A pre-authorisation allows a hotel to place a hold on a sum of money on a guest’s payment card. This means that the guest’s card issuer will allow the hotel to debit up to the pre-authorisation amount, usually within seven days.
Reasons a hotel can place a pre-authorisation on a card include:
- Making sure the hotel can debit for a no-show within their stated T&Cs
- Covering the cost of the stay plus other potential charges such as room service or bar tabs
- Holding a place on an excursion or a spa treatment
- Holding funds for a security deposit in the case a hotel needs to charge guests for damage upon checkout
The guest can choose to pay on a different card or by cash, but until the bill is settled the hotel can be sure that they will be paid for services even if there is a later issue.
Can a hotel charge a different amount to the pre-authorised amount?
When the guest has spent less than the pre-authorised amount, the hotel can process the payment request for a lower sum. However, if the guest ends up owing more than the pre-authorised payment, a new charge will need to be processed.
Why are pre-authorisations important for hotels?
A pre-authorisation offers security for a hotel when taking a booking and during a guest’s stay.
Before the guest arrives, pre-authorising the amount of the first night of their stay secures the booking. In pre-COVID-19 times, no-shows would account for up to 2% of bookings; being allowed to charge for the first night can encourage a guest to cancel in good time.
Upon arrival, pre-authorising the amount of the stay plus more per day should cover room service or other charges during the stay. It offers security in case the guest can’t pay at the end of the stay.
A hotel may not want to charge a guest for a tour, experience, or transfer before they receive the service. Pre-authorising the amount gives surety that the vendor can be paid in advance, knowing the balance will still be settled through the guest’s card.
In short, being able to pre-authorise a stay on a card through an embedded payment solution such as Kovena, ensures the hotel has cashflow and can help reduce no-shows as well.