THE STR SECURITY PLAYBOOK
CHAPTER 6
How to Prevent Chargebacks for Your Short-Term Rental
Stop chargebacks and the risk of fraud before they happen
If you’ve been on the receiving end of a credit card chargeback as a short-term rental host, or worry that they could seriously hurt your business, you’re not alone (or paranoid).
In fact, did you know that 20% of all attempted transactions in the travel industry are fraudulent? And that online travel agencies (OTAs) lose $11 billion annually because of fraud?*
There’s no denying it: Chargebacks could cost your business hundreds or even thousands in lost revenue. Also, if a guest is requesting a chargeback, it indicates they’re not happy, which could lead to a bad online review and negative word-of-mouth comments.
So how can you prevent chargebacks? By improving guest communication and security, using dedicated technology designed to do just that.
Our 8-step process walks you through it.
- Screen guests
- Communicate responsively and address issues quickly
- Document communication
- Display your house rules clearly
- Have a clear cancelation policy
- Provide an accurate property description
- Establish smooth check-in
- Exceed guest expectations
If you’re ready to stop chargebacks before they even happen, and protect your vacation rental business, you’re in the right place. Here’s how.
Minimize your risk of chargebacks.
*Studies from travel payment experts Wex, and digital identity specialists LexisNexis ThreatMatrix.
The two types of chargeback
Chargebacks are when customers dispute a transaction on a credit or debit card, and get their money back from the bank.
There are two types of chargebacks.
1. Fraudulent
Either a genuine case of fraud via s stolen credit card, where the cardholder’s money was stolen and they are rightfully trying to get it back. Or a case where the cardholder is trying to avoid paying by claiming that they were a victim of fraud.
2. Non-fraudulent
The cardholder accepts that they paid, but they try to cancel for a full refund in advance or try to get their money back because they claim they’re unhappy or dissatisfied with the service or experience.
Your main route of recourse as a business owner is to ensure there’s a valid (virtual) paper trail of your guest communications. Gathering screenshots, saving messages, and requiring signatures makes it more difficult for customers to successfully commit fraud.
8 ways to prevent chargebacks for your short-term rental
1. Screen guests
Screening guests using automated software is one of the best ways to ensure vacation rental safety, and prevent security issues before they occur.
With only a name, ID, and credit card details, screening vacation rental software can:
- Calculate the risk of fraud
- Identify possible credit card irregularities such as using a card under a different name
- Keep track of repeated attempts to use a card, or pay with different cards
- Flag up possible issues such as cards that don’t match the guest’s name
Reduce your workload and minimize your chance of being a victim of fraud.
2. Be responsive and communicate with your guests
Establishing excellent and prompt communication with guests right from the start of the booking process (and even before they book if they inquire or ask a question first) is key.
Addressing any issues quickly, also via good communication, also reduces the risk of guests feeling dissatisfied and taking the route of a chargeback.
This is because it:
- Reduces the risk of guest dissatisfaction and frustration, as they can ask a question and receive a quick and helpful reply
- Makes it more likely the guest will feel comfortable communicating with you directly rather than proceeding straight to a chargeback
- Gives you the chance to resolve guest problems quickly so they don’t attempt to chargeback
- Enables you to ask questions upfront to detect any guests who may be uncomfortable with your policies, checks, or rules
- Gives you a chance to introduce and restate your rules and policies, so guests can accept, reducing the risk of them claiming they received a different experience to was expected
- Shows your guest that you care about their experience and are working hard to iron out any problems
- Enables you to continually improve your service, make tweaks to your processes, learn where issues occur, and make it less likely that guests will find problems in the first place
Using dedicated guest communication technology can make this much easier, as you can keep all of your guest messaging under a single dashboard.
This enables you to schedule messages with all the important details in advance, and make sure the guest has everything they need upfront, to reduce and manage the risk of dissatisfaction further. It also allows you to easily keep track of messages, and respond promptly wherever you are.
It’s also a good idea to have a set of contacts on hand in case of practical emergencies, such as a 24-hour plumber, locksmith, and contractor; or even just a nearby assistant who can visit the property in person. This will make it quicker and easier to respond to on-the-ground issues.
3. Keep well-documented communication
Keeping communication digital not only makes it quicker and easier to respond to, but it also maintains a (virtual) paper trail. This is a crucial way to help prevent chargebacks (or at least, to win your case in the event that a guest tries to unfairly request one).
