During a recent stint in sunny Madrid, a series of decisions got me thinking about something we’ve all pretty much just resigned to happening – and that’s the credit card authorizations when checking in to almost any hotel.
The hotel tell you it’s all about incidentals or room damage, but it’s so much more than that. In today’s world of modern digital payments, a hotel putting an additional hold or “authorization” of any amount over what the room costs is pure consumer psychology. Specifically, the psychology of additional revenue.
Surprise, surprise, it often works.
Many hotels rates are pre-paid these days. You arrive and owe “nothing”, yet you still end up handing over a card. What gives, right?
Even if you haven’t prepaid, you end up paying more than what it says on the folio for the actual reservation charge, because virtually all hotels take an additional credit card authorization between $50-$150 per day, per room on top of the room rate.
What is this, and why? A hotel authorization can be justified by a front desk team in many ways. Some say it’s like insurance against room damage or theft while others will talk about it covering any incidental charges like clothes pressing or minibar.
In reality though, the hotel could very easily handle these things without taking an extra $50-$150 per day to hold onto from the start, in addition to what you paid for your room.
They take this because speed and ease of transaction makes you more likely to leave some of that deposit behind than if you pulled your credit card out every time you wanted to buy a round of drinks or order room service.
The Psychology Of Hotel Authorizations
We all know the phrase “don’t cry over spilled milk” and I think it’s fairly apt with this discussion. When a hotel takes an additional authorization of $50-$150 per day, even though it’s only a hold on a credit card and basically like non-existent money that was never actually spent, people feel like it’s money that’s already been spent.
- It shows up against your available credit.
- You see it listed in your transactions as pending spend.
- It doesn’t “fall off” as a charge for up to 7+ days.
Naturally, you feel in some way, however illogical it may be, as if this money is already gone in some way. With it already “gone”, people are more likely to spend more loosely than they might otherwise. They already took the $100 per day, so that $20 cocktail at the bar just feels more justified, right?
And then there’s speed and ease.
Anyone ever feel cheaper when holding actual cash than paying with credit card? You’re not alone. Watching each $20 leave your hands is a very different experience to handing over a piece of plastic. Yet simply signing your name is an entirely different level to both. You hardly think!
You don’t reach into your pocket for a card at all and all you need to remember is your room number and name. The server loves the ease, you love the ease and off you go. You simply sign and money is spent. And don’t forget — in your mind it’s money already spent, so it’s like it’s not even happening.
Extracting Extra Spend
Particularly with factors like jet-lag, fatigue and long days of meetings or touring a city, making transactions “easy” has significant benefit to a hotel. Think of that feeling of just getting up from breakfast without signing. It’s a treat in life.
Someone on the verge of going out but feeling fatigued will find it difficult to argue with the ease of spending that already swiped money and simply signing a folio charge for room service or at the cozy hotel bar.
The less someone needs to work or think to spend money, the more money they might spend. Particularly when traveling internationally as a family, I find myself falling into this clever trap more and more often, however aware I am. Sure, one more glass, it’s already spent anyway.
Just keep that in mind the next time you’re at a hotel.
If you ever want to see anger, look at the TripAdvisor comments of people who put their debit card down to cover a stay not realizing that they’ll be charged the incidental too.
People’s generosity with stars starts to go down when they realize the hotel is holding an extra $150 per day and they won’t get it back for 7 days. Which is a good reminder never to use a debit card for an incidental charge at a hotel.