The needle is a magnet
A magnetic compass works because its needle is a small magnet, free to turn and align with Earth’s magnetic field. It does not need to know where you are going.
Open a pocket compass and the needle settles while the case stays in your hand. A very small object is responding to a very large field. Quite a job for something that fits in a coat pocket.
Why does it turn back?
The needle can pivot. Turn the case, and the needle can turn relative to it, tending to line up with the local magnetic field again.
That is the mechanism described in the US Geological Survey’s compass explanation. The compass is responding to a field, rather than recognising a destination. It has no idea which way your hotel is.
There is more than one north
True north means the direction of the geographic North Pole. A compass usually points in a slightly different direction.
The angle between those directions is magnetic declination. It varies with location and changes over time. So “the needle always points straight at the North Pole” is a tempting shortcut that misses an important detail.
Even a needle can get distracted
A nearby magnet or electrical system can affect the direction a compass shows. It responds to the field around it, including local interference.
Enjoy everyday objects with hidden tricks? Explore what a barcode actually tells a scanner, or browse more clever things hiding in plain sight.