Experts expect the hotel industry to bounce back from pandemic disruptions this year, with the American Hotel and Lodging Association predicting a 63.4% occupancy rate, up from 57.6% in 2021. In response, hotels are preparing to welcome back guests with open arms. From the moment a guest checks in to the moment they check out, hospitality businesses must strive to create an excellent customer experience that increases satisfaction and trust.
As they evaluate their business, hoteliers must remember that they can’t only focus on friendly service, clean rooms, and nice amenities. Hospitality companies must also be careful to manage a guest’s “open-to-buy” limit, or the amount a cardholder can spend before reaching its maximum credit line.
To meet the digital generation’s higher standard, hospitality businesses must consider a few standard guidelines to optimize their payments systems. That way, they can manage “open-to-buy” limits and ensure they maintain customer satisfaction throughout the entire journey.
Not Authorizing Excessively Large Amount
Unlike retail stores, hotels use a two-part authorization model – a credit card is validated (‘authorized’) when the guest arrives at the hotel and is then ‘captured’ (i.e., asssigned a final dollar figure) when the guest checks out. Because of this two-step dynamic, hoteliers must consider multiple factors to determine the optimal dollar amount to authorize on the guest’s credit card. Although it might seem easy to set the number at an excessive amount, doing so is unfair to the cardholder as the card issuer places the ‘auth’ as a ‘hold’ against the account’s credit limit (or bank account in the case of a bank card).
That’s why hoteliers must strike a balance and find the number that is most likely to get authorized while at the same time not setting the bar too low (which introduces the possibility of void/re-auth transaction churn). This consideration should include calculating anything from past transaction history (for a specific customer) to possible incidental fees and restaurant charges (for a typical customer). As they estimate the charges, hoteliers must be careful not to allow any opportunity for a decline or chargeback that can lead to frustration for the guest.
Reversing Any Uncompleted Pre-Authorizations
When hoteliers receive a single capture at the end of a guest’s stay, the issuer effectively reverses the previous authorization and replaces it with the final amount. For example, if a hotel pre-authorizes someone for $500, but the stay is $392, a correctly captured message reverses the $500 (at the card isser’s end) and replaces it with $392, effectively giving the customer $108 of purchasing power on their card balance. On the other hand, if guests exceed the authorized amount, the best and simplest way to manage the transaction is to reverse the pre-authorization and replace it with a new pre-authorization.
An unreversed pre-authorization can lead to a significantly negative experience with the guest, which is why hoteliers must make sure they quickly clean up any lingering, uncaptured charges. Leaving auth positions uncovered is especially concerning for guests managing tight financial positions. These guests are looking for an accurate view of their credit card transactions. If they see that they still have a pre-authorized amount from a hotel they stayed at days ago, it can cause a significant amount of inconvenience for the customer.
Educating Guests on What to Expect From Their Bill
Lastly, hoteliers must be open and transparent about their billing policies. Nowadays, guests have complete visibility into their accounts via phone apps and, unlike the earlier paper-statements-only era, can view authorization activity as soon as it hits their account. If we go back to our earlier example, when they check out, the guest will expect to immediately see the $500 hold removed and replaced by the $392 capture. Businesses must educate customers on what to expect on their credit card statement and when they will see a charge or removal.
Hotels will also often put signs up at the front desk letting guests know that if they give a debit card for authorization, the guest understands that they will be putting a hold against their bank account balance. That way, guests know the implications of these practices and how they may affect their other contemporaneous purchases (while the hold is in effect).
Managing a Card’s “Open to Buy” in a Tight, Controlled Fashion
At the end of the day, hoteliers have a responsibility to clean up authorizations and ensure that unbillable amounts don’t infringe on a guest’s purchasing power. Otherwise, it can cause a significant amount of inconvenience, souring the guest’s overall experience.
Hoteliers can manage guests’ “open to buy” limits by having processes in place that accurately capture each part of the transaction. With suitable systems and capabilities, businesses can automatically clean up the remnants of completed transactions and ensure that guests walk away with a positive and delightful impression of their stay.