What is a hotel chargeback?

A hotel chargeback is a dispute resolution process initiated by a guest or credit card company to reverse a payment made to a hotel, typically due to dissatisfaction or fraud.

A hotel chargeback begins with a guest contacting their credit card issuer to dispute a charge. This could be due to a billing error, suspected fraud or simply dissatisfaction with service the hotel provided.

The credit card company then investigates the claim. It reaches out to the hotel for transaction documentation and details. If the investigation finds in favour of the guest, the charge is reversed, and the hotel is required to return the funds to the guest’s account.

There are also third-party hotel chargebacks, which can add some complication into the mix. These occur when the payment was originally processed by a third party, such as an online travel agency (OTA) or a booking platform.

In this guide we’ll take a closer look at hotel chargebacks, to gain a deeper understanding of why they happen, and how your hotel can minimise them.

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From minimising billing errors to helping you deliver an indisputably incredible guest experience, Little Hotelier can help your hotel reduce chargeback instances.

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Why is it important to prevent hotel chargebacks?

Chargebacks can have a significant negative impact on your bottom line, particularly if you are a small, independent hotel. This is money that you’ve already earned for services you’ve (usually) already rendered, after all, making these losses more painful than simple cancellations.

On top of the financial losses, you also face the administrative burden, and potential issues in terms of your business’s reputation and credit rating. Frequent chargebacks can see you facing higher fees from your bank, can strain relationships with payment processors, and can send your listing falling down rankings on key booking channels.

Common reasons for disputing hotel charges

The most common questions regarding hotel chargebacks hint at the issues that hotel guests can face:

  • Can you dispute a hotel stay?
  • Can you dispute a hotel charge on your credit card?
  • Can I dispute a hotel charge on my debit card?
  • How to dispute a hotel charge
  • What happens if you dispute a hotel charge?
  • How to dispute hotel charge for bad service

But exactly what are the reasons that guests dispute hotel charges on a credit card? Five of the most common include:

Billing errors

Guests might dispute what they perceive as incorrect billing, like being charged for services that they don’t think they received, or for room rates that they believe are higher than what they booked.

Unapproved charges

If a guest’s credit card has additional charges that they did not approve – minibar items, parking, massages, etc – they might file a dispute.

Fraudulent transactions

A guest might claim that their card was used fraudulently, whether to book your hotel or to pay for products and services within your hotel, particularly if they didn’t actually stay with you.

Dissatisfaction with the stay

If the guest feels that the stay did not meet their expectations or the quality they were promised, including issues with cleanliness, amenities or service levels, they might dispute the charges.

Cancellation policy issues

A guest who cancels a reservation, but is still charged due to confusion over the hotel’s cancellation policy, might dispute the charge.

hotel chargebacks

How to manage hotel chargebacks effectively

So how does a small, independent hotel manage, minimise and ideally eradicate chargebacks? What solutions would you suggest for reducing chargebacks within the hotel? 

Here are some effective strategies:

Create a clear chargeback policy

A clear hotel chargeback policy should outline procedures for verifying charges, handling disputes, and communicating cancellation or refund terms to guests, to avoid unnecessary chargeback requests.

Document transactions accurately

Your policy should also include guidelines for your team to document all transactions and paperwork accurately – digital receipts, guest agreements, transaction records – to ensure you have all the evidence you need, and to help credit card companies assess each request.

Train your staff to handle disputes

Your staff need to be able to communicate clearly and calmly with guests who (rightly or wrongly) feel as though they have been unfairly treated. You should train your staff to handle these situations, and you should ensure they know your resolution procedures back to front.

Implement secure payment methods

You can enhance the security of your payment processing methods by choosing tools that are PCI DSS certified and GDPR-compliant.

Leverage chargeback prevention tools and alerts

There are even built-in fraud detection tools and systems that can prevent chargeback hotel problems from occurring in the first place. You can set up real-time alerts, you can get smart systems to monitor every transaction, and you can automate dispute responses where appropriate.

Top solutions to reduce hotel chargebacks

Many of the secrets to minimising hotel chargebacks are hidden within your data. By crunching historical chargeback data, you can identify recurring trends, such as specific services or booking channels that frequently lead to disputes, which you can then work to fix.

The insights generated from this data can help you to enhance your guest services, refine your processes, clarify your cancellation policies, and address the things that your guests are dissatisfied with.

One source of valuable chargeback data, insights and solutions? Little Hotelier.

By Dean Elphick

Dean is the Senior Content Marketing Specialist of Little Hotelier, the all-in-one software solution purpose-built to make the lives of small accommodation providers easier. Dean has made writing and creating content his passion for the entirety of his professional life, which includes more than six years at Little Hotelier. Through content, Dean aims to provide education, inspiration, assistance, and, ultimately, value for small accommodation businesses looking to improve the way they run their operations (and live their life).