Digital payments have made booking travel easier than ever \u2014 but they\u2019ve also opened the door to a growing threat: credit card fraud. For hotels, the cost goes far beyond disputed charges. Fraud eats into profits, piles work onto staff, and damages the trust that keeps guests coming back.<\/p>\n
While the threat will always be there, hotels don’t have to accept fraud as a part of doing business. With the right systems and safeguards in place, hotels can protect revenue and keep payments secure for every guest.<\/p>\n
In this article, we\u2019ll break down the most common types of hotel credit card fraud and share six strategies to stop it before it hits your bottom line.<\/p>\n\n
Credit card fraud occurs when a person uses stolen or fake credit card information to make unauthorized purchases. <\/b>It can happen in various ways, such as through phishing scams, hacking, or theft of physical credit cards.\u00a0<\/span><\/p>\n In a recent<\/span> survey from Stripe<\/span><\/a>, 64 percent of global business leaders said that it has become harder to fight fraud since the onset of the pandemic. That\u2019s in part due to the<\/span> growing popularity of eCommerce<\/span><\/a>, digital payments, and contactless payments, all of which have contributed to an increase in the scale and sophistication of payment fraud.<\/span> <\/div>\n\n \n\n\n For hoteliers, payment fraud can carry serious consequences, resulting in chargebacks, fees, and lost revenue. To combat fraud and protect their business, lodging operators must take proactive measures to safeguard credit card data. Without the proper processes and systems in place, properties are liable and will lose the trust of guests.<\/span><\/p>\n The hotel industry is a prime target for credit card fraud for various reasons, including the high proportion of card-not-present transactions, relatively high transaction amounts, and delays between hotel bookings and guest stays. Recent<\/span> hospitality industry trends<\/span><\/a> like digital check-in and contactless payments have only exacerbated the risks.\u00a0<\/span><\/p>\n Here are some of the most common types of fraud in the lodging industry:<\/span><\/p>\n A<\/span> chargeback<\/span><\/a> occurs when a guest disputes a hotel charge with their credit card company or issuing bank. It\u2019s considered a fraudulent charge if the guest disputes a legitimate charge in order to obtain a refund, falsely claiming that they did not authorize the transaction or did not use the services.<\/span><\/p>\n A common example is when guests dispute a charge for items consumed from the minibar. However, in some cases of chargeback fraud, the guest may be the victim of a stolen credit card used to pay hotel room charges.<\/span><\/p>\n Friendly fraud occurs when a guest disputes charges they previously authorized, believing them to be fraudulent, often due to a misunderstanding or miscommunication. The<\/span> Global eCommerce Payments and Fraud Report<\/span><\/a> found that over one-third of merchants experience friendly fraud.<\/span><\/p>\n For hotels, an example of this would be when a guest doesn\u2019t remember having dined in the hotel restaurant or doesn\u2019t recognize the restaurant’s name on their credit card statement. It can also occur if the guest is unsatisfied with their experience and initiates a chargeback to obtain a refund.\u00a0<\/span><\/p>\n Hotel reservation fraud occurs when a fraudster makes a hotel reservation using a stolen or fake credit card number. In some cases, the person may pay an advanced deposit and then cancel the reservation, requesting a refund to a different account. <\/span><\/p>\n Card testing fraud occurs when a fraudster uses a stolen or fake credit card to make small purchases to test the card’s validity. If the card is validated, they may use it to make larger purchases. Hotel reservations are a popular way to test cards because the credit card is authorized when booking, but charges are not processed until checkout. When fake reservations are made, the property may experience no-shows and lost revenue.<\/span><\/p>\n Loyalty fraud occurs when a scammer hacks into a guest\u2019s membership account and uses the guest\u2019s loyalty points to book hotel stays, redeem gifts, or sell points. Loyalty programs are especially vulnerable to fraud because reservations typically aren\u2019t screened as carefully as paid reservations. When loyalty fraud occurs, guests may blame the property, even if the breach occurred elsewhere, and the hotel risks losing its most loyal customers. <\/span><\/p>\n Clearly, the stakes are high when it comes to payment fraud. So how can your independent property reduce its exposure? Here are some tips and best practices to consider.<\/span><\/p>\n Always ask hotel guests, in person, for photo identification at the front desk during check-in and cross-reference the name with the guest\u2019s credit card. Enter the guest\u2019s name, complete address, and phone number correctly into your computer system. If your property accepts digital check-ins, ensure procedures are in place to automatically verify the credit card, upload identification, and obtain the guest\u2019s agreement to registration policies to avoid identity theft.<\/span><\/p>\n Keep all correspondence between your property and guests on file, whether in print or digital format, including confirmations (showing the cancellation policy),<\/span> email communications<\/span><\/a>, phone calls, signed registration cards, and sales receipts. You will need this information in the event you receive a chargeback or request for a refund that you wish to dispute.<\/span><\/p>\nCommon types of hotel credit card fraud<\/h2>\n
Chargeback fraud<\/h3>\n
Friendly fraud<\/h3>\n
Hotel reservation fraud<\/h3>\n
Card testing fraud<\/h3>\n
Loyalty fraud<\/h3>\n
6 ways to prevent fraud at your property<\/h2>\n
1. Verify ID at check-in<\/h3>\n
2. Keep thorough records<\/h3>\n
3. Create anti-fraud policies and standard operating procedures (SOPs)<\/h3>\n