For prepaid stays, I've had this work two different ways (and I've only booked 2 prepaid stays)

Once, my CC was charged the full amount (inlc. destination fee). The destination fee was refunded when I checked out and the folio was settled.

Once (upcoming stay this weekend) my cc was charged the amount not including the destination fee.

The website or app will always include the destination fee; you can safely ignore this. Just check your final folio and make sure you were not charged for it. You can see this in the app before you check out (no need to actually go to the front desk)