Why friendly fraud is becoming a major challenge for hospitality businesses
The hospitality industry is losing revenue to a form of fraud that is riddled with ambiguity and an uncomfortable middle ground. It is not committed by organised criminal rings, but by legitimate guests using their own payment cards to dispute valid charges. That is friendly fraud in hospitality. A real cardholder disputes a completed transaction through their bank rather than with the property directly. This revenue leakage now accounts for between 70% and 79% of all credit card chargebacks across industries. The term seems disarming and benign. Merchants face total costs of $450 for every disputed transaction in the travel and hospitality sector, representing a 3.75x multiplier on the original booking value (according to Chargeflow). The scale of the problem is growing exponentially. Global chargeback volumes are projected to grow 24% by 2028, reaching 324 million transactions. Travel-related disputes are already surging 30% year-on-year. For a sector where 6% of annual revenue is absorbed by fraud. The thin operating margins exert pressure on profitability. This paper examines why hospitality is disproportionately exposed to first-party fraud, what forms the threat actually takes, and what a credible operational response looks like.
