Why are Hotel Deposit Policies so Important?

One of the things guests will often look at when booking a room at an accommodation is, what the hotel deposit policies are. This shouldn’t come as a surprise – after all, no one wants to lose out on their hard-earned money if they have to cancel their trip for some reason. A hotel deposit policy is therefore an important part of the guest experience. It gives guests the peace of mind that their money is safe, and it also protects the hotel from last-minute cancellations. But what makes a good deposit policy? Read on to find out. 

What is a Hotel Deposit Policy?

By having a hotel deposit policy in place, hotels are able to protect themselves from incurring charges for guest damages or cancellations. Deposit policies ensure that there is always some form of compensation should an issue crop up. In most cases, the hotel will keep the funds on file until after checkout at which point they will release any unused funds back to the cardholder. However, if any damages occurred or the cancellation policy was not followed, then the hotel can charge the card on file for those incurred costs.  


There are many reasons why hotel deposit policies are important. Not only do they help minimise last-minute cancellations and no-shows, but they also protect hotels against damages that may occur during a guest’s stay. By having a hotel deposit policy in place, hotels can rest assured knowing that their business is protected should any unforeseen issues arise. 

By having a hotel deposit policy in place, a hotel can rest assured knowing that their hotel is protected should any unforeseen issues arise.

What Makes a Good Deposit Policy?

There are a few key things that every good deposit policy should have: 

  • A clear cancellation policy 

    • This should state when and how guests can cancel their booking, as well as any cancellation fees that may apply. 
  • A refund policy

    • This should outline when and how guests will receive their deposit back if they do need to cancel their booking. 
  • A credit card guarantee

    • This protects the hotel from no-shows and last-minute cancellations. 
  • Clear terms and conditions

    • These should be easy for guests to understand and should be prominently displayed on the website or booking platform. 

By having these elements in place, hotels can be sure that their deposit policy is fair, transparent, and protective of both the guests and the hotel. 

Importance of hotel deposit policies

Let’s take a look at the key advantage of having a proper hotel deposit policy below:

1. Help protect a hotel from no-shows and last-minute cancellations

When hoteliers set their hotel deposit policies, they are taking proactive measures to protect their business from no-shows and last-minute cancellations. By requiring guests to provide a credit card or other form of payment upfront, hoteliers can ensure that they will not be left with empty rooms and lost revenue. In addition, hotel deposit policies can help to deter guests from making last-minute changes to their reservations as they will be less likely to do so if they know that they will forfeit their deposit. As a result, hotel deposit policies can play an important role in protecting hoteliers from financial losses.

2. Help manage inventory and room availability

For hoteliers, one of the most important aspects of managing a property is ensuring that rooms are available when guests need them. This can be a challenge, especially during peak periods when demand is high and cancellations are common. One way to manage this risk is to implement a deposit policy. Under this policy, hoteliers require guests to pay a deposit when they make a reservation. If the guest cancels the reservation, the deposit is forfeited. This helps to ensure that hoteliers have some financial protection against last-minute cancellations. In addition, it can also incentivize guests to commit to their reservations, which can help to fill rooms during periods of high demand. As a result, deposit policies can be an effective tool for hoteliers to manage their inventory and room availability.

3. Help hotels manage their cash flow and prevent bad debt

One way hotels can manage their cash flow is by implementing deposit policies. Deposit policies require guests to pay a certain amount of money upfront, which helps to ensure that the hotel will receive at least some payment for the stay.  Hotels can charge a deposit to ensure that guests don’t damage their property or don’t leave without paying. Additionally, deposit policies can help to prevent bad debt, as guests who do not pay their hotel bill in full may be required to forfeit their deposit. While hoteliers cannot always prevent guests from defaulting on their payments, deposit policies can be an effective way to minimise financial losses.

4. Help streamline the check-in process for guests

One way to streamline the check-in process is to implement a deposit policy. By requiring guests to provide a credit card or cash deposit at check-in, hoteliers can reduce the time spent checking ID cards and taking down contact information. Deposit policies and pre-authorisations can help hoteliers to save time and ensure that guests have a positive experience from the moment they arrive. It can help to improve the guest experience by making it easier and faster to check in. When a hotel uses a Property Management System (PMS’s) that embed Kovena, they can directly take pre-authorisations from their central reservation system.

5. Help provide a sense of security and trust for guests

Hoteliers understand that one of the most important aspects of providing a good guest experience is ensuring that guests feel safe and secure during their stay. One way to build trust and provide a sense of security is to have clear and fair deposit policies in place. Deposit policies should be clearly stated at the time of booking, and hoteliers should do everything possible to make sure that guests understand the policy before they arrive. With a clear written agreement, guests can be assured that they will get their money back if they follow the hotel’s policy. Hoteliers should make sure that they are available to answer any questions that guests may have about the policy. By taking these steps, hoteliers can help build trust with their guests and ensure a positive experience for all.

Deposit Amounts

Hotel deposit policies vary depending on the hotelier. However, a common policy is to charge a deposit at the time of booking and then refund the deposit if the guest cancels their reservation at least 72 hours prior to arrival. The amount of the deposit can vary but is usually equal to one night’s stay. For example, if a hotel room costs $100 per night, the hotel might charge a $100 deposit at the time of booking. If the guest cancels their reservation more than 72 hours before their arrival date, they will receive a full refund of their deposit. However, if they cancel less than 72 hours before their arrival date, they will forfeit their deposit. This policy helps to ensure that hotel rooms are always in high demand.

Pre-authorisations and Automation Built for Hotels

Pre-authorisations help guarantee reservations as it allows the hotel to place an amount on hold on the guest’s card. The card issuer enables the hotel to debit up to the pre-authorisation amount, and this can serve as an efficient way to hold the funds for the security deposit. 

Hotels that use more advanced Booking Engines enjoy this pre-authorisation feature. Kovena is a payment solution that can be embedded into a hotel PMS or Booking Engine to enable advanced pre-authorisation and reduce no-shows as a result.

Hotel deposit policies are important to protect the hotel and its guests. By requiring a deposit, the hotel can ensure that guests are serious about their reservation and that they will not cancel at the last minute without penalty. This policy also helps to prevent no-shows, which can be costly for hotels. Guests appreciate knowing upfront what the deposit policy is, so there are no surprises when they arrive at the hotel. 

With clear hotel deposit policies and terms & conditions in place, hoteliers will provide guests with a streamlined experience when creating a booking. With an advanced solution like Kovena, hoteliers are able to create automated card payments aligned with their hotel’s booking terms and conditions, which in return, unlocks revenue by reducing no-shows and man-made errors. Contact us to learn more about what our payment software can do to make your overall operations efficient, secure, and frictionless.

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