3 min read

How much do fraudulent bookings really cost you?

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We all know online travel agencies (OTAs), management companies, booking platforms and hotels are suffering right now. Even those who anticipate an increased revenue post-pandemic are rightfully concerned about the future, and unsure of how they should adapt their business plan.

But there’s more bad news than COVID-19. Fraudsters, who thrive on chaos in any situation, are taking the opportunity of this crisis to boost their attacks. In this post, we’ll see why, and how much it could cost your business.

Escalating fraud rates worldwide

The world is stuck at home, and many find themselves with reduced income. Unfortunately, we’ve already witnessed how this boosts the numbers of fraudulent attacks. Across many verticals, including the OTA industry, the numbers have grown exponentially in terms of:

  • Chargeback rates: due to payments processed with stolen credit card numbers.

  • Multi accounting: when the same person opens multiple accounts to benefit from referral or signup bonuses.

  • Account takeover: legitimate guest accounts are stolen by fraudsters, who then drain them of travel credits, or mine them for ID details.

  • Identity fraud: where bad agents combine stolen ID data acquired on the darknet and real data to create synthetic IDs. 

The last point is particularly worrying for the hospitality industry, where knowing your guests is the key to growing a business successfully.

Expect even more synthetic ID fraud 

As the WFH (work from home) movement continues to gain traction, fraudsters are increasing their attacks designed to gain personal information. COVID-19 phishing attacks grew by 600% worldwide in early 2020, especially on workers who are adjusting to a new set up, or unprotected by a company firewall.

Data leaks, which show no sign of slowing down, are surely going to affect more companies, and the personal ID numbers of millions will inevitably flood darknet marketplaces. But what will happen when you accidentally let the wrong person through your doors?

The true cost of fraud

The most immediate cost you’re likely to notice is that of chargeback fees. This is a direct loss, which can range from $20 - $50 depending on the card scheme, acquirer or processor.

Which brings us to the indirect costs of managing chargebacks and bad bookings. Creating a dispute report, gathering evidence and even understanding the various requirements from different acquirers can be a hugely time consuming task.

The amount of resources and efforts required grows exponentially, and in fact, at SEON, we’ve calculated that every dollar lost to fraud ends up losing hospitality companies up to three dollars in indirect costs.

When it comes to affiliate or bonus fraud, you’re also looking at wasted marketing dollars. Part of your budget is being eaten away by bad agents who end up shrinking your business rather than growing it.

And last but not least, there’s the fact that you’re turning away legitimate travellers. Their potential bookings have been taken by people who have no intention of staying in the accommodation, frustrating their travel plans, which could lead to a loss of reputation in the long term.

Avoiding risky bookings in uncertain times

Whether your region is COVID-free or still in its throes, you might be tempted to relax your user screening process. But don’t forget that a bad user results in a lot more than a wasted booking. It’s a liability that could sink your business through high chargeback fees, wasted time and resources.

To learn how to avoid hotel fraud during COVID-19, check out our latest blog with SEON.

This post was written by SEON, a fraud fighting specialist that leverages Machine Learning and innovative tools to help business grow with complete peace of mind.