Hotel chargebacks: how to avoid and manage them

Chargebacks can be a real problem for hoteliers, a bottleneck to profitability that consumes a lot of time and energy to manage. This dynamic occurs when a guest reports a transaction as invalid, inaccurate, or fraudulent. 

Although chargebacks exist to protect credit card holders from fraud or poor service, they are also used as a way to avoid paying for hotel accommodations. That said, how can we reduce chargebacks at a hotel? In this article we will analyze the process of chargebacks and we will give you the keys to manage them effectively.

What is a hotel chargeback?

First things first, what is a chargeback? It’s a complaint about a transaction that is initiated by a customer’s bank after the cardholder has indicated that they do not agree to that charge.

For the credit card holder, this system protects against fraudulent operations and unauthorized charges. For a hotel, it is a threat that can cause profit loss. 

Typically, a chargeback occurs when a customer claims what they believe to be a fraudulent transaction on their credit card statement. 

Regardless of the reason, after submitting the claim, the cardholder’s bank and the receiving bank investigate its validity. Until the return request is resolved, the guest will receive the amount claimed in credit form.

But if both banks can’t resolve the conflict, the receiving bank will send a chargeback notice to the hotel, which can accept or refute the decision. The guest may have to provide evidence.

Every chargeback your hotel faces takes staff time and effort, which could be put to more productive uses, and also causes financial losses. To prevent this, it is possible to protect your hotel against chargebacks with strong and clear procedures. 

How to reduce hotel chargebacks

It is necessary to take a strong stance against fraudulent hotel chargebacks, so here are some methods to reduce them:

1. Provide detailed bills. This can be a printout copy that we physically deliver or an email invoice at checkout, but it’s a good idea to have a clear process for sharing itemized invoices with guests.
2. Thorough registration. You never know what transaction might result in a chargeback, so it’s best to keep precise records and clear evidence to respond to any claim. To do this, keep a copy of the draft of the sale signed by the client, and detailed with the date and amount of the transaction.
3. Keep records for at least three years. Most card issuers require a minimum retention period of 13 months. 
4. Answer fast. Chargebacks are an unpleasant task, but it is crucial to respond on time or you may automatically lose the claimed amount.
5. Trained staff. Incorrectly payments or inaccurate invoices can cause expensive chargebacks. Make sure that the staff is well trained to avoid these situations.

How to control hotel chargebacks?

To control this kind of fraud, the Goguest platform offers a complete system that facilitates operations management making it harder to this situations to happen. At the check-in, an NFC bracelet is put on the wrist of the guest, who signs a document giving his consent to the use of the bracelet as a payment method. 

This way, when the guest pays for a service, the wristband is scanned to identify him, the check is closed and posted in the PMS. Each chip has a unique code and a PIN can be added to validate the service charge. All charges are posted in the PMS and on the Goguest platform so that every fraudulent chargeback can be monitored.

How to reply to a chargeback?

During the process of disputing a chargeback, the cardholder and the provider try to prove the hotel wrong by providing evidence. But how are these returns managed? Let’s see that step by step:

• The cardholder contacts his bank to inform that there is a transaction they want to claim.
• The issuing bank reviews the claim, supporting documents, and the cardholder’s explanation. After reviewing them, the bank decides whether to reject the evidence, or to accept it.
• The payment gateway receives the payback. If the issuing bank decides that the claim is valid, it sends a notification to the payment platform and withdraws that amount of money.

• The provider receives the return notification and has two options: 
• -Accept the return and then the cardholder will be reimbursed.
• -Reaffirm the charge by providing valid evidence. 

• The payment platform receives the proofs and sends them, if necessary, to the issuing bank.
• The issuing bank receives the evidence and can:

• -Accept that the hotel made a legitimate charge and ask the cardholder to withdraw their claim and return the amount.
• -Accept that the cardholder is right and close the case.

How long does it take to process a chargeback?

As we have just seen, managing a chargeback can be a long and tedious process. It depends, mostly, on the company issuing the credit card, since each one of them has its own terms.

Generally, a cardholder can initiate a claim within 120 days from the date of the transaction. After you provide the evidence, it may take 60-75 days to be resolved.