Documenting communication also means keeping proper records of all guest emails, inquiries, messages, paperwork, and payment details.
Using digital tools to file this under a single digital platform will help you keep it secure, and ensure you have it on hand easily in the event of a chargeback case.
This also means:
- Using digital tools to check ID and guest screening results
- Using secure payment processing tools
- Storing guest data and ID safely
- Keeping all guest communication history
- Sending house rules and check-in instructions digitally
Keeping a paper trail will help you dispute guest claims of poor service or a lack of transparency (such as to their bank) and show you’ve communicated professionally, honestly, and promptly.
4. Display house rules
One way to preempt and prevent any future chargeback claims is to make your house rules totally clear from the start.
This:
- Reduces the risk of guests being able to claim that they weren’t informed of rules or policies
- Helps to establish excellent communication by stating your boundaries and expectations
- Deters non-compliant or problematic guests by putting them off before they book or arrive
Displaying your house rules clearly means:
- Putting the major rules (such as check-in policies or pet rules) on your listings
- Sending them to guests ahead of arrival
- Reminding guests of the rules again on check-in
- Displaying the rules clearly in your rental and/or making them accessible—such as via the guest’s smartphone by using a feature like Operto Guest’s house manual
Using digital automation technology makes this much more streamlined, as you can easily send house rules in advance, schedule policies to send as part of your confirmation messages, and ensure guests have all the info they need accessible on their smartphone.
5. Present a transparent cancellation policy
Similarly, being as upfront about your cancellation policy as your house rules can only work in your favor when it comes to chargebacks.
This means:
- Guests know what your cancellation policy is before they book, making any bookings less likely to quibble after payment
- Guests can cancel easily if they need to, and don’t need to resort to chargebacks
- Guests can’t claim they thought they could cancel but were surprised to find they couldn’t (leading them to request a chargeback)
- You appear professional and set expectations clearly upfront, making guests less likely to attempt chargebacks or other unexpected behavior
It is also a good idea to make your cancellation policy (and refund policy) relaxed enough so that guests can easily cancel if they don’t accept your rules. This means you can vet the guests before they arrive, and identify any potential issues before they happen.
6. Provide accurate property descriptions
Making sure your property description is as accurate as possible, goes a long way towards preventing genuine chargebacks from unhappy guests.
Of course, you want to sell your rental and highlight its plus points, but it’s important to ensure your listings are also accurate and fair, and don’t oversell or misrepresent your offering.
This:
- Avoids guest disappointment and poor reviews
- Reduces the risk that people will book your unit, only to belatedly find out it’s not suitable for their needs
- Improves trust between you and guests and deters chancers from trying to dispute payments
This will also mean you attract your ideal guests within your chosen niche, and don’t waste time or effort trying to please people who were never looking for your kind of property anyway.
Make sure your descriptions:
- Accurately explain exactly who your property is aimed at, and the amenities you provide
- Are clear about what you offer and what you don’t
- Don’t over promise on decor, space, amenities, quality, or location
- Highlight possible problem issues or stumbling blocks that could be an issue for some guests (such as no elevator in a tall building, or loud street noise in a city-center apartment)
PRO TIP – Even bad reviews help you to improve
Looking at previous, common guest issues (such as reports of street noise, or steep staircases) can help give you ideas about what potential issues you could highlight on your listings. This will help to preempt any future complaints or chargebacks.
If the potential shortfalls of your property are clearly marked, guests can’t claim that they weren’t aware, and are less likely to issue a chargeback dispute (or have a solid case if they do).
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7. Establish a smooth check-in procedure
Implementing a smooth check-in procedure is one way to ensure excellent service, establish good communication, set boundaries upfront, and impress guests even before they arrive.
Using a tool such as Operto Guest makes this much easier and more efficient. It can:
- Send guests all the check-in information they need ahead of arrival, reducing pre-stay stress and enabling them to get excited and prepared
- Enable seamless, easy access via a keycode sent to the guest in advance so there are no last-minute panics or problems
- Reduce the risk of difficulties and bad impressions upon check-in as guests don’t have to meet someone in person when they arrive, eliminating the chance of no-shows or delays
- Reduce stress among guests as there’s no issue if they get delayed or arrive later than planned
- Ensure better security for your STR, as only people with the correct keycode can enter
- Eliminate the risks and costs involved with physical keys, including if guests lose them, accidentally leave them inside the unit, or illegally try to copy them
- Make check-out much easier as guests can simply leave without worrying about where to leave the key
Enabling smart check-in via a smart keycode lock also means that you can offer cleaners, maintenance staff, and other assistants into your properties more easily, so you can maintain the unit at a higher level and ensure cleanliness, giving guests a great first impression.
