Hotel ChargebacksWhat’s the Fastest Way to Get a Refund for a Bad Booking?

What Consumers & Merchants Need to Know About Hotel Chargebacks

There are some verticals that are more susceptible to chargebacks than others. High-dollar items like camera equipment, computers, and designer fashion are at risk. That said, dispute-to-transaction ratios in the hospitality space tend to be among the highest in all verticals.

The epidemic of hotel booking chargebacks isn’t slowing down, either. In fact, it's gaining even more steam over time. In this piece, we’re going over chargebacks in the hotel industry, providing advice to help both cardholders and merchants.

Chargebacks in the Hotel Industry: At a Glance

With chargebacks in the hospitality space, the cardholder makes a booking, either through the merchant or a third-party like Expedia or Booking.com. The cardholder later contacts their bank, claiming that the booking was not satisfactory, and requesting a return of funds.

The hotel industry's chargeback challenges are unique due to the service-based nature of its business, where the product is the experience itself. In retail, a chargeback might be resolved by returning a physical item. In lodging and hospitality, though, services rendered cannot be returned. This inherent difference complicates the resolution process, as hotels must provide compelling evidence that the service was delivered as agreed upon to fight the chargeback successfully. 

Furthermore, hotels must deal with the high costs of vacancy when a room is booked and unused due to a last-minute cancellation or no-show, which can also lead to disputes. The combination of high-value transactions, advance bookings, and the subjective quality of service makes hotel chargebacks particularly challenging to manage.

Common Causes of Hotel Chargebacks

Cardholders file chargebacks in the hotel industry for several reasons, each stemming from different experiences and expectations. Here are some of the most common claims that lead to disputes:

There are valid reasons to file a hotel booking chargeback. This does not imply that cardholders should file a chargeback as a first recourse, though. Customers should always try to resolve the issue with the hotelier before calling the bank to dispute a charge. They should also be aware that the bank may request evidence to substantiate any claims made.

Breaking Down Criminal Fraud in Hotels & Hospitality

Fraud tends to impact the travel and leisure industries even more heavily than other sectors like retail or digital goods. We can attribute this to five specific factors:

The American Hotel and Lodging Association asserts that as much as 55% of all card fraud in the US takes place within the hospitality industry. Of course, that only takes criminal fraud into consideration. When you factor in other loss sources like friendly fraud, the real figure is much higher.

So, why is hospitality a target for fraudsters? Well, hotel stays are often a very personal experience. As such, they can constitute an uncomfortable gray area.

From the bank’s perspective, it can be difficult to ask a customer to relay the personal details of a recent visit or ask what made that visit uncomfortable. By the same token, a hotelier might mistake a polite response for approval of an unsatisfactory service. You can see how a fraudster might view this as an opportunity to capitalize on miscommunication.

How to Dispute a Hotel Charge

When disputing a hotel charge, cardholders should follow a structured process to ensure their concerns are addressed appropriately and efficiently. Here’s some practical advice on how to handle this situation:

What Are Hotels Doing to Fight Chargebacks?

New technologies may help hotel operators cut down on chargeback issuances. Take digital check-in and keyless entry systems, for example, that match the cardholder to their mobile device may help verify users’ identities. They offer better insight into a guest’s specific activities on the property than paper records held by hotel staff.

These systems may not capture every detail of a guest's stay, but they can confirm that the guest was present at the hotel and used their room. This confirmation is critical during disputes where a guest claims they never visited the property. In the event of a chargeback, these systems can provide a comprehensive audit trail and immediately communicate this information to the vendor handling the dispute. The automated system quickly informs both vendors and clients, allowing for proactive management of the situation, which is more efficient than waiting for multiple parties to respond. 

Moreover, this approach keeps the hotel updated with regular reports and records, which are valuable for future reference. This automation strategy can help resolve disputes effectively and boost labor productivity. It shifts the burden of managing chargebacks away from accounting and finance teams. This strategy can be particularly advantageous if it helps preserve even a few bookings each month.

What Else Can Hotel Operators Do To Prevent Chargebacks?

You can reduce your chargeback ratio and prevent hotel chargebacks with a few simple steps. We’ve identified some basic steps you can take today that will help you avoid disputes and retain more revenue:

Have Additional Questions About Stopping Hotel Chargebacks?

You shouldn’t be worrying about fighting hotel chargebacks or keeping up with industry regulations. You should be focused on running your business.

Chargebacks911® offers the industry’s most innovative solutions for chargebacks. Our technologies enable merchants to identify the source of disputes and then deploy the right solution to deliver immediate results.

Friendly fraud in the hospitality industry isn’t slowing down. That’s why you need to kick chargeback mitigation into high gear. Contact us today to learn more.