The issue of hotel credit card surcharges has unleashed a wave of criticism of the practice, with other industries singled out while the hotel sector claims that slow refunds by banks and card providers are giving hotels a bad name.
My Business readers lamented their frustration with the holding or “pre-authorisation” fees commonly charged by hotels when checking in.
The problem is twofold: first, that most hotels pile on these charges in the first place, reducing the funds available on the credit card; and second, that it is taking too long for these to be refunded.
“It is a scam. I understand a hotel wanting your card details in case of extra charges, e.g., mini bar etc., but there is absolutely no reason to charge holding fees,” commented one.
“In my experience the ‘holding fee’ has always been refunded, and has dropped out of my credit card’s charges ‘pending’ within five days. I think the longest was seven days. I haven't experienced any problems with getting the full refund. The most I have ever been charged as a holding fee is $150, but I believe some hotels can charge a lot more,” said another.
“Having said all this, I am certainly not in agreement with this practice. It’s very inconvenient, especially if I am travelling and staying in several hotels over a two [to] three-week period.”
Yet another said a recent experience had their funds locked up for close to three weeks.
“The last time I stayed at a hotel… they charged over $200 as holding fee and didn't refund it for almost three weeks! At 1.5 weeks mark, I called them asking why it hasn't been refunded yet as I didn't use the mini bar or damaged the property and they said it’s being processed,” the reader recalled.
“It’s very inconvenient and stressful if people have to always monitor and follow up to see that this made-up charge has been refunded - especially on a long holiday with multiple hotel stays.
A fourth reader emailed My Business to say they fail to see why the charges are necessary at all, noting that it occurs not just in Australia but worldwide.
“I have *never* had a hotel not eventually make a full refund of the amount charged, meaning they have never had justification to make the charge in the first place. In any case, the hotels have our credit cards and so can claim damages after the fact if necessary,” the reader, who wished to remain anonymous, said.
“Most recently, on a trip to Europe last year, I checked into a hotel in Milan for one night, they charged a second night as the ‘pre-authorisation’ and took over a month to refund it. At the end of that trip, returning to Australia with the credit card close to its limit, I made use of the Melbourne Airport Parkroyal’s ‘afternoon’ rate due to a missed connection and again was charged a ‘pre-authorisation’ fee which took several days to be refunded.”
Change may be on the way: industry
Carol Giuseppi – CEO of Tourism Accommodation Australia, which is tied to the Australian Hotels Association – suggested that hotel operators are effectively being wedged on the issue, as they try to balance business risk mitigation with customer expectations, as well as the constraints imposed on them by banks and card providers.
She claimed the situation has been misrepresented.
“The reality is that pre-authorisation is taken to ensure the guest has credit only. Say you’ve booked a week’s accommodation: there needs to be some authorisation that you actually have money in your account to fund that week,” Ms Giuseppi told My Business.
“When you pay for a plane ticket, they don’t let you on the airline unless you’ve paid for it. Whereas you can stay in a hotel room without paying for it.”
She added that hotels also don’t necessarily receive funds from accommodation pre-paid through online sites until after the guest has checked out, which is why many still impose these fees despite the guest having already paid for the room.
According to Ms Giuseppi, the hotel does not actually receive those funds, which are instead held by the bank (or card provider), until such time as the hotel requests access to it to cover loss/damage or authorises them to be returned to the customer.
“The biggest challenge is that on departure, the pre-authorisation is matched off against the actual [room] charge, and many of the problems arise because of slow release from the banks – sometimes up to two weeks,” she said.
“This then means lots of calls back and forth with lots of calls and faxes to ask the banks to release the funds.”
With the situation a constant source of complaints from both customers and hotel operators, Ms Giuseppi said the industry is working to find a suitable resolution.
“Now with the banks holding on [to these funds], some hotels are actually introducing payment on arrival to stop that issue happening.”
Not just hotels charging holding fees
Ms Giuseppi pointed out that such fees are not unique to the hotel industry, noting that car rental companies also impose these charges on customers.
“Car rental companies in fact take pre-authorisation charges, and sometimes for quite high values,” she said.
“They often charge for the excess amount, which can be as much as $1,000.”
Another My Business reader suggested that campervan operators are much worse to deal with in relation to charges.
“Hotels are generally great and I’ve never encountered any issues with them compared to campervan operators,” they commented.
“They don’t just take a pre-authorisation. They charge your card directly so the funds are completely gone. Depending on the length of your trip and your credit card interest free period, this means you are potentially either paying interest or having to repay this amount to your card provider.”
The reader added: “The bit that really gets me though is that they also charge you a credit card fee for it. At the end of your hire, they refund the charges excluding credit card fees. So you can end up paying sometimes hundreds of dollars in ‘fees’ even though you got a full refund.”
Card providers American Express (AMEX) and VISA have been asked to respond. A spokesperson for the Australian Bankers Association (ABA) declined to comment, suggesting the matter is for individual banks.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.