Fraud in hospitality isn’t new. But something has shifted. The barriers to entry for bad actors have collapsed. What once required sophistication, resources, and insider knowledge now requires a laptop, an internet connection, and access to increasingly accessible AI tools. Meanwhile, the hospitality industry, built on people, relationships, and experiences rather than technology, hasn’t fundamentally changed how it operates. The gap between threat sophistication and defensive capability has never been wider. And that gap is where fraud thrives.
To understand why hospitality is such a prime target, we need to look beyond surface-level statistics and dig into the fundamental characteristics of this industry, the ones we celebrate, and the ones we need to protect.
The Paradox: Trust as Strength and Vulnerability
Hospitality, by definition, requires extending trust to strangers. A guest walks into a property, and the operator assumes good intent. This assumption is foundational to the guest experience, what makes hospitality feel welcoming rather than transactional or suspicious. It’s a cultural value that defines the entire sector.
This trust-first model is what differentiates hospitality from other industries. When operators trust guests, they remove barriers to entry, streamline check-ins, and create seamless experiences. This frictionless approach is a competitive advantage. The irony is striking: the same frictionless experience that delights legitimate guests also makes it easier for bad actors to slip through undetected.
But here’s where the vulnerability emerges. Hospitality operates at scale with high guest turnover and minimal repeat relationships. Unlike traditional businesses where relationships build over time, hospitality often involves one-time interactions with strangers. This anonymity, combined with the trust-first model, creates a perfect storm: operators are expected to trust people they’ve never met, will likely never see again, and know very little about.
Hospitality’s greatest strength – its foundation in trust and human connection – is simultaneously its most exploitable vulnerability. This isn’t a flaw to be ashamed of; it’s a structural characteristic we need to be aware of.
The Structural Vulnerabilities Built Into Hospitality
To truly understand why hospitality is such a prime target, we need to look at the operational DNA of the industry itself. The vulnerabilities aren’t accidental, they’re baked into how hospitality was built and how it operates.
The Industry Isn’t Tech-Native
Hospitality is fundamentally a people-driven industry, not a tech-driven one. While other sectors like fintech and e-commerce have built security into their DNA from the ground up, hospitality evolved around human judgment and relationship management. This means many operators still rely on manual screening processes, gut feelings, and inconsistent verification methods.
When technology is adopted, it’s often bolted on as an afterthought rather than integrated into core operations, leaving gaps and inconsistencies. According to PhocusWire’s 2024 Adyen Hospitality Report, 51% of hotel owners still handle a significant volume of phone reservations despite digital options being available. While this may provide reassurance for older guests, it leaves hotels more vulnerable to breaches and fraud.
High-Volume, Low-Touch Transactions
Unlike banking or e-commerce, where high-value transactions trigger rigorous verification, hospitality processes thousands of small transactions with minimal friction. A $500 booking feels low-risk individually, but aggregated across a platform, it represents massive exposure. The sheer volume makes manual verification impossible.
The numbers tell the story: over a third of hotel businesses have reported a rise in fraud attempts in the past year. Among those who fell victim to deceptive transactions, the average loss was over $700 per guest in 2024. When you multiply that across hundreds or thousands of properties, the exposure becomes staggering.
Decentralized Decision-Making
In many hospitality businesses, individual property managers or operators make their own decisions about guest acceptance. There’s no centralized risk assessment or consistent screening protocol. This decentralization is great for autonomy, but it creates inconsistency. One property might have rigorous screening, another might wave through anyone with a credit card. Fraudsters quickly learn which properties are easier targets.
This inconsistency is compounded by the reality that 72% of hotels claim to be PCI compliant, but the reality may differ. Front-desk staff, often working with minimal supervision during overnight shifts, make real-time decisions about payment acceptance and identity verification without centralized oversight.
The Physical Nature of the Product
Unlike digital services, hospitality involves physical access to real property. A fraudulent booking doesn’t just mean a chargeback, it means someone has access to your building, your guests’ safety, and your assets. This raises the stakes dramatically compared to other industries.
Consider this: hospitality is among the top 15 sectors for targeted online attacks, with a 60% increase in card-not-present fraud since 2022. The high volume of card-not-present transactions, large transaction values, and long booking windows place hospitality in a uniquely vulnerable position.
Hospitality’s structural characteristics, high volume, low friction, decentralized decision-making, and a non-tech-native culture, weren’t designed with fraud prevention in mind. They were designed for hospitality. Now we need to evolve.
The Human Element: Why People Matter
Here’s what makes hospitality fraud particularly insidious: it exploits the very qualities that make hospitality professionals exceptional at their jobs.
Hospitality Workers Are Trained to Say Yes
Hospitality professionals are trained to be accommodating, to problem-solve, and to prioritize guest satisfaction. This cultural orientation is beautiful, it’s what creates exceptional experiences. But it’s also exploitable. A guest who seems friendly, has a good story, or appears legitimate is more likely to be welcomed. Hospitality workