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Small Hotel Payment Processing Guide

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The GoCardless content team comprises a group of subject-matter experts in multiple fields from across GoCardless. The authors and reviewers work in the sales, marketing, legal, and finance departments. All have in-depth knowledge and experience in various aspects of payment scheme technology and the operating rules applicable to each. The team holds expertise in the well-established payment schemes such as UK Direct Debit, the European SEPA scheme, and the US ACH scheme, as well as in schemes operating in Scandinavia, Australia, and New Zealand. See full bio

Last editedDec 20212 min read

If you run a small hotel or bed & breakfast, you know how important excellent customer service is for your business reputation. Yet while many hotel owners focus plenty of time and attention on room cleanliness and comfort, it’s important not to forget about providing a smooth check-in and payment experience. Guests should be able to check in and pay for their rooms quickly and efficiently, which is where a good hotel payment processing service comes into play.

What is payment processing?

To get started, we’ll answer the fundamental question: what is payment processing, anyway? This term simply refers to the action of accepting payments from your hotel guests. While cash or cheques used to be the standard, today’s guests are accustomed to paying online, either with cards or electronic methods like bank transfer. To accept cards, hotels must use a third-party payment gateway that processes the transaction for a fee.

How to process payments

There are numerous systems that can be used when looking at how to process payments. The best payment processing solution will depend on the size of your business and your customers’ preferred payment options.

Open a merchant account with your bank to serve as a holding area for processing funds. When cleared, they’ll transfer to your regular business account.
Use a third-party payment gateway to act as a middleman for processing payments.
Sign up for an all-in-one payment solution like Stripe or PayPal that can process a variety of different payment types, both on your hotel booking website and at the check-in desk.

Most hotels will need a payment gateway to keep customer financial details secure. The payment gateway works by submitting card data from your booking website to the payment processing network. Here’s a step-by-step breakdown of how this works alongside your hotel’s property management system (PMS):

Step 1: The customer provides their credit card information as payment for the room.
Step 2: The card details are sent from your website or POS card reader to your payment gateway.
Step 3: The payment gateway submits the fully encrypted credit card details to a payment processor. Some gateways will use tokenisation for additional security to keep customer details safe.
Step 4: The payment processor takes this encrypted information and authorises the transaction with the credit card network, customer’s bank, and hotel’s bank. The customer’s bank must approve or decline the transaction.
Step 5: The bank’s response is sent back to the payment processor, who transmits it to your payment gateway. It’s then transferred to your integrated PMS to complete the booking.

Special considerations for hotels

As you can see, the property management system plays an important role when it comes to processing payments and completing bookings. When comparing options, be sure that your payment gateway integrates easily with your cloud-based PMS. There are additional benefits to integrating a processor with property management systems. For example, you can pre-authorise cards to pay for incidentals, complete purchases, void transactions, or issue refunds easily when a customer cancels their booking.

Choosing the right hospitality payment processing solution

For a smooth, easy hotel payment processing, businesses should have either:

A merchant account and payment gateway
An all-in-one payment processing service

In either case, take care that your gateway or processor works alongside your existing PMS. Additional factors to consider when comparing hospitality payment processing solutions include:

Monthly and per-transaction fees
Card types accepted
Multicurrency processing
Mobile payments supported
Security features

Choosing the right processor is key to making the check-in and payment process as straightforward as possible for guests. With integrated apps, you’ll also be able to keep all your payment information in one easy, retrievable location for more accurate accounting and financial reports.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.