3635 Reso hotels

Introduction

• What it is: This MCC represents establishments that primarily provide lodging services, including hotels and motels.
• Risk level: Medium — Generally stable, but affected by economic conditions and travel trends.
• Acceptance difficulty: Medium — Moderate due to seasonal fluctuations in bookings and potential for chargebacks.
• Typical business models: hotels; motels; boutique accommodations; inns; serviced apartments.
• For merchants: Expect moderate MDR rates; possible reserve requirements during peak seasons; chargeback management needed.
• What PSPs expect: Proof of business legitimacy; documented cancellation and refund policies; website showcasing property and services.

Payment Insights & Benchmarks

Merchants in the hotel and lodging industry (MCC 3635) should anticipate complexities in payment processing that extend beyond standard e-commerce. Factors such as the mix of accepted payment methods, risk management practices, and the nature of customer transactions can significantly impact performance.

Payment methods

Cards: widely accepted but often subject to additional verification, particularly for international transactions.

• E-wallets: increasingly used, offering quicker transactions and deposit capabilities, though not universally accepted.
• A2A payments: useful for instant transfers, but reliance on customer banking options can limit accessibility.
• Prepaid solutions: can minimize chargebacks and enhance privacy, though they may have lower acceptance.
• Reservations platforms: integration is crucial as they may dictate accepted payment types and terms.

Authentication & security

Strong Customer Authentication (SCA) and 3DS are typically required, especially for cross-border and high-value transactions.

• While these measures help reduce fraud, they can also lead to higher cart abandonment rates if not optimized.
• Regular fraud reviews should include metrics on chargeback types to distinguish between genuine disputes and fraud.

Benchmarks (indicative, not guaranteed)

MDR: often higher compared to standard e-commerce due to perceived risk.

• Rolling reserves: can be significant, potentially ranging from 5% to 20%.
• Settlement cycles: usually longer than average, often exceeding 7 days.
• Chargeback ratios: higher than retail, potentially exceeding 1% due to cancellation and no-show disputes.
• Approval rates: lower for card transactions; e-wallets may see faster approval.

Key metrics to monitor

Payment method contribution to overall revenue.

• Average transaction value to identify high-risk transactions.
• Decline rates across payment methods to target improvements.
• Chargeback trends and their reasons to mitigate future occurrences.
• Customer feedback on payment experience to refine processes.

Risk & Compliance

Merchants in the hotel and lodging industry (MCC 3635) face significant scrutiny due to various financial and operational risks. Payment service providers (PSPs) and acquirers typically implement rigorous controls to manage chargebacks, fraud, and compliance with AML/KYC regulations, requiring merchants to stay vigilant and proactive.

Chargebacks & fraud

A high incidence of friendly fraud, where customers claim they did not authorize a payment after their stay.

• Guests exploiting booking cancellations and refunds, especially during peak seasons or promotional offers, leading to bonus abuse.
• Common fraud mitigation tools include device fingerprinting, chargeback alerts, and comprehensive fraud detection systems to monitor transaction patterns.

AML/KYC expectations

Strong customer identity verification (IDV) is required, including detailed checks against sanctions lists and politically exposed persons (PEPs).

• Processing large transactions or unusual booking patterns may necessitate source-of-funds verification.
• Triggers for manual review often include repeated large payments, unusual booking behaviors, or the use of multiple payment methods within a short time frame.

Operational red flags

Lack of transparency about ownership structures, especially in franchise models or where hotels are marketed as white-labels.

• Traffic sources that lack verification, such as unverified third-party referral sites or excessive bookings from high-risk geographies.
• Inadequate policies for cancellations and refunds can raise alarms; unclear terms may lead to disputes and chargebacks.
• Absence of controls for verifying guest identities at check-in can pose risks and lead to fraudulent activities.

Onboarding Checklist

Merchants operating under the RESO HOTELS MCC should prepare a complete onboarding package before approaching PSPs or acquirers. A well-structured submission improves approval chances and shortens review times.

Legal & corporate documents

company registration and incorporation documents

• disclosure of beneficial owners (UBO) and corporate structure
• valid licenses for the relevant business activities
• policies: Terms of Service, Privacy, AML/KYC, Refund Policy

Financials & risk management

recent financial statements and cashflow forecasts

• liquidity or reserve model for payouts
• description of antifraud setup and monitoring tools

Product & marketing

demo access or screenshots of the live platform

• marketing plan and traffic source overview (affiliates, SEO, PPC)
• geographic targeting information
• KYC flow details, including IDV providers and thresholds

Technical integration & security

payment architecture overview with supported methods/providers

• description of SCA/3DS flows, retry logic, and tokenization
• PCI DSS compliance status and data storage policy

Operations

customer support coverage (languages, 24/7 if available)

• SLA for dispute handling and chargeback response
• deposit, bet, and payout limits; self-exclusion mechanisms
• internal process for chargeback investigation and documentation

Regulation & Licensing

Licensing and certification are critical for merchants in this MCC, as PSPs and acquirers will require proof of compliance before onboarding. Recognition of licenses depends heavily on the merchant’s jurisdiction and the markets they target.

