Chargebacks are a serious threat to profit margins in the hospitality sector. Every year, millions of people across the country contact their bank or card provider to cancel a charge on a hotel room or extra services while on holiday. These chargebacks result in hefty fees and lost revenue for hotels across the nation.
The Federal Reserve Bank of Kansas City published a working paper stating that the travel and hospitality industry was more vulnerable to chargebacks and fraud than any other. The average value of a chargeback for a travel business was more than double the rate of other industries.
As a hotel owner, chargebacks and card fraud have the potential to erode your profits, lower your occupancy, and become a consistent bottleneck to growth for your business. Here are the three most common reasons for customers could be claiming back funds from your business and how you can reduce chargebacks for your hotel:
1. Unclear policies
As a hotel owner, your job is to balance customer satisfaction with economic reality. A clear plan and transparent policy will help you reduce chargebacks significantly. Let your customers know you will charge them for no-shows and late cancellations. Work with your agents to claim penalties when guests fail to pay for use of the minibar or damage the property. Train your staff to handle customer payment details properly and make sure the cards being used are not expired during purchase. Take a deposit when customers make a reservation and let them know if the deposit is refundable within a certain timeframe.
Clear policies will help your guests know what to expect and could help you win a battle over a chargeback later.
2. Lack of communication
One of the biggest reasons for frequent chargebacks at hotels is a lack of communication. You need to hire professional customer service agents to handle calls and deal with grievances as quickly as possible. Offer gestures of goodwill when a customer has an issue with the service. Clearly communicate all your policies and make sure you maintain contact with your guests before, during, and after their stay. Make sure your business name matches your marketing material and brand so that customers are not puzzled by your charges on their bank statement.
This open line of communication will help you enhance your hospitality service, reduce chargebacks, and accumulate evidence for legal disputes.
3. Outdated payments technology
Perhaps the best way to reduce chargebacks is to automate and update your payment processing infrastructure. The latest payment technology can hook your business up to the automated clearing house (ACH) network that is faster, less prone to errors, and less susceptible to chargebacks. Sign up for a merchant account or work with a payments facilitator to improve your payments gateway and reduce chargebacks. Payment providers can offer you virtual terminals, sophisticated APIs, and built-in chargeback prevention features to help you reduce chargebacks and sustain revenue.
There are three reasons for chargebacks in the hospitality and tourism industry – lack of communication, outdated payments technology, and unclear policies. As a hotelier, you need to train your staff, communicate effectively with your guests, and update your payments infrastructure to reduce chargebacks and conserve sales.