SERTIFI GUIDE
Hotel Chargeback Dispute Types and How to Win Back Revenue
In 2024, the hospitality and travel sector saw an 816% increase in chargebacks compared to 2023 (Sift). And with more than 50% of guests disputing chargebacks instead of asking for a refund (pymnts.com), it’s time for hospitality merchants to get proactive and better prepare for chargeback claims before and after they take place.
In this guide, we share three examples of chargeback disputes Sertifi’s payments team recently fought and won, including the evidence that was shown and the lessons that were learned along the way.
Case #1: Product Unacceptable (Won)
The Case
The mother of the bride (cardholder) and others demanded last-minute changes to the venue—known for its curated dining and weddings—that were not part of the signed contract. On the day of the wedding, they insisted on alterations that directly conflicted with the agreed-upon terms established beforehand. As each demand was brought up, the venue accommodated the request to the best of their ability, including:
- The bridal party showing up at the venue hours before the agreed upon start time (the venue welcomed the party and showed them to their dressing room).
- The cardholder requested different chairs after being dissatisfied with the previously contracted chairs (the venue quickly sourced and rented chairs at no additional cost).
- The cardholder requested that a bar be set up in the groomsmen’s dressing room (the venue quickly arranged drinks upon the father of the bride’s request).
- The cardholder claimed the event room was filled with debris (the venue cleaned up after the third-party florist and was done two hours before the ceremony).
- The cardholder raised a complaint about the humidity, which resulted from the caterer—hired by the wedding planner and not part of the hotel’s contracted services—cooking live in the event room (the venue continuously adjusted the temperature to maintain a comfortable environment).
Key Learnings
- Be able to prove your client’s satisfaction. This can be done with security footage, social media, photography, and/or the clients’ written word.
- Be able to debunk any false or exaggerated claims. Get everything in writing. Whether it’s a contract, an email, or even a written request, make sure that you can show what you and the client agreed to before the chargeback took place, along with any last-minute requests and changes that were made.
- Providing support for your rebuttal is just as powerful as evidence. Without context, evidence can fall flat.
- Remain neutral by holding back emotion. By staying professional, you retain the power by being factual and reasonable.
Case #2: Event Never Took Place (Won)
The Case
After a wedding celebration took place, the mother of the bride (cardholder) was unsatisfied with her billing amount for the goods and services provided. To make her point, she claimed to be displeased with the type of alcohol that was served at the event, the quantity that was served, and how it was served. She also claimed that the bar ran out of alcohol early because the bartenders were serving premium liquor in mixed drinks (which was contracted and specified in the special mixed drinks to be served).
When the venue checked their records, it was revealed that the only issues with alcohol at the event were:
- A guest attempting to remove alcohol from the bar on several instances after being dissatisfied with the bar’s selection due to their religious beliefs (event staff explained it was part of the bar package ordered by the host/cardholder).
- Bar staff discontinuing to serve the best man after he began drinking heavily and arguing with staff (event staff warned the host/cardholder that he would have to leave if the situation escalated).
Key Learnings
- Review chargeback reason codes. Different card issuers have different chargeback reason codes. Make sure that the chargeback reason code the cardholder presents in their claim matches the situation. This not only saves time but also helps you craft a precise and effective rebuttal letter.
- Be aligned with your vendors or any other third parties. By operating off the same plans, contracts, terms, and knowledge, you and your team will become more of a united front, ultimately preventing miscommunication.
- Keep security footage around longer. By doing so, you can ensure that you are protected with evidence for longer periods of time. Chargeback windows are typically 120 days from the transaction date. However, for future-dated events like events and vacation reservations, the dispute window begins on the event start date rather than the payment date.
- Protect yourself for insurance purposes. Collect all available chargeback evidence, including photos and security footage. For example, if a guest claims they were injured due to a wet surface or debris—using “product not acceptable” as the chargeback reason—security footage can refute the allegation. This evidence helps protect against fraudulent disputes and minimizes the risk of unnecessary insurance claims or legal threats.
- Source social media posts. Leveraging a guest’s social media can be a powerful way to dispute chargebacks, as photos, check-ins, and reviews serve as timestamped evidence proving their presence and engagement at your venue.
Case #3: Stolen Card (Lost but with Good Reason)
The Case
A cardholder noticed they were charged $2,200 from a hotel they had never visited or did business with. Since the cardholder did not authorize the transaction, he filed a chargeback and reported his card as stolen. At the same time, Stripe, Sertifi’s integration partner that powers SertifiPay, sent the Sertifi team an Early Fraud Warning (EFW) after detecting the charge to be risky. The Sertifi team then notified the hotel of the EFW. The guest had already checked in under a name different than the cardholder’s confirming the card’s stolen status, so the hotel called the police. The police arrived and arrested the fraudster who stole the cardholder’s real information.
Key Learnings
If the payment had been collected using a traditional processor that doesn’t support Early Fraud Warnings, or had been key-entered in the PMS, the risk of the transaction would have never been detected, and the hotel would have owed the cardholder for the fraudster’s actions. But there are other reasons using a proper ecommerce system to process deposits is best practice:
- Automate your payment security/payment process. Key-entering credit card information results in higher processing costs with interchange downgrades (steep penalty fees) because card issuers see it as a big red flag that fraud could be afoot. Processing cards as an ecommerce transaction, instead of a key-entered transaction, can save you thousands.
- Process payments securely. Protect your revenue and your guests by processing payments in a PCI-compliant manner.
- Get funds faster. Processing payments digitally can help your well-earned revenue arrive in your bank account faster, so you can have extra funds to protect yourself with. By accepting ACH payments, your payment is deposited directly to your account from the cardholder’s account, saving you time and lowering fees (ACH processing fees are significantly less than card fees).
- Use 3DS to verify cards. 3-D Secure shifts fraud-related chargeback liability to the card-issuing bank, providing added protection for merchants. If the issuing bank flags a transaction as risky, a challenge flow is triggered to verify the cardholder’s identity.
- Adopt an advance deposit policy. Send a request for an initial deposit or the full anticipated amount immediately. This allows you to leverage 3-D Secure authentication, providing additional fraud protection. If a stolen card is used and the transaction is processed through a frictionless flow, the legitimate cardholder may notice the pending charge, prompting them to either contact you directly or alert their bank to initiate a dispute—helping to mitigate potential chargebacks before services are rendered.
From unsatisfactory seating to stolen payment credentials, cardholders can and will file chargebacks for countless reasons no matter the validity of their dispute. That’s why hospitality businesses can benefit from taking crucial steps to protecting themselves from chargebacks before and after they occur.
At the same time, recognizing the possibility of winning a chargeback with the right defense is just as important, if not more so. No matter the circumstances, the right evidence and a rebuttal letter stating why the merchant should win the dispute and debunking the cardholder’s false claim are essential. And it’s easiest to work within a system and process that curates that evidence for you from the get-go.