Hotel deposit: Fee and refund guide for hosts

What is a hotel deposit?

A hotel deposit is a payment made by guests to secure their reservation and to cover potential excess costs during their stay, from damages to incidentals.

A hotel room deposit can take the form of either a credit card pre-authorisation or a payment that is refunded on check out.

In this guide we’ll take a deeper dive into this hotel deposit meaning, revealing all that a property owner needs to know about hotel cash deposits and pre-authorisations.

Why do hotels charge a deposit?

Why do hotels ask for a deposit from guests? A hotel might charge a deposit to guard against no shows, as this encourages guests to follow through with their booking. And by charging security deposits – aka damage deposits – hotels can compel their guests to treat properties with respect, lest they lose that downpayment. If damage does occur, the deposit can go some way to paying for it.

Do all hotels require a deposit?

Do hotels charge a security deposit as a rule? No, not all hotels require a deposit, but most, including the majority of the world’s larger chains, do.

Hotels that don’t charge a deposit are typically smaller, independently run operations, such as boutique hotels, B&Bs and hostels.

This poses a question: is a deposit negative or positive? For the most part, both hotels and guests acknowledge that deposits are often necessary, and understand why the policy exists.

Hotels with no deposit

So which are the hotels that don’t require deposits? A few hotels without deposit policies – at the time of writing – include:

• Hilton: Most Hilton hotels do not charge deposits on direct reservations. If you cancel before the deadline (usually 1-3 days before check in) you get your money back, and after that, you’re charged for the first night if you don’t show. 
• Motel 6: The majority of Motel 6 bookings do not require a deposit, although they do require “an advance payment deposit of the total charges for the first night’s lodging.”
• Extended Stay America Select Suites: A longer-term accommodation option, this arm of the Extended Stay chain requires no security deposit (and no binding lease).

What are the different types of hotel deposit fees?

A few different terms are used to describe hotel deposit fees, and there can be slight differences in the definitions of each. Damage deposits and incidental deposits are both forms of hotel security deposits. Advance deposits are charged ahead of time, while credit card holds aren’t technically charged at all.

• The two most common types of deposit are ‘advance’ (partly or fully repaid prior to arrival) and credit card holds/pre-authorisations (where funds are reserved but not charged on a guest’s credit card).
• Hotels that require no deposit or guarantee experience significantly more cancellations and no-shows than those with prepayment or deposit requirements.
• Deposit fees can also be used to support “Buy Now, Pay Later” offerings and new ‘scheduled pre-payment’ solutions, allowing hoteliers to split guest payments across multiple dates pre-arrival.

While the specific rules of hotel deposits can vary, most work in more or less the same way. The main difference is in the wording used, as a few different terms are used to describe hotel deposits. Here are the most common and what they mean.

Hotel security deposit

A payment made by guests at check-in to cover potential damages or unpaid charges during their stay.

Incidental hotel deposit

A payment or pre-authorisation to cover any extra expenses like room service, mini-bar usage and in-room purchases.

Hotel damage deposit

What is a breakage deposit at a hotel? Another name for a security or damage deposit, it’s a charge taken at check-in to cover possible damage to the room or hotel property, and is refunded at check-out if no damage is found.

Advance hotel deposit

A partial or full payment made by guests at the time of booking to secure their reservation.

Early check-in or late check-out deposit

A fee charged to guests requesting check-in before the standard time or check-out after the standard time.

How do hotel deposits work?

A hotel deposit is usually taken at check-in, but sometimes beforehand. The deposit can usually either be paid in cash or on card, or can be held as a ‘pre-authorisation’ on a credit card, where money is held but not actually taken.

How much is a hotel deposit?

A hotel deposit typically costs within the range of $50-$200.

Do hotel deposits get refunded?

Yes, guests can get a hotel deposit refund if no damage is made at the hotel or no incidentals need to be charged. You should be fully refunded or the credit card hold should be released at check out.

How long does a hotel deposit refund take?

How long do hotels take to refund deposits? Or from the guest’s point of view, when do hotels give your deposit back? Depending on the guest’s bank or credit card provider, most refunds will typically be processed within 3-10 business days.

Key takeaways

• Hotel deposits are usually taken at check-in and may be held on a credit card, but not charged.
• Refunds are issued if there’s no damage or additional charges incurred during the stay.
• Deposit refunds typically take 3-10 business days to process, though this timeframe is controlled by the guest’s bank or credit card provider.

Little Hotelier has given me more freedom because I have the app on my phone. I can pick up any of the bookings and manage it remotely. We can relax, take a step back, and let Little Hotelier run our business.

Elaine Milne,

Owner

Calder House

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How do you create a hotel deposit policy?

If you’re creating a hotel deposit policy from scratch, it’s wise to align your policy with guest expectations wherever possible:

• Clear and fair deposit policies can save you and your guests time at check‑in, and help you to build guest trust through transparency. If your system is unusual, you need to let guests know.
• Most hotels will place a credit card hold between $100 and $200 at check‑in to cover incidentals or damages, releasing that hold a few days after check out.
• Another common policy is for the deposit to be refunded if a guest cancels their reservation more than 72 hours before arrival, but not after that date.

 To create your hotel deposit policy, clearly define when and how deposits are collected, whether as a fixed amount or a percentage of the booking, and outline acceptable payment methods (e.g. credit card hold, cash, electronic payment). Specify refund conditions, including the timelines and circumstances where deposits may be withheld. Ensure the policy is easy to understand and transparently communicated at booking and check-in.

Let’s walk through a hotel deposit policy example process to gain a slightly deeper understanding of how you might go about creating yours.

Set an amount that protects without deterring bookings

Begin by evaluating the right amount for your property and guest type. Try to work within that $50-$200 range that guests have come to expect. Consider using tiered deposits for different booking types, like direct bookings vs third-party sites, and potentially reducing deposits during low season to get more guests in.

Offer flexible deposit alternatives for guests

Consider alternatives to traditional deposits, such as damage waivers, incidental fees and insurance. Think carefully about whether your guests would prefer these alternatives, and how you might communicate their pros and cons. Sometimes a simple, standard security deposit is the best option.

Provide various payment methods for deposits

Think about how your target market tends to pay – cash, credit card, debit card, via digital wallets or third-party apps – and try to offer deposit options for all common methods.

Communicate your hotel deposit policy clearly

Confirm your deposit policy through pre-arrival and confirmation messages, and signage at your check-in desk, to minimise guest confusion and potential annoyance.

Handle hotel deposit refunds effectively

Ensure your staff have a deep understanding of your deposit policy, including the deposit ledger, how to efficiently process deposits and refunds, instances where the hotel security deposit is not refunded, and the typical refund times a guest can expect.

Automate deposit processes for streamlined operations

By automating your deposit processes, you remove much of the admin workload from the shoulders of your front desk staff, and you reduce opportunities for human error that can put a real dampener on the guests’ experience with your hotel.

Key takeaways

• Align deposit amounts with industry standards ($50-200) to meet guest expectations while protecting your property.
• Clear communication at booking and check-in prevents confusion and builds trust with guests.
• Automation reduces administrative burden and human error while improving the guest experience.