Understanding Hotel Payment Processing Basics: Key Players

The hotel payment ecosystem operates through several key players working together to process transactions securely and efficiently:

Guest (Cardholder) — The guest starts the payment process using their credit card and can dispute charges through their bank if needed.

Hotel (Merchant) — The hotel accepts payments while maintaining PCI-compliant systems and manages payment-related customer service.

Payment Processor — The processor routes transaction information between parties and handles the technical aspects of payment settlement.

Card Networks — Visa, Mastercard, and others maintain the global payment infrastructure and set the rules and fees for card transactions.

Issuing Bank — The guest's bank provides credit cards, authorizes transactions, and handles cardholder disputes.

Acquiring Bank — The hotel's bank maintains merchant accounts and deposits processed funds into the hotel's account. These players interact seamlessly during each transaction, communicating in seconds to verify, process, and settle payments. Understanding their roles helps hoteliers optimize payment operations and resolve issues effectively when they arise.

Here, it’s important to note that the payments industry has seen significant consolidation, with many traditional processors merging or being acquired. Modern Payment Service Providers (PSPs), like Stripe, Square or Ayden provide the technological interface and bundle multiple of the payment services listed above into one solution. Some providers also white-label their processing services to other companies.

Common Payment Methods in Hospitality

Hotels must accommodate various payment methods to meet guest preferences and market demands. Here's an overview of the main payment methods and their implications.

Card-Present Transactions

These occur when guests physically present their cards at the hotel. Modern terminals support chip & PIN technology for enhanced security, while contactless payments offer convenience for smaller amounts.

Card-present transactions generally have lower processing fees and fraud risks since the physical card and often the cardholder's identity can be verified in person.

Card-Not-Present Transactions

Online bookings and phone reservations fall into this category, along with virtual cards commonly used by OTAs. These transactions carry higher fees and security risks due to the inability to physically verify the card.

Hotels must implement additional security measures like 3D Secure and CVV verification to protect against fraud. Virtual cards are increasingly common for OTA payments, offering enhanced security through single-use numbers.

Alternative Payment Methods

Digital wallets like Apple Pay and Google Pay are gaining popularity, combining security with convenience.

Bank transfers remain relevant for group bookings and long-term stays, with SEPA Instant Credit Transfer offering real-time settlements across Europe - a significant improvement over traditional SEPA transfers that could take 1-2 business days.

At HotelMinder, we expect SEPA Instant to become ubiquitous and widely used across Europe and for Europeen guests.

“Buy Now Pay Later” solutions like Klarna are emerging in the hospitality sector, particularly for advance bookings.

It’s also worth noting regional payment methods such as WeChat Pay and Alipay are essential for hotels serving international guests, especially from Asian markets.

Hotels should carefully evaluate which payment methods to accept based on their target market, considering both operational costs and guest preferences.

Glossary of Key Terms Every Hoteliers Must Know

Before we dive deeper into the complex subject of hotel payment processing, it’s important to make sure some of those often used terms are clear and well understood:

Merchant Account

A bank account that allows businesses to accept card payments. Hotels may have multiple merchant accounts for different currencies or properties.

Payment Gateway

The software that securely sends payment data to processors. Think of it as the digital equivalent of a physical card terminal.

Payment Processor

The service that routes transactions between banks. Unlike gateways, processors handle the actual movement of funds. Note that the distinction between gateways and processors has become increasingly blurred as many modern providers offer both services in one package.

Interchange Fees

The base cost charged by card networks for processing transactions. Fees vary by card type and transaction method.

Authorization Holds

Temporary fund reservations during check-in that block a specific amount without actually charging it.

Chargebacks

Forced refunds initiated by guests through their banks, often resulting in additional fees for hotels.

PCI Compliance

Required security standards for businesses handling card data. Non-compliance can result in significant fines.

Tokenization

The process of replacing sensitive card data with secure tokens for storage and future transactions.

3D Secure

An additional security layer for online payments, requiring cardholders to verify their identity with their issuing bank.

Types of Payment Solutions in Hotels

Many, if not most, modern Property Management Systems (PMS) now include integrated payment processing one way or the other. It can be either an external or an internal solution.

External Payment Solutions (Third-Party Processors)

In this case, the external Payment Processor is integrated into the PMS through APIs or other middleware solutions.

Hotels can work directly with payment processors or gateways independently of their PMS.

This approach typically offers more flexibility in processor choice and potentially lower rates, but may require additional technical setup and maintenance.

Advantages

• Often significantly lower processing fees
• More flexibility to switch providers and less dependence on PMS vendor
• Potential for better support from payment specialists

Disadvantages

• Additional vendor relationship to manage
• May need separate PCI compliance measures
• Can be more complex to set up and maintain

Common Payment Processors

Stripe is a developer-centric platform with extensive API documentation and modern interface. Standard rates of 1.4% + €0.25 for European cards, 2.9% + €0.25 for international cards. Popular choice for digital-first properties.

