Lodging merchants, such as hotels, motels and resorts, are classified as high risk by Visa and MasterCard and often have hard time setting up a merchant account on regular terms. This is particularly true for new establishments, with no previous payment processing experience. The reason, as always, is that historically lodging merchants have generated higher-than-average levels of chargebacks.
There is a set of rules regulating the processing of credit card payments each time a lodging reservation is made or cancelled. If you manage a hotel, motel or a resort, you need to incorporate these rules into your payment processing procedures and train your staff on implementing them.
The rules for processing credit card payments at hotels revolve around the Guaranteed Reservation program most such merchants typically participate in. Guaranteed reservation is one that is paid in advance and the hotel is then required to have a room available when the consumer who made the reservation arrives and until checkout time on the following day.
If the consumer cancels a confirmed reservation before 18:00 on the arrival date, the hotel cannot charge a no-show fee. Otherwise, a no-show charge equal to one night’s lodging can be assessed.
How to Manage Credit Card Payments for Guaranteed Reservations
The following procedures should be followed when processing credit card payments for guaranteed reservations:
- When a consumer requests to book a room with a credit or debit card, you must explain the terms of the guaranteed reservations program, and specifically provide the following information:
- An authorization check will be made when the consumer arrives to ensure that there are sufficient funds on the card to cover the lodging expenses. The check acts like a pre-authorization, which places a hold on a portion of the available credit line.
- The cancellation procedures that must be followed for a no-show charge to be avoided.
- Take the consumer’s card account information and confirm the room rate and location. Then provide a reservation confirmation number. If the reservation is made by phone, you should also provide the confirmation number and cancellation procedures in writing (via email).
- If a cancellation request is made in accordance with you stated policy, you must honor it and provide the consumer with a cancellation number.
- Prepare a registration card and assign a room number to it, before your customer’s expected arrival.
- When a consumer who has made a reservation arrives on the specified date, you must provide a room as agreed. If you are unable to do that, you must provide a comparable room for one night at a different location and at no additional charge, as well as transportation to the other location and a three-minute domestic or long distance phone call.
- If you receive no cancellation request and the consumer who made the reservation does not stay at your hotel, you can assess a no-show charge by following these following procedures:
- Complete the transaction, as you normally would, and write the words “guaranteed reservation / no-show” in the cardholder signature field.
- Follow regular authorization procedures.
- If an authorization approval is received, deposit the no-show charge.
- Store the actual no-show registration card for six months from the date the transaction is deposited.
Everyone in your organization who works at the check-in or takes phone calls from customers should be able to follow these procedures.
No-show charges are the primary reason hotels fall into the high risk credit card processing category and you will never be able to completely preclude disputes stemming from them. This is why it is very important that you keep detailed records of all of your no-show charges and are able to quickly respond to all transaction copy requests and so prevent chargebacks.
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