A hotel discount for drug dealers

I recently stayed at the beautiful Sydney Hotel. As I checked in I noticed several small cards on the front desk with a simple message, “payments made by credit card incur a 1.5% service fee”. The same message is seen upon checkout. 1.5% is a small amount, isn’t it? Apparently it is not small enough for the hotel to absorb in their $350 a night room charge.

Service Fee

This is not uncommon in Australia. And not just at hotels. There are two problems that I see with this practice. The first of which I have already alluded. At two key points of interaction with a hotel, the message delivered is that we must charge you more because you have taken the outrageous decision to use a credit card to pay your bill. Instead of arriving and leaving the hotel with a warm glow of a great stay, you are left shaking your head wondering why a giant business cannot figure out a way to manage their costs without calling them out separately on the bill.

The second reason is that this new practice ignores modern pricing strategies based on the psychology of payments and value. Consider this alternative: The hotel’s room rate is raised to cover the 1.5% fee, and those paying cash are given a discount off of that rate. Those people who have reserved a room at a certain price are not annoyed by having to pay more to use their cards. And those paying cash are pleasantly surprised that they received this tiny discount.

As I checked out of the hotel I had a brief discussion with the desk clerk on this strategy. I wondered out loud, “who does pay cash at a hotel, where even a weekend stay would require a hefty roll of $20 notes”. She innocently replied that almost everyone uses a credit card. I suggested that those who now benefit from this practice may be people you would rather not want staying in the hotel; drug dealers, motorcycle gangs, organised crime operatives and money launderers.

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“I’ve never thought of it like that” she said, as the 1.5%

was automatically added to my bill.