Adyen is an Enterprise-focused solution offering advanced features and global payment methods. Complex interchange++ pricing model. Minimum monthly invoice of €100 or 2.5% + €0.10 per transaction. Best suited for large hotel groups.

Worldpay is a traditional hospitality-focused provider with established banking relationships. Custom pricing based on volume, typically ranging from 1.5% to 2.5% + fixed fee. Strong presence in European markets.

Examples of PMS solutions offering external payment solutions: 5stelle, HotelTime, Clock, etc

Built-in Payment Solutions (PMS Native Processing)

This means the PMS vendor either has pieced together their own payment processing infrastructure, or has partnered with a specific processor to offer white-labeled payment services (often with Stripe).

The result is a deeply integrated payment process from within the PMS.

Advantages

• Seamless integration with no additional setup required
• Single vendor for support and troubleshooting
• Often includes specialized hospitality features
• Typically PCI-compliant out of the box

Disadvantages

• Usually more expensive than external solutions
• Limited flexibility to change processors
• Potential lock-in to the PMS vendor
• May lack advanced features available from dedicated processors

Examples of PMS solutions offering built-in payment solutions: Cloudbeds, Little Hotelier, Mews, etc

Understanding Hotel Payment Pricing Models

Hotels can choose from different pricing structures for payment processing. Understanding these is crucial for cost optimization.

Here's a detailed comparison of the two main models:

Interchange++ (IC+)

Interchange++ (IC+), also called "Interchange Plus Plus", consists of three distinct components:

• Interchange Fee — is the base cost set by card networks (Visa, Mastercard, etc.) and paid to issuing banks. It typically ranges from 0.20% to 1.80% depending on card type
• Scheme/Card Network Fees (First +) — is also paid to card networks for processing infrastructure and typically ranges from 0.02% to 0.65%
• Processor's Markup (Second +) — is the service fee charged by the payment processor. Usually a fixed percentage plus a small per-transaction fee and typically ranges from 0.5% to 1.0%

Therefore, the pricing structure for Interchange++ (IC+) is literally:

Interchange + Scheme Fees + Processor Markup = Total Cost

Key advantages / disadvantages

• Most transparent model in theory but much more difficult to understand and budget for
• Shows actual card network fees plus processor markup
• Typically offers lowest total cost
• Complex statements but allows detailed analysis
• Best for properties with high transaction volumes

Exemple

If interchange fee is 1.5% + €0.10, and processor markup is 0.5% + €0.10, then the total fee would be 2% + €0.20

Blended Rates

A simplified pricing model offering a flat percentage fee for all transactions, such as 2.9% + €0.30 per transaction, regardless of card type or transaction method.

Blended rates are typically proposed by Payment Service Providers (PSPs) and payment facilitators who target small to medium-sized businesses.

Key Points

• Single flat rate for all transaction types and straightforward monthly statements
• Simpler to understand and predict costs, simplified accounting and budgeting
• Typically higher overall cost and limited negotiating power
• Hides actual interchange fees
• May be suitable for small properties valuing simplicity

Example: Flat 2.9% + €0.30 for all transactions regardless of card type

Blended Rates vs Interchange++ (IC+) — Cost Comparison Table

Note: Regional variations play a significant role in payment processing costs, with rates varying substantially between North America, Europe, and Asia-Pacific markets. While these figures provide a general framework, actual costs depend heavily on your location, transaction volume, and the specific card schemes dominant in your market.

Popular Hotel Payment Solutions: Market Exemples & Comparison

Cloudbeds Payments — Blended or Interchange++

Built on top of Stripe, Cloudbeds Payments offers two distinct pricing models:

• Blended Rate Model: Fixed rate of 2.9% + €0.30 for standard cards, with additional 1% for specialty/international cards. Amex, JCB, UnionPay, etc.
• Cost+ Model (aka Interchange++ (IC+)): Variable rate consisting of base cost + 1.2% markup + fixed fee per transaction. Rates vary by card type and location.

Mews Payments — A hybrid Model

Built on top of Stripe, Mews Payments uses a hybrid pricing model:

• Core Processing: Interchange++ structure for Visa/Mastercard
• Alternative Cards: Blended rates for Amex, JCB, UnionPay, etc.
• It’s important to note that additional tokenization fee applies for card storage.
• Overall rates typically range from 2.7-3.5%

HotelTime — Choose your own Payment Processor

Hoteltime offers third-party payment processing integrations through its API infrastructure. While the system doesn't provide native payment processing, it maintains certified integrations with major payment providers and supports custom payment gateway connections.

The platform offers standard payment functionalities including real-time processing, automated reconciliation, and multi-currency support through its API layer. Integration possibilities include mainstream processors like Stripe and Adyen, with pricing determined by the chosen payment provider.

