That seems like a lot just for a room. Yikes.

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Also to confirm it wasn’t hotels that contacted me it was actually sonder.

Many countries have laws requiring foreign visitors to register with the local police. By taking your passports the hotels are doing this for you (and it's not their decision - it's the law - they have no choice). If the hotel didn't do this for you, you would have to find a local police station and register yourself.