The hidden cost of international hotel stays

A stay at the Langham, Melbourne, Australia, taught me a valuable lesson.

It’s a fantastic hotel by the River Yarra, close to the central business district. We loved everything about it – the ornate public rooms, tasteful decoration, beautiful pool and spa with fabulous views of the river and city. But one thing happened to us there which caught us unawares.

Hidden costs

These days, it’s common for hotels to ask for a credit card when you check in. They take an imprint of your card, and explain that it’s a pre-authorisation for them to deduct the cost of ‘incidentals’ during your stay. These might include room service, bar drinks, laundry, etc. I’ve always assumed that the practice is designed to cover the hotel in case a guest leaves without paying their bill, or without paying for their ‘incidentals’ – fair enough.

So I wasn’t surprised when the Langham asked me for my card when we checked in, even though we’d already paid for our room in full at the time of booking. I was a little surprised at the amount – AU$100 per night, which added up to AU$300 in total for our stay. Oh well, I thought, and duly handed over my debit card. I assumed that it would be charged only if we purchased ‘incidentals’ during our stay. Which was in fact the case – except that another hidden cost crept in without us noticing.

Unfair exchange

After a wonderful weekend in Melbourne, we checked out. Nothing to pay, since our room had already been paid for, and we had not used any chargeable services at the hotel. All good. We flew home to New Zealand with lots of great memories. It was only when checking bank statements several days later, that I noticed that my bank account had actually been debited the AU$300 on our day of arrival.

The money had been refunded on our day of departure. But – and here’s the rub – because my bank account is in a currency other than Australian dollars, my bank had charged me a currency exchange fee for both transactions. This cost me just under NZ$20! In other words, I had paid a price for the Langham’s security, at no benefit to myself at all. Somehow, this doesn’t seem fair.

Credit card hack

Here’s another thing I spotted. We’d stayed at a Marriott hotel, also in Australia, a couple of days earlier. On that occasion I’d handed over my credit card for pre-authorisation rather than my debit card. The transaction appeared on my credit card statement as a ‘pending’ debit, which meant that my available credit balance was reduced accordingly. A week later, it was still there.

I contacted the Marriott, who looked into the matter and explained that it was not they, but my bank, who were tardy in removing the charge. In fairness, the Marriott were excellent – they contacted my bank and the charge was duly removed. Since the charge was always ‘pending’ it was never completed, so I did not incur any currency exchange fees. Apparently it is not unusual for banks to take up to 14 days to remove these holding charges!

So what service did I pay for, and to whom?

If you think about it, large hotel chains like the Marriott must have millions of dollars worth of customers’ money on hold, or in their coffers, at any one time! Are they earning heaps of interest on this cash bonanza, I wonder? I did a little research on this, and apparently it’s not the case. Although the hotels have pre-authorisation to spend the money, the funds don’t belong to them, so meanwhile they just sit in a kind of cyber holding zone.

But when I think about the case of the Langham, who actually debited the money from my account, does the same apply? I checked their booking terms and conditions on their web site, but could not find the answer. They imply that all pre-authorisation processes are determined by the customer’s bank or payment provider rather than the hotel itself. So the banks definitely benefit from all this, although they would probably argue that they are providing a service. Someone has to pay for it – and naturally, it’s not the hotel!

How to avoid those hidden charges

So what does all this mean for the innocent, honest traveller? My lessons learned are: always check the small print to find out your hotel’s policy on ‘pre-authorisations’ – and it might pay to check your bank’s policy too. Forewarned is forearmed! Use a credit card rather than a debit card for pre-authorisations whenever possible. Finally, always check your statements when you return home, to make sure that you’ve received your refund if applicable.

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5 Comments

  1. A lot of hotels we’ve stayed at have charged a pre-authorisation. However, we always use our credit card and so the amount is only “pending”. You’ve made some valid points and provided great tips on how to minimise the costs.

  2. Interesting post. I usually pay attention at these charges but the truth is, with this exchange fees only the bank wins money for a service that we don’t actually need.

  3. This is such an interesting post and I have to say, not something I have ever had happen to me, as I am seldom the one to hand over my card on my travels. This seems to be just another one of the big cooperation ways of getting our money into their pocket without actually earning it! It’s a great tip, definitely worth noting, to use the credit card instead of the debit card moving forward.

    1. Thanks Ellie, glad to hear you’ve managed to avoid this so far! I suppose my bank would say that they charged me the fee for a service they provided (converting my money to Australian dollars and back again) but it was a service I didn’t ask for or need!

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