2023 Hotel, Flight & Reservation Chargebacks Guide
Table of Contents
- What kind of chargeback fraud is prevalent in travel?
- How do you prevent travel chargebacks?
- How do you fight travel chargebacks?
- How do you prevent fraud in the travel industry?
- Let the experts deal with chargebacks for you
- Can cardholders dispute airline purchases?
- How can I avoid chargebacks as an airline?
- Can customers dispute non-refundable hotel reservations?
In the travel and hospitality field, you get used to selling a lot of relatively ephemeral products like tickets, bookings, and reservations. They’re intangible, they hold no inherent value, and they expire. They’re also vulnerable to being essentially destroyed by circumstances beyond the control of both the merchant and the customer, such as a family emergency or, say, a global pandemic.
What this all means is that travel companies get hit with a lot of chargebacks. In fact, a study conducted by the Federal Reserve Bank of Kansas City found that the travel industry has twice the chargeback rate of the average business, and more than double the average dollar amount per chargeback. If you’re in the business of facilitating travel, you need to have a robust strategy for dealing with chargebacks.
While many of the standard best practices for preventing and fighting chargebacks are universal, travel and hospitality chargebacks do come with some unique considerations that merchants should be aware of.
What kind of chargeback fraud is prevalent in travel?
The list of potential reasons why a customer might initiate a friendly fraud chargeback is endless. Some of them do so knowing that they’re breaking the rules and disputing a valid charge, but others commit friendly fraud out of ignorance or confusion. Either way, travel companies must protect themselves by challenging friendly fraud chargebacks no matter why they happen.
Non-refundable tickets and reservations are a major source of friendly fraud chargebacks, and no-shows are among the most frequent perpetrators.
What often happens is that a person purchases a non-refundable ticket and fails to show up at the appointed time. Under the terms of their agreement, they’re liable for the charge even if they’re unable to make use of the ticket. However, many of these customers will dispute the charge anyway, rationalizing that they shouldn’t have to pay for a ticket they didn’t use.
Even when the reason they’re a no-show has nothing to do with the company that sold them the ticket, these consumers often feel “punished” by the non-refundable charge for the ticket, and they retaliate by demanding a chargeback.
Hotel add-on charges such as pay-per-view television or products from the mini-bar are another big chargeback generator. When the customer sees that they were charged ten dollars for a diet soda and a candy bar, they may decide that the price is unreasonable and dispute the add-on charge.
They reason that the hotel should be willing to negotiate the add-on charges on the grounds that the prices were inadequately displayed, their child raided the fridge without permission, etc., and when the hotel refuses, they go straight to their credit card issuer to ask for a chargeback. Sometimes this ends up with the entire room charge in dispute.
Some travel blogs and “life hacking” websites actively encourage travelers to dispute these charges, and give them tips on how to phrase their claim and present the best case for themselves when they call their banks.
How do you prevent travel chargebacks?
This goes double for travel businesses that sell non-refundable bookings or other ephemeral products. Your cancellation, rebooking, and refund policies should be crystal clear.
If you find confusion about a particular part of your terms and conditions is leading to chargebacks, it may be wise to include an explanation of it in simple terms during the checkout process.
To some extent, you can delay disputes and protect yourself from chargebacks by placing authorization holds when a customer pays for a product or service they won’t be able to utilize right way, rather than charging the customer immediately. An authorization hold will essentially earmark the funds for you until you process the charge, which also means there’s no charge for the customer to dispute.
Don’t be afraid to blacklist customers who burn you with friendly fraud. If they get away with it once, it’s highly likely that they’ll try to do it again. The car rental industry is notorious for their unforgiving attitude about this. Dispute a charge because they dinged you for not returning a vehicle with the gas refilled and you’ll never be able to rent from that company again!
How do you fight travel chargebacks?
When you are faced with a friendly fraud chargeback, you can usually fight them and win if you have the right evidence. Maintaining detailed and accurate records is an extremely important aspect of chargeback defense.
It's important that merchants fight chargebacks with a combination of prevention and recovery:
- Provide excellent customer service, including transparent refunds and clear labels for all transactions so the customer knows what they are.
- Employ fraud prevention, including AVS and advanced authentication tech, to stop true fraud before it turns into a chargeback.
- Engage in chargeback recovery by fighting chargebacks in representment, typically through a chargeback management firm.
How do you prevent fraud in the travel industry?
Travel businesses fall heavily on the side of card-not-present transactions, which makes them a magnet for fraudsters, hackers, and phishers who probe for vulnerabilities that will allow them to get their hands on cardholder data. Travel companies may also present an attractive target for thieves looking for a place to test or utilize stolen payment credentials.
For true fraud, your best defense is to adhere to rigorous payment industry security standards.
Require AVS/CVV matching, use fraud prevention tools like 3-D Secure, and make sure your website and all third party services you use are up-to-date and patched against known threats.
Advanced fraud tools can give each attempted transaction a score for fraud risk that can be used to automatically accept, reject, or red flag transactions. If there are some signs of potential fraud, but not enough to be conclusive, it may be worth contacting the cardholder to make sure they authorized the charge.
Let the experts deal with chargebacks for you
Travel can be stressful and emotional for people. A big, long-planned trip is a high stakes event, and when budgets get stretched by unexpected charges or unforeseen events cause people to miss flights and reservations, there’s a natural tendency to get angry and seek some form of redress wherever you can find it. That often means filing a chargeback.
Especially when operating in an industry so plagued by illegitimate chargebacks, hiring a professional chargeback management company is usually an excellent financial decision. These experts will not only fight chargebacks for you, but can also provide insight into why they’re happening in the first place, helping you optimise your business practices and prevent future chargebacks.