Reverse your reversal of fortune

Chargebacks are a major challenge for hotels, with last-minute cancellations, no-shows, and service disputes leading to significant revenue loss.

In HOSPA’s latest webinar, CEO Jane Pendlebury was joined by Ian Murray, VP, client growth, Prommt and Connar Hobbs, VP business development, Chargebacks911 to discuss how to safeguard hotels against card fraud, chargebacks, and costly disputes - while delivering secure, frictionless payments for your guests.

Murray opened the debate, commenting: “Chargebacks are more prevalent and more regular in the [hospitality] industry because of the nature of the business and the number of customer non-present transactions you take as a business. There's a higher level of potential ambiguity, risk and fraud.

“It may seem like the quicker option [to take payments over the phone], but if you don't have systems in place, where you have a custom, branded, payment journey that tells the customer every step of the journey, makes them aware of your terms and conditions, cancellation policies, before they even pay with you, then you’re leaving yourself very much open to … chargebacks for valid reasons and frauds, where you don't have a leg to stand on.”

Hobbs added: “The scale and cost of chargeback to any business comes under the three R’s: revenue, risk and reputation.

“There are so many hidden impacts to any kind of a merchant, whether it be in the hotel space or any space. And that is the cost of the room, the cost of taking that off the market, that somebody such as myself could have taken that hotel room for the night.

“The risk is, obviously, there's the revenue risk to one side. Again, what consumers don't know is every single merchant and every payment service provider is held to a threshold. That threshold being a certain percentage of your transactions turning into chargebacks, and if you breach certain thresholds as a merchant, there are fees, and there's the the possibility of having your account shut down.

“Then there’s reputational risk. We could have a scenario where a group of customers learns that  particular merchants aren't defending their chargebacks, then they are going to tell their friends they stayed at x hotel and got a charge back and their money back.”

Hobbs identified cases of genuine chargebacks, where there could be something wrong with the room, or an error with processing, as well as what he described as “friendly fraud”, where someone was trying to get something for nothing.

He added: “In this particular industry there isn't a group of people in a hotel that are trained on defending chargebacks. So typically, what you see is consumers raising chargebacks and getting away with it because no one's there to hold them accountable.”

Looking at hotels and how the hospitality sector could protect itself, Murray said: “Small things like terms and conditions and a custom-branded template, make your protection iron tight in these scenarios. You don't want to spend half an hour worrying about one person out of 100 when sending a payment request. You want the kind of solution in place that will defend you.

“There are two parts to your strategies for chargebacks. The initial part is how you set up your infrastructure and customer non-present infrastructure: convert your payments from non secure to treaty secure. Get a supplier that's PCI level and compliant. Be clear and informative in terms of the customer's journey, what they should expect, and what you expect as a merchant when they pay with you, and what they need to sign off on.

“And have these as automated as you can, have them integrated to your PMS.”

When considering how to address chargebacks, Hobbs said: “The first thing is to understand the reason that the chargeback was raised …and what pieces of compelling evidence are required to essentially have that chargeback overturned in favour of the merchant.

“Stage two is understanding what data you have collected. Does it match the actual customer that is attempting or actually made the purchase? And then you need to speak to your customer and find out what the problem was. Was it a problem with the service? Was it a problem that you had seaweed on the beach? Was the sand not up to par? And it's understanding this that will should drive your decision into making the required defence package to have that overturned.”

As we are increasingly finding in the hospitality sector, information is the key.