Payment Fraud and Chargebacks in Travel: For Hotels and Advisors

Payment Fraud and Chargebacks in Travel: For Hotels and Advisors

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In travel and hospitality, fraud rarely looks dramatic. It appears as a refunded booking, a clawed-back commission, or a balance sheet that no longer reconciles. But beneath those adjustments lies the same problem: money has already moved before anyone realises something was wrong.

As global tourism rebounds, fraud is climbing with it. Visa’s 2024 Global Risk Report found that travel and leisure merchants now face some of the highest chargeback rates across any card-present sector, while Mastercard’s Risk Trends 2025 notes that “fraud exposure in travel agencies and lodging exceeds 2.7 times that of retail.”

Why Travel is so Exposed

Unlike retail, where goods are shipped only after payment clears, travel works in reverse. Bookings and room nights are confirmed first, suppliers are paid next, and only then are fraud alerts raised, which is often days or weeks later.

• For travel advisors, this means the sale has already been recorded, suppliers booked, and commissions expected. When a cardholder disputes the charge, the issuing bank pulls back funds through Visa or Mastercard’s network, leaving the agency to refund or absorb the loss.

• For hotels, especially those using prepaid or OTA-style models, the issue is mirrored: a fraudulent booking looks genuine until check-in no-shows and chargebacks arrive weeks later.

Both sides face the same reality: late fraud alerts, high operational velocity, and a multi-party payment chain where no one knows the risk until it’s too late.

The Financial Damage behind every Fraud Case

Fraud creates a loss and accounting impacts:

• Revenue reversals: Sales are recognized, commissions accrued, and taxes filed before reversal, requiring restatements or prior-period corrections.

• Cashflow hits: Refunds and chargebacks pull money directly from merchant accounts, often long after supplier payouts are made.

• Tax misstatements: VAT or sales tax may have been reported on fraudulent income, inflating liabilities and creating recovery headaches.

• Supplier penalties: Consolidators and hosts claw back commissions, damaging relationships and liquidity.

Even small volumes add up. A single fraudulent $5,000 booking can erase the profit from twenty legitimate transactions once chargeback fees, lost commissions, and tax adjustments are included.

Types of Fraud affecting Travel and Hospitality

1. Customer fraud – stolen cards, “friendly” chargebacks, and synthetic identities.

2. Supplier fraud – fake DMCs or bedbanks taking deposits and disappearing.

3. Internal fraud – refund manipulation or duplicate supplier payments.

4. System fraud – bot activity inflating bookings or loyalty redemptions.

Each requires a different response. Technology alone cannot solve them all.

How modern Fraud Tools work

Most travel advisors and hotels now encounter pre-authorization risk scoring without realising it. These systems, built into gateways such as Stripe Radar, Authorize.net, Advanced Fraud Detection, or enterprise layers like Riskified, Forter, and Signifyd, analyse transactions in milliseconds.

Here’s how they work:

1. Card capture: The card is vaulted in a PCI-secure system.

2. Risk scoring: APIs query global fraud networks, checking card BIN data, IP location, device fingerprint, and historical velocity.

3. Decisioning: The tool returns a score or recommendation—approve, verify, or block—before the supplier or hotel receives funds.

4. Ongoing learning: Machine-learning models update continuously using industry-wide data to reduce false positives and identify new fraud behaviour.

These tools rely on shared data ecosystems, not isolated models. They access vast databases of previous fraudulent patterns to assign a probability of risk.

Why timing is important

Even the best technology can only reduce risk, not remove it. Visa and Mastercard’s alert cycles still mean that genuine disputes or late frauds take time to filter back to the merchant. That lag is what makes financial controls essential.

Antravia’s work with travel businesses shows that most losses occur not because fraud wasn’t detected, but because the business lacked an accounting framework to absorb it. Fraud becomes dangerous when it creates confusion across your books.

What Hotels and Agencies Can Do

1. Build Fraud Controls Into Finance, and not just Payments

Treat fraud exposure as a financial risk, not an operational nuisance.

• Create a monthly fraud reserve line in your P&L based on historical chargeback ratios.

• Delay supplier disbursements on high-risk bookings until post-authorization windows close.

• Reconcile card settlements and booking systems daily to flag anomalies early.

2. Segment Payment Channels

Use separate merchant accounts or gateways for high-risk destinations, short-lead bookings, or new clients. This limits the damage of any one incident.

3. Tokenize and verify early

Always vault card data, and where possible, use 3-D Secure or identity verification before supplier payment. Hotels should implement pre-arrival verification workflows; agencies should delay ticketing until the fraud check clears.

4. Train Staff to recognize Fraud Patterns

Human intervention still matters. Red flags include mismatched emails and phone numbers, multiple cards per traveler, or booking origins far from cardholder locations.

5. Audit Trails and Documentation

Keep every fraud-related decision recorded—risk score, approval, verification evidence. This is crucial if a chargeback is disputed later or if auditors request proof of financial controls.

What’s on the Market

Fraud prevention is evolving fast. Mainstream players such as Riskified, Forter, and Signifyd offer chargeback-protection and indemnification models for e-commerce, while Stripe Radar, Authorize.net AFDS, and Fraud.net provide cost-effective real-time scoring for service industries.

Alongside these, bespoke travel-industry systems have emerged that integrate directly into booking and card-vault platforms, performing fraud scoring before supplier payments. These niche tools operate similarly to enterprise fraud networks but are tailored for agencies managing multi-party bookings.

The key takeaway is this: technology can help detect risk, but only your financial discipline determines whether the loss ends up on your balance sheet.

Accounting for Fraud in 2025 and beyond

Travel businesses should align fraud management with their accounting structure:

• Treat fraud losses as a controllable expense.

• Use variance analysis to track monthly deviations in refunds and chargebacks.

• Include fraud metrics in management reporting alongside revenue and cashflow.

• Document preventive actions as part of your internal control system; this strengthens credibility with banks, insurers, and investors.

Conclusion

Fraud in travel doesn’t announce itself, but it slips quietly through a system built on trust and prepayment. By the time alerts arrive, money has moved, rooms have been booked, and commissions accounted for.

Modern fraud-scoring tools help, but they work best when embedded inside a financial framework that protects your working capital and reporting integrity.

For travel agencies and hotels alike, the solution is clear financial control, audit readiness, and operational vigilance.

That’s where prevention stops being an IT problem and becomes what it always was: a finance problem.

References

• Visa. (2024). Global Risk Report 2024. Retrieved from https://usa.visa.com

• Mastercard. (2025). Risk Trends 2025. Retrieved from https://mastercard.com/risk

• Federal Trade Commission. (2024). Consumer Fraud Reports by Industry. https://ftc.gov/reports

• AHLA. (2024). Hospitality Security & Fraud Overview. https://ahla.com

• AccountingTools. (2023). Accounting for Chargebacks. https://www.accountingtools.com

Disclaimer:
Content published by Antravia is provided for informational purposes only and reflects research, industry analysis, and our professional perspective. It does not constitute legal, tax, or accounting advice. Regulations vary by jurisdiction, and individual circumstances differ. Readers should seek advice from a qualified professional before making decisions that could affect their business.
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