SabeePay — Stripe only

Built on top of Stripe, SabeePay offers a straightforward pricing model with a 0.5% convenience fee on top of standard Stripe fees.

How to Choose the Right Payment Solution for your Hotel

1. Understand Your Hotel's Needs

Your property's size and transaction volume determine which payment solution and pricing model will work best. Here's how to match your profile with the optimal solution:

Note: These thresholds are approximate and can vary by market and provider.

Smaller properties typically benefit from the simplicity of blended rates, while larger operations can leverage their volume for better pricing.

2. Hidden Costs to Watch For

Many hoteliers focus solely on processing rates, but hidden fees can significantly impact total cost of ownership. Here are the most critical fees to evaluate before signing any agreement:

Tokenization Fees

Possibly the most overlooked yet significant cost for hotels. Some processors charge €0.10-0.50 per stored card, regardless of whether you process a payment.

With hundreds of reservations monthly, these fees can add up quickly. In some situations with the potential to even surpass yearly PMS subscription fees!

Who charges tokenization fees: Mews

Currency Conversion Charges

These fees often hide in exchange rates, typically adding 1-3% markup. Dynamic Currency Conversion (DCC) can add another layer of costs.

Some providers offer better rates for specific currency pairs - negotiate these if you have consistent foreign transaction volumes.

Chargeback Fees

Beyond the disputed amount, each chargeback typically incurs €15-40 in handling fees. These include investigation fees, resolution fees, and additional penalties if the dispute is lost.

Protect yourself by collecting strong documentation, implementing 3DS2 authentication, and maintaining clear cancellation policies.

Pro Tip: Request a complete fee schedule and calculate total cost based on your typical transaction patterns, not just the headline processing rate. Consider seasonal fluctuations in your calculations.

3. Key Features Checklist

Before selecting a payment solution, ensure it offers these essential capabilities for modern hotel operations:

Virtual Terminal Access — Essential for taking phone reservations and manual payments. Look for solutions offering secure card entry, saved payment methods, and detailed transaction history. Should allow multiple staff access levels and provide clear audit trails of all manual transactions.

Mobile Payment Support — Critical for modern operations, especially for properties with restaurants, spas, or room service. Ensure support for major digital wallets (Apple Pay, Google Pay), QR code payments, and contactless transactions. Mobile solutions should work seamlessly with your PMS for real-time room charging.

Multi-currency Processing — It’s not just about accepting different currencies, but processing them efficiently. Your solution should offer real-time exchange rates and the ability to settle in multiple currencies. Ensure pricing for currency conversion is transparent and that the system supports local payment methods in your key source markets.

Fraud Prevention Tools — Modern fraud prevention goes beyond basic security checks. Look for solutions offering 3DS2 support, combined with intelligent fraud scoring and monitoring. The system should balance security with guest convenience, avoiding unnecessary payment friction.

4. Quick Hotel Payment Processing Comparison Guide

Native PMS Payments — Directly integrated with your PMS, these solutions offer simplicity and unified support. Processing rates are typically higher (2.7-3.5%), but setup is minimal. Best for small properties prioritizing ease of use over cost optimization.

Third-Party Solutions — Independent providers offering more competitive rates (1.5-2.5%) and greater flexibility. Require separate integration but provide better reporting tools and custom features. Ideal for larger properties with technical resources and negotiating power.

Payment Facilitators (PayPal, Stripe) — Quick to set up with transparent pricing, but usually more expensive (2.9-3.5% + fixed fee). Offer excellent developer tools and instant onboarding. Best for properties needing immediate solutions or those with low transaction volumes.

Bank-Direct Solutions — Traditional merchant accounts offering the lowest possible rates for qualified properties. Require longer setup times and often annual commitments, but provide dedicated support and custom pricing. Suited for established properties with strong financials.

Pro Tip: Rather than focusing solely on rates, calculate total cost of ownership including all fees, integration time, and support needs. The cheapest processor isn't always the most economical solution

Hotel Payment Processing Fee Calculator

Understanding the true cost of payment processing can significantly impact your hotel's bottom line.

While blended rates appear simpler, they often mask substantial potential savings available through interchange++ pricing.

The difference can amount to tens of thousands of euros annually, depending on your property size, guest mix, etc.

Our calculator helps you cut through the complexity by comparing different pricing models using your actual business data and quoted rates.

Get in touch with us to get access to the free calculator!

Recommendations

Selecting the right payment solution requires balancing current needs with future capabilities.

While smaller properties can manage with standard solutions, complex setups involving multiple properties or international payments often need expert guidance.

As the industry evolves toward contactless, mobile, and real-time payments, choose a solution that offers both competitive pricing and the flexibility to adapt to emerging technologies.

Regular review of your payment strategy ensures you stay competitive and meet changing guest expectations.

Next up in: Payment Processing Software