Chargebacks can happen no matter what industry you’re in. In fact, chargebacks may happen in some industries more often than you may think. One of those industries happens to be lodging. That’s right, hotels experience chargebacks as a result of several issues.
One of the most common reasons for a hotel chargeback is late presentment. Late presentment occurs when the lodging establishment submits settlement charges more than 30 days after services have been rendered. So if more than a month has passed without settlement charges being submitted, that’s reasonable cause for a chargeback to be filed against a hotel.
In fact, the hotel industry has one of the highest chargeback ratios among several different industries. Across all industries, the average ratio for chargebacks is approximately 0.4%, whereas for hotels, the average comes in at around 1.1%.
According to LexisNexis, many of those chargebacks are simply a result of fraud. Chargeback fraud occurs in two ways: friendly fraud and true fraud. Friendly fraud occurs when a customer partakes in services rendered and then lies about the quality with which they were delivered. This kind of fraud occurs in about 71% of cases. True fraud is what’s really frightening. This is when information is stolen either from an establishment or from customers through that establishment. It accounts for 29% of chargebacks in the hotel industry.
Fraud, whether true or friendly, costs the hotel industry a lot of money. In fact, according to data from the U.S. Census Bureau, BI Intelligence discovered that fraud cost merchants in the U.S. approximately $30 billion in 2014. Per transaction, that means merchants are losing $3.08 per every dollar of fraud; in other words, a $100 chargeback could end up costing $308 in the long run.
There are a few ways you can help prevent chargebacks from ever happening, however. First, respond to all retrieval requests within 12 days. The sooner you communicate, the better. And second, provide a local or 800 number on all receipts and invoices so customers can contact you immediately in the event that a financial issue arises.
Chargeback is certainly a frightening prospect for businesses, but it can be prevented. Don’t forget to take these steps to stop chargeback in its tracks.