Monday, December 4, 2023

How hotel chargebacks work and how to handle them | By Tom Brown

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Chargebacks can be a persistent challenge for hoteliers, posing a threat to profitability and consuming valuable time during the dispute process. While chargebacks serve a crucial role in protecting cardholders from fraud or service issues, they can also be misused to avoid legitimate payments, particularly in the hospitality sector.

In this article, we’ll walk you through the entire chargeback process and provide insights on how best to navigate these challenges as a hotelier.

What is a chargeback?

A chargeback is a transaction reversal initiated by a customer’s bank when the cardholder disputes a charge on their card. It differs from a refund, as refunds are typically initiated by the service provider, not the bank.

For the cardholder, a chargeback is a safeguard against dishonest merchants and unauthorized charges. For businesses, it can be an unwarranted threat to revenue.

Parties involved in the chargeback cycle

Part of what makes handling chargebacks complicated is that there are multiple parties involved. All of the following play a role:

  • The cardholder
  • The card issuer
  • The card network (e.g. Visa, Mastercard, Amex)
  • The acquirer, payment gateway (e.g. Adyen, Stripe)
  • The merchant or service provider

Causes of chargebacks in hospitality

Chargebacks are always initiated by the cardholder. They talk to their bank and provide a reason, which the bank then translates into one of their 151 predefined ‘reason codes’.

Chargebacks in the hospitality sector often reflect one of these common scenarios:

  1. The cardholder fails to identify the charge on their account.
  2. The cardholder doesn’t want to pay for their stay because they’re not happy with the service or experience.
  3. The cardholder doesn’t remember making the purchase.
  4. Another household member used the card for a purchase, leading to unrecognized transactions.
  5. The cardholder disputes the need to pay for cancellation or a no-show fee.
  6. Unauthorized use of the card, such as stolen cards or testing card limits, i.e. fraudulent activity.

Somewhat surprisingly, over two thirds of chargebacks labeled as ‘fraudulent’ are attributed to ‘friendly fraud,’ where the cardholder simply doesn’t recall the transaction and seeks clarification.

Responding to chargebacks

Understanding the reason code associated with a chargeback is crucial. It allows you to identify the root cause and submit a response with compelling evidence – in other words, to increase your chances of winning the case. Familiarizing yourself with chargeback codes can also aid in improving processes to prevent future occurrences.

Disputing hotel chargebacks: a step-by-step process

It’s inevitable that at some point you’ll need to dispute a chargeback. If you follow the process and provide the evidence required, you have every chance of winning the claim.

It’s also important to know that the issuing bank or acquirer might charge you a dispute processing fee. If you win the case, you get that money back, but the bank keeps it if you lose.

  1. Cardholder contacts their bank. The cardholder informs their issuing bank about the disputed transaction.
  2. Issuing bank reviews the claim. The bank assesses the supporting documents and decides whether to accept or reject the dispute.
  3. Acquirer receives the chargeback. If the dispute is accepted, the acquirer is notified and the disputed amount is withdrawn.
  4. Merchant responds to chargeback: The merchant can either accept the chargeback or provide relevant supporting evidence to dispute it.
  5. Acquirer reviews evidence. The acquirer assesses the evidence provided by the merchant.
  6. Issuing bank makes a decision: Based on the evidence, the issuing bank either supports the merchant or the cardholder.
  7. Arbitration (if necessary). For complex cases, evidence may go to arbitration, where card networks make a final decision.

Timeframe for chargeback processing

Chargeback resolution timelines vary, but generally, a cardholder can initiate a chargeback within 120 days of the transaction. After providing evidence, it takes 60-75 days to receive a final decision, which cannot be directly contested.

Tips to avoid chargebacks

While some chargebacks are unavoidable for hoteliers, proactive measures can minimize their likelihood.

  • Use clear payment descriptors
    Ensure that your property name is easily recognizable on bank statements. Use the guest-facing name of your property, rather than any holding company.
  • Clearly present policies
    Display payment and refund policies prominently, and ensure customers acknowledge them – this is an important piece of evidence in your favor.
  • Communicate with customers
    Keep customers informed about additional charges, so that you avoid surprises on their credit card statements.


Understanding the chargeback process is crucial for minimizing its impact on your hotel business. While chargebacks may still occur, implementing proactive measures and effective communication can significantly reduce their frequency.

Properties powered by Mews Hospitality Cloud typically have a much lower chargeback rate than average. In particular, hotels that use Mews Payments have little to no problems as every single transaction is processed seamlessly and securely with the guest’s consent.

Discover more about modern hotel payments

Does your property have a modern payment system? Discover the benefits of a fully integrated payments solution – including reduced chargebacks and a healthier bottom line – in our guide, We Need to Talk About Payments. Download the guide

About Mews

Mews is the leading platform for the new era of hospitality. Powering over 3,500 properties across more than 80 countries, Mews Hospitality Cloud is designed to streamline operations for modern hoteliers, transform the guest experience and create more profitable businesses. Customers include Accor, Generator-Freehand, The Strawberry Group, The Social Hub, Life House and Airelles. Mews has been named the World’s Best Hotel PMS Provider and Best Independent Hotel PMS Provider by World Travel Tech Awards (2023) and Best Place to Work in Hotel Tech (2021, 2022) by Hotel Tech Report. The company has offices in Europe, the United States and Australia.

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