Hospitality Chargeback Challenges, Strategies and Industry Insights

Chargeback Gurus helped a large hospitality client's full-service locations achieve a revenue recovery rate of 53%.

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Chargeback Gurus Overview

Chargeback Gurus is the leading provider of chargeback management services to the hospitality industry, leveraging innovative technology, AI insights, and deep industry expertise to help hospitality companies prevent chargebacks and recover more revenue. Our clients include leading hospitality companies that maintain a diverse portfolio across various international markets and asset categories.

 

 

Challenge

The hospitality industry has experienced an increase in credit card disputes, resulting in financial losses as well as operational hurdles. Without experienced chargeback management experts, identifying the root causes of these disputes has proved to be challenging for most companies. This has necessitated a multi-pronged approach within the industry to explore strategies aimed at preventing fraudulent chargebacks, maintaining a sustainable chargeback ratio, and increasing revenue recovery.

Key Industry Challenges:

- Managerial Expertise and Time Constraints: Hotel managers, often lacking in chargeback expertise and burdened by time constraints, face difficulties in effectively responding to disputes.
- Limited Analytics for Root Cause Identification: The industry lacks robust analytics tools to identify the root causes of chargebacks, hindering the ability to derive actionable insights.
- Prevalence of First-Party Misuse: A significant percentage of chargebacks are caused by first-party misuse, requiring risk mitigation strategies designed to combat this more complicated threat.
- Complexity of Operations: The industry's reliance on hundreds or thousands of Merchant IDs (MIDs) results in a lack of streamlined processes and consolidated solutions, further complicating operations. 
Addressing these challenges necessitates the development of tailored strategies that prioritize enhanced analytics capabilities, managerial training, and streamlined operational processes to effectively combat fraudulent activities within the hospitality industry.

Approach

 The CBG approach combines expertise in the hospitality sector with cutting-edge technology to deliver chargeback prevention and revenue recovery solutions tailored to hospitality clients. 

This approach includes:

- Data-driven Insights: Utilizing our proprietary FPRONE™ platform to aggregate data and deliver actionable insights.
- Custom Dispute Packages: Tailoring dispute responses to each property’s unique needs, leading to higher success rates.
- Collaboration with Property Management and Key Stakeholders: Working closely with leaders and property managers to implement effective, property-specific policies and strategies

Effective Strategies for Reducing Chargebacks in the Hospitality Industry

 

Challenge

The tech and media industry is facing significant challenges in managing chargebacks across digital and physical transactions. Inconsistent transaction data, limited visibility into customer interactions, and frequent technical issues contribute to low chargeback recovery rates. Companies struggle with insufficient evidence to dispute chargebacks, gaps in transaction details such as missing IP addresses and device IDs, and poorly communicated policies, leading to preventable disputes and lost revenue.

Key Industry Challenges:

- Incomplete Transaction Data: Missing crucial details, such as IP addresses and device IDs, weakens dispute responses and reduces recovery chances.
- Technical Issues: Frequent credential login problems and user verification issues diminish the effectiveness of contesting chargebacks, especially for digital services.
- Insufficient Policy Disclosure: Lack of clear, upfront communication regarding policies at the time of payment increases the risk of chargebacks.
- Fraudulent Activity: High levels of payment fraud demand stronger fraud prevention measures and more effective customer verification.
- Ineffective Evidence Management: Inadequate documentation and inefficient processes make it harder to gather and submit evidence on time, leading to lost recovery opportunities.

Approach

The CBG approach focuses on refining data capture, speeding up evidence submission, and improving responses to complex disputes across the tech and media industry. By identifying key deficiencies in transaction details and policy communication, this approach enhances chargeback prevention and recovery efforts.

This approach includes:

- Comprehensive Case Review: Identifying gaps in data capture and dispute processes to streamline chargeback management.
- Optimized Documentation Process: Ensuring timely submission of essential transaction details such as device IDs and IP addresses.
- Effective Dispute Responses: Developing tailored dispute responses to address industry-specific chargebacks, such as subscription cancellations and credential-related issues.

Effective Strategies for Reducing Chargebacks in the Tech & Media Industry

Validating Online Travel Agency Reservations 
Property managers should carefully review reservations made through Online Travel Agencies (OTAs) and ensure rooms are booked accordingly. 

Prominent Payment and Refund Policies 
Display payment and refund policies prominently during the booking process and ensure guests acknowledge them.

Clear Communication Before The Guest Arrives 
Ensure all reservation details, cancellation policies, and any additional charges are clearly communicated to the guest prior to their arrival.

Rapport With The Guest During The Stay 
Ensure continuous open communication and promptly address any concerns during the guest's stay to prevent dissatisfaction or frustration. 

 

Best Practices-1

 

Guest Interaction Documentation Protocol 
Document all interactions with guests, including emails, phone calls, and resolution attempts for evidence records. 

Authorization of Transactions In The Presence of Customer
Process transactions using Chip & PIN whenever the customer is present and ensure all transactions, including the additional charges levied for services, are posted with valid authorization code. 

Reliable Payment Security Protocols with AVS & 3D Secure
Use AVS to verify the billing address provided by the cardholder. Implement 3D Secure protocols for online transactions to add an extra layer of authentication.

Cardholder Information Records 
Collect essential transaction and cardholder information along with identification of the guest, ensuring thorough verification and enhanced security against unauthorized activities. 

 

Solution

CBG’s expertise and technological integrations with top processors and PMS platforms empower hospitality clients to achieve substantial revenue recovery and chargeback reduction. Chargeback Gurus continues to drive meaningful improvements for clients, paving the way for sustained success in the hospitality sector by enhancing the customer journey and providing efficient dispute resolutions.

Recovery Rate*
*Before Pre-Arb time frame: January to December, 2024

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53%

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