(mysql): UPDATE banners SET impressions = (impressions+1) WHERE `id` IN (?)
ERROR: 1064: You have an error in your SQL syntax; check the manual that corresponds to your MariaDB server version for the right syntax to use near '?)' at line 1
Protect Your Hotel From Fees That Needlessly Drive Up the Cost of Accepting Card Payments, by Bob Carr
Mr. Carr

Revenue Management

Protect Your Hotel From Fees That Needlessly Drive Up the Cost of Accepting Card Payments

By Bob Carr, Chairman & CEO, Heartland Payment Systems

Interchange rates, rate increases and undisclosed mark-ups

No doubt, you have heard the old adage, "you have to spend money to make money." While there may be relevance to that statement, understanding a few key pieces of information about card processing can ensure you're not spending more than you have to when it comes to accepting electronic payments.

As a hotelier, accepting credit and debit cards for reservations and room payments is a way of life. However, recently, you may have noticed the mounting cost of these transactions. By the time a card is swiped, processing fees for a single transaction can range from two to five percent of the total sale. The fees for card processing services may be among the three highest expenses your hotel incurs, perhaps outmatched only by labor and property costs. Unlike overhead costs, you might not be sure what you are paying when it comes to processing card transactions. Yet, it is critical to identify all of the fees and surcharges - and who you're paying them to - so you can further control your expenses and save money.

The fact is there are three components of processing fees you, like every card-accepting merchant, must pay: interchange; dues and assessments; and processing fees. Understanding exactly what these fees are - and why you're paying them - can help you eliminate unnecessary costs and boost your bottom line.


Interchange is the fee charged for passing financial transactional information back and forth between your hotel, your payments processor, the card brands (such as Visa®, MasterCard® or Discover® Network) and the banks that issue credit and debit cards. Interchange rates are determined and imposed by the card brands so banks that issue credit and debit cards can recoup their costs.

Typically, the card brands increase interchange rates in April and October. Unfortunately, many payments processors seize these opportunities to inflate the rate increases without full disclosure ... making money at your expense. For example, if Visa charges an interchange rate of 1.75 percent, your processor may mark that up and charge you 2.6 percent. Yet, disproportionately, when Visa increases its rate to 1.76 percent, you may see an increased rate of 2.65 percent from your processor.

Most processors don't disclose the breakdown of fees as separate line items on statements and make it seem as though the card brands are charging higher interchange rates than they actually are. Sometimes processors will even send correspondence informing merchants that the card brands have raised their rates, omitting their own increases and making it appear as though the card brand is solely responsible for the upsurge. Under this system, processors can increase their profit margins - while pointing to interchange rate increases as the reason.

This is further complicated by the fact that the card companies apply different interchange rates depending on the type of transaction. There's one rate for credit card purchases when cards are physically swiped, another when card numbers are keyed in manually and yet another for over-the-phone and online purchases. Compound that by different rates for debit, rewards, corporate and platinum cards, and you end up with more than 250 different interchange rates.

While it's all cataloged in complex rate schedule documents, Visa's is more than 20 pages long and MasterCard's is about 75. It's no wonder many hoteliers and other business owners are confused. In fact, most people who don't understand these fees simply go along with the costs to avoid the time and frustration associated with determining the true cost of card transactions.

Dues and assessments

The card brands also charge dues and assessment fees - also called acquirer brand volume fees (ABVFs) - to cover their own operating costs. These charges are determined by the purchase price of a product or service, and while they're not as complex as interchange rates, it's important to acknowledge and understand these fees.

Processing fees

On the other hand, payments processing fees can be just as, if not more, complicated than other charges since every processor approaches pricing differently. Often, what initially looks like a "good deal" is not what it appears to be. A processor may quote you a low rate for a specific type of transaction to "make the sale", but deliberately neglect to point out that only a small percentage of your transactions qualify for that low rate … and the remainder are charged at a fee that could be as much as double or triple that low rate. Many processors are also notorious for charging "hidden" or "junk" fees. These charges are disguised on monthly statements with cryptic codes and jargon, making them purposefully hard to decipher, especially for time-pressed hoteliers. Security fees, membership fees, access fees and compliance fees are just a few of the many vague, deceptive fees you may find on your processing statement if you take a closer look. Processors have clever ways of disguising unjust fees. For example, when reviewing your statement, look to see if the card type is identified for each transaction. If it's not, you may be paying more than necessary for lower-cost transactions. Debit card transactions, for example, usually cost less than credit card transactions.

Many processors also impose arbitrary fees, such as "bill-backs" and "surcharges," on top of your "low" discount rate without disclosing them to you. There may be fees from PCI security to batching, authorization, annual charges and more, increasing your per-transaction cost with no added value.

These bill-backs and surcharges are nearly impossible to identify and quantify on your bill. Some charges are contained in the month the transaction occurred, while others appear in the following month with little or no explanation. For instance, you might see some surcharges for April 15 on your April bill and the rest on your May bill. Surcharges might be listed as, "Surcharge 06/15/10: $0.34", leaving you wondering if the charge refers to the day's sales or one transaction and why it was charged - and with no way to reconcile your charges or figure out net costs and profits for transactions.

