising you and providing chargeback resources and tools to help you dispute the chargeback. By reducing and avoiding chargebacks, you can save significantly. 

Payment Processing with Ascent

Are you ready to keep more of your money while making more bookings? Ascent can help reduce payment collection times, the need for manual entries, and the number of trips to the bank. We feature compliant surcharging and the ability to book now and pay later, along with so much more. 

With more than twenty years of experience working with independent hotels, resorts, boutique hotels, and bed & breakfasts, we aim to make your payment processing frictionless with streamlined operations. Reach out to us today to see if we might be the right fit for you!