Hotel deposit and prepayment policies: a practical guide

A hotel deposit or prepayment policy says how much the guest pays before arrival and when. The main options are full prepayment at booking, a partial deposit, a card pre-authorisation that holds funds without charging them, and a card guarantee that is charged only on late cancellation or no-show. Each balances guest convenience against your risk.

What are the main ways hotels secure a booking?

Hotels use four common methods, plus the option of taking no guarantee at all. They are often mixed, with different methods on different rate plans.

Method	What happens to the guest’s money	Best for	Main risk
Full prepayment	Charged in full at booking	Non-refundable rates, peak dates, packages	Some guests will not book without flexibility
Deposit	Part charged at booking, balance later or at the hotel	Long stays, groups, events, resorts	Balance still has to be collected
Pre-authorisation	Funds held on the card, charged later or released	Securing the stay or incidentals close to arrival	The hold expires after a limited time
Card guarantee	Card details saved, nothing charged unless the policy applies	Flexible rates with pay at property	The card may decline when you try to charge it
No guarantee	Nothing collected	Trusted segments, low-demand dates	No-shows cost you the room

The right mix depends on how often your guests cancel late or do not arrive, how far ahead they book, and what guests in your market expect. In some markets, many guests prefer to pay at the hotel. Our guide to pay at property and no-shows covers that side in detail.

What is the difference between a pre-authorisation and a charge?

A charge (also called a capture or sale) takes the money. It appears on the guest’s statement and the funds move to you after settlement.

A pre-authorisation (also called an authorisation hold) asks the card issuer to reserve an amount on the card. The guest’s available balance goes down, but the money has not moved. Later, you either capture the amount, capture part of it, or release it.

Stripe’s documentation uses hotels as its example: they often authorise a payment in full before a guest arrives, then capture the money when the guest checks out. Two limits matter in practice:

Holds expire. According to Stripe, an authorisation for an online card payment is usually valid for 7 days, and some card-network and transaction combinations are shorter. Visa merchant-initiated transactions, for example, have a window of about 5 days. If you do not capture in time, the funds are released. Extended authorisations of up to 30 days exist for certain eligible payments, but not for every card or business.
Guests may not see the difference. Stripe notes that some card statements do not clearly separate holds from captured payments. A guest may think they were charged twice. Explain holds in your emails and at the front desk.

Because holds expire, a pre-authorisation at the moment of booking does not protect a stay that is weeks away. Hotels that want certainty for future stays usually take a deposit or a full prepayment, or save the card as a guarantee and authorise closer to arrival. Exact rules vary by payment provider and card network, so check with yours.

How does a card guarantee work?

With a card guarantee, the guest enters card details at booking but pays nothing. The card is stored securely by the payment provider, not by the hotel. If the guest cancels after the deadline or does not arrive, the hotel charges the amount stated in the policy. If the guest arrives, they pay at the property as normal.

Three points make a card guarantee work well:

Clear permission. The guest must see what can be charged and when. If you charge a saved card later without the guest present, card rules treat this as a merchant-initiated payment, which needs the guest’s agreement.
Authentication where required. In the European Economic Area, Strong Customer Authentication rules under PSD2 apply to many online card payments. Payment providers handle this by authenticating the card when it is saved, so later charges are more likely to go through. A bank can still ask for authentication or decline.
A plan for declines. A saved card can be cancelled, blocked or empty by the time you charge it. Decide in advance what your team does: contact the guest, ask for another card, or release the room.

In goDirects, pay at property can be offered per rate plan, either with a card guarantee or with no card at all.

How much deposit should a hotel ask for?

There is no universal figure. Common structures are the first night, a fixed percentage of the stay, or a fixed amount per room. Choose the one guests can understand at a glance, and that covers the loss you would suffer on a late cancellation.

Example (illustrative numbers only): a guest books 5 nights at $160 per night.

Structure	Deposit at booking	Balance
First night	$160	$640
30% of stay	$240	$560
Full prepayment	$800	$0

Examples use US dollars; the same maths works in any currency.