Operator licenses

Local business licenses — typically required by municipalities to operate legally in a specific location.

• Health and safety permits — necessary to ensure compliance with local health regulations, especially for accommodations.
• Tourism and hospitality licenses — issued by regional tourism authorities, often required for hotels and lodging establishments.
• Fire and safety certificates — may be mandated to ensure the premises meet safety requirements.
• Some jurisdictions require specific licenses for hotels operating as resorts or offering gambling services.

Geo-restrictions

Certain countries impose strict regulations on foreign hotel operators, impacting their ability to operate legally.

• In some regions, the lack of a local license can lead to operational bans or fines.
• Merchants should be aware of local laws regarding licensing for short-term rentals versus traditional hotel operations.

Certifications & audits

PCI DSS compliance is required for managing card data securely within hotel transaction systems.

• Annual health and safety inspections may be mandated by local regulatory bodies.
• Accessibility audits ensuring compliance with regulations such as the ADA (Americans with Disabilities Act) in the US.
• Environmental audits may be necessary for hotels promoting eco-friendly practices and sustainability programs.

Official Definitions & Network Comparisons

This section shows how major card networks define this MCC and highlights practical differences that affect merchant onboarding.

Explanation:

Although the definitions across networks are primarily aligned, variations in wording such as "related services" versus "accommodation services" can affect how the merchant is categorized. Additionally, some networks might necessitate specific documentation based on the merchant's location or services offered. Common reasons for denial might include insufficient business documentation or non-compliance with state or regional regulations.

Alternative MCC Codes

Merchants often confuse this MCC with other categories. The table below shows which codes are related, why they are confused, and what risks misclassification brings.

Rule of thumb for merchants:

If your business is primarily providing lodging or accommodations, ensure you use MCC 3635. Misclassifying your operations can lead to compliance issues, including potential fines and merchant account termination.

Best Practices for Merchants

Merchants in the RESO HOTELS category must navigate a complex landscape of consumer expectations and transaction risk. By adhering to these best practices, you can enhance operational efficiency, build consumer trust, and mitigate potential financial liabilities.

Classification & transparency

always use the correct MCC; accurate classification is crucial for avoiding account issues

• clearly disclose terms, cancellation policies, and fees on your website to foster trust
• present all necessary licensing and regional compliance details transparently

Fraud & chargeback reduction

implement 3DS authentication or step-up flows for transactions flagged as high-risk

• utilize clear billing descriptors and provide instant confirmations to customers after bookings
• maintain thorough event logs of reservations and cancellations to support any dispute resolutions

Payment acceptance optimization

offer multiple payment methods, including credit cards, digital wallets, and local payment options to cater to diverse customer preferences

• route transactions based on customer geography and regularly test the performance of different payment service providers (PSPs)
• consider using separate merchant IDs (MIDs) for different types of services or geographical markets

Operational discipline

track key performance indicators (KPIs) such as booking conversion rates, chargeback metrics, and customer feedback

• conduct regular compliance audits, and keep internal policies updated to reflect best practices
• designate a dedicated team or individual to handle disputes and establish clear service-level agreements (SLAs) for response times

Payouts & liquidity

prepare for rolling reserves by keeping liquidity buffers that can accommodate extended timelines for settlements

• integrate automated anti-money laundering (AML) checks for withdrawal requests, especially those exceeding specific thresholds
• monitor payout schedules closely to ensure timely releases and identify any unusual withdrawal activity

Business Scope & Examples

This MCC covers businesses primarily engaged in the operation and management of hotels and lodging establishments. Merchants classified under this category usually provide services related to overnight accommodations for guests, including additional amenities and services commonly associated with hospitality.

Models

full-service hotels (offering a range of amenities such as restaurants and gyms)

• budget hotels (offering basic accommodations at lower prices)
• boutique hotels (unique and individually designed small hotels)
• extended stay hotels (accommodations for longer guest stays)
• motels (typically featuring outdoor entrances and convenient parking access)

Borderline cases

Vacation rentals — properties rented out on a short-term basis (e.g., Airbnb); may be classified differently depending on structure and operation.

• Hostels — shared lodging facilities; may require distinct classification based on target demographic and service model.

Signals for correct classification

primary revenue generated from overnight stays and related services

• on-site facilities available for guests (e.g., dining, event spaces)
• business operates under defined check-in and check-out processes