Card processing comes with many different nuances and complexities, but when you know the facts, you can control your costs and protect your bottom line. As we enter a new season of interchange rate increases, be vigilant in examining your processing statements. Try to identify the source and reason for each charge, and note - and question - those left unexplained. Don't hesitate to ask your processor for assistance. You can also consider having your accountant or even another processor take a look. At no cost to you, some processors will walk you through your statement to help uncover hidden fees and show you where you can save money.

By understanding as much as you can about card processing and the associated costs, you'll be empowered to decide whether to continue filling your payments processor's pocketbook - or to keep that money in your hotel, where it belongs.

Bob Carr is chairman and chief executive officer of Heartland Payment Systems ¯ the nation’s fifth largest payments processor and the official preferred provider of card processing, gift marketing, check management, payroll and tip management services for the American Hotel & Lodging Association and 38 state lodging associations. In line with Heartland’s commitment to merchant advocacy and education, Mr. Carr spearheaded The Merchant Bill of Rights (www.merchantbillofrights.org) to promote fair credit and debit card processing practices for all business owners. He has also been a driving force in the enhancement of payment card security with E3™ (www.E3secure.com), Heartland’s end-to-end encryption technology. Mr. Carr can be contacted at Bob.Carr@e-hps.com Extended Bio...

HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.

Receive our daily newsletter with the latest breaking news and hotel management best practices.
Hotel Business Review on Facebook
General Search:

OCTOBER: Revenue Management: Measuring All Hotel Revenue Streams

Natasa Christodoulidou

Revenue Management, also known as yield management, may be defined as the process of analyzing, anticipating, and impacting consumer behavior to maximize the profits from a fixed perishable resource, primarily hotel guest rooms and airline passenger seats (Christodoulidou, Berezina, Cobanoglu, 2012). Revenue management, including overbooking and dynamic pricing, has been an enormously important innovation in the service industry (Netessine & Shumsky, 2002). For example, a number of airlines overbook their reservations for a particular flight by 14% since on average they expect a 10% to 20% no shows on flights. The Marriott hotel chain credits its revenue management system for generating additional revenue of about $100 million per fiscal year. READ MORE

Kristie Dickinson

Revenue management continues to be one of the most important aspects of profitably operating a hotel, though it also remains one of the most difficult to grasp fully. Last year, I wrote an article on the Top 5 Questions Hotel Owners Should Be Asking About Revenue Management, which focused on conversations that owners should be having with their operators about setting goals, analyzing data and how best to measure results, all good primer leading up to budget season. To further the discussion, I will highlight some specific issues below that bear relevance in today’s market READ MORE

Steve  Van

We have all heard the old cliché that “less is more”, and, while there is a grain of truth in the notion that simplicity and clarity are sometimes preferable to complexity, the reality is that, regardless of the circumstances, more information is almost always a better bet. Today we are seeing the tension between these two ideas play out in the hotel industry, where revenue management has exploded with new approaches in recent years–almost all of it facilitated by an avalanche of previously ignored or unavailable data. Consider just how sophisticated revenue management has become in the hotel industry. READ MORE

EJ Schanfarber

The revenue manager of an individual hotel or hospitality entity has become the “quarterback” of modern hospitality strategy and, in many ways, operations. He or she reviews past game data, surveys the competitive environment, consults with coaching staff (ownership and brand standards) and listens to teammates (especially the general manager and director of sales) before hitting the field on any given day and making a complex play call. As we know, with revenue management, a lot of things are in motion at once before we can determine and allocate “which rooms, when, at what rates.” READ MORE

Coming Up In The November Online Hotel Business Review

Feature Focus
Architecture & Design: Original, Authentic and Localized
Corporate hotel developers once believed that their customers appreciated a homogenous design experience; that regardless of their physical location, they would be reassured and comforted by a similar look, feel and design in all their brand properties. Inevitably this led to a sense of impersonality, predictability and boredom in their guests who ultimately rejected this notion. Today's hotel customer is expecting an experience that is far more original and authentic - an experience that features a design aesthetic that is more location-oriented, inspired by local cultures, attractions, food and art. Architects and designers are investing more time to engage the local culture, and to integrate the unique qualities of each location into their hotel design. Expression of this design principle can take many shapes and forms. One trend is the adaptive reuse of existing facilities - from factories to office buildings - as a strategic way to preserve and affirm local culture. Many of these projects are not necessarily conversions of historic properties into grand, five-star landmark hotels, but rather a complete transformation of historic structures into mixed-use, residential, and hotel projects that take full advantage of their existing location. Another trend is the addition of local art into a hotel's design scheme. From small sculptures and photography to large-scale installations, integrating local art is an effective means to elevate and enhance a guest's perception and experience of the hotel. These are just a few of the current trends in the fields of hotel architecture and design that will be examined in the November issue of the Hotel Business Review.