Operto Guest enables you to link guest communication with smart locks, so you can communicate with guests even more effectively and make their check-in even more seamless.
Happier guests mean even less chance of chargebacks due to disappointment or dissatisfaction.
Reduce logistical nightmares, ensure security, and give guests an excellent first impression.
8. Exceed guest expectations
Overall, a major way to prevent chargebacks from disappointed guests is to eliminate the risk of them being disappointed in the first place.
Of course, some guests may always find something to complain about, or they may—despite your best efforts—have booked a space that was always going to be unsuitable or unsatisfactory for them, no matter how obvious it was in your listings and subsequent messages.
If you’ve followed all of the above tips, it’s unlikely that guests will book without realizing what they’re getting. Nor will they have a case if they still decide to request a chargeback.
Together, our tips combine to mean one thing: Offering a fantastic guest experience.
In addition to establishing excellent communication and providing accurate listings, you could also exceed guests’ expectations by:
- Offering personalized welcome notes or treats on arrival, especially if they’re tailored to the guest (e.g. dog treats if they’re bringing their furry friend, or vegan gifts if they’re plant-based)
- Slightly underselling your property online, and offering touches of luxury they might not have expected, such as plush towels, high-end toiletries, and high thread-count sheets
- Going above and beyond to help, such as offering tailored recommendations for the local area, need-to-do neighborhood insights, or having someone bring your guests breakfast on day one
- Checking up on guests on day one and mid-stay, to check they’re OK and ask if they need any help or have any questions
- Offering discounts or collaborations with local shops or restaurants
- Niching down to a specific type of guest and providing the exact amenities they’ll need, such as great coffee, fast WiFi or a bright workspace for a digital nomad
- Offering late check-out for free
- Making it easy for guests to leave their luggage with you before and after their stay
- Letting guests bring their pets
- Offering discounts and other perks for direct booking next time they stay
Anything that will make your guest’s stay easier, more suitable, and more comfortable will go a long way to avoiding chargebacks. If nothing else, guests will see your care and attention, and understand that you’re a business trying your best to offer excellent service.
Preventing STR chargebacks: Communication, security, and tech
Chargebacks may seem intimidating and anxiety-inducing, which is why it pays to focus on the everyday, small details of running your business to avoid them.
This means remembering that each of your guests is a human being, rather than just a name on a credit card or security screening. Mostly, guests want to be respected and cared for. They’re far less likely to feel misled or disappointed if, as a host, you offer them this good experience.
And whether you’re trying to prevent fraudulent chargebacks (due to criminal activity) or non-fraudulent (due to disappointment or avoidance of rules), connected technology such as Operto Guest can help—with streamlined two-way communication, and enhanced digital check-in with automated ID verification.
Minimize your risk of chargebacks.
Frequently asked questions about vacation rental chargebacks
What is a chargeback?
A chargeback is when customers dispute a transaction on a credit or debit card, and get their money back from the bank or card issuer. There are two kinds of chargebacks. The first, dubbed “fraudulent”, denotes a genuine case of fraud, where the cardholder’s money was stolen and they are rightfully trying to get it back (or they are claiming this to be the case). The second, dubbed “non-fraudulent”, is when customers dispute a transaction, and get their money back from the bank on the basis of a valid grievance.
Can a chargeback be denied?
Yes, a chargeback can be denied if you are able to present genuine reasons that the dispute is not valid. For example, if a guest claims that you did not provide a certain feature or amenity, but you very clearly stated this in advance (so the guest cannot claim to be surprised or that they received bad service). To do this, it helps to keep a full paper trail of the booking, including the listing, and guest-host messages.
What are valid reasons for a chargeback?
A valid chargeback comes under the banner of “non-fraudulent” chargebacks, such as if a guest is genuinely disappointed with their stay, or truly finds that the property they paid for did not meet the expectations or level of service they had been led to believe they would receive. Vacation rental hosts can prevent this by providing accurate descriptions of their properties, establishing a good rapport upfront, and exceeding guest expectations at every stage of the guest journey.