The stay total is 5 × $160 = $800. Show taxes and fees in the total the same way you show them on the room rate, so the deposit is a clear share of a clear number. goDirects calculates totals, taxes and fees on the server, so the amount on the booking page is the amount in the confirmation.

Longer stays and bigger commitments justify bigger deposits. Monthly apartment stays, weddings and group blocks usually have their own deposit schedules in a written agreement. See monthly stays and group room blocks.

How do you match the deposit to the cancellation policy?

A deposit and a cancellation policy must tell the same story. If a guest pays a first-night deposit on a flexible rate, the policy must say whether that deposit is refunded when they cancel before the deadline. Mixed messages cause most payment disputes.

Rate plan	At booking	Cancel before deadline	Cancel after deadline or no-show
Flexible, pay at property	Card guarantee, nothing charged	Nothing charged	Penalty charged to the card
Flexible, deposit	Deposit charged	Deposit refunded	Deposit kept
Semi-flexible	Deposit charged	Deposit kept, balance not charged	Deposit kept, plus any further penalty stated
Non-refundable	Full stay charged	Not refunded	Not refunded

For deadline wording, read our cancellation policy guide.

Which payment options should you accept for deposits?

Offer the methods guests in your source markets actually use. A deposit page that only accepts one type of card loses bookings. goDirects connects to payment providers including Stripe, Tap, PayTabs, Tamara and Razorpay, where they are available in the hotel’s country, alongside pay at property. Guests can see prices converted into their own currency, while the charge is made in the hotel’s currency. Explain that on the payment page, because the final amount on the guest’s statement depends on their card’s exchange rate. See multi-currency.

When the guest arrives, the front desk collects the balance. Taking that payment in the same system as the booking keeps one record per stay. See reception payments.

Steps to set up a deposit and prepayment policy

List your rate plans and decide the payment method for each: prepaid, deposit, guarantee or no guarantee.
Write the deposit amount as a rule guests understand: first night, a percentage, or a fixed amount.
Match each deposit to the cancellation terms of the same rate plan.
State when the balance is due and how the guest pays it.
Explain any pre-authorisation or incidentals hold, including when it is released.
Show the amount charged today and the amount due later on the booking page and in the confirmation email.
Train staff on holds, refunds and declined cards, and on who approves exceptions.
Review no-shows, late cancellations and disputes each season, and adjust.

If you want to see deposits, card guarantees and pay at property working on your own website, book a demo.

Frequently asked questions

Is a pre-authorisation the same as a deposit?

No. A deposit is a real charge: the money leaves the guest’s account. A pre-authorisation only holds an amount on the card, and you later capture it or release it. Holds expire after a limited period that depends on the card network and payment provider, so they suit dates close to arrival rather than stays booked months ahead.

Why does a guest see a hold after checkout?

Released holds can take time to disappear from a guest’s available balance, and some card statements do not clearly separate holds from charges. Tell guests at check-in what you are holding and why, and confirm at checkout that it has been released. The timing of the release on their side depends on their bank.

Can a hotel charge a saved card for a no-show?

Generally yes, if the guest agreed to that policy when booking and the card was saved for that purpose. The policy should state the amount and the conditions. Payment rules, such as Strong Customer Authentication in the European Economic Area, affect how cards must be saved. Check local consumer law and your payment provider’s requirements.

Should every rate require a deposit?

Not usually. Deposits reduce risk but can reduce bookings from guests who want flexibility. Many hotels keep a flexible rate with a card guarantee or pay at property, and use deposits or full prepayment on non-refundable rates, peak dates, long stays and groups. Your own cancellation and no-show data should guide the mix.

What deposit is normal for a long stay?

Long stays often use a deposit agreed in writing, such as one month or a share of the total, with the rest paid in instalments. The right amount depends on your market and contract terms. Make the schedule clear before booking, and explain what happens to the deposit if the guest leaves early.

Sources

This article is general information, not legal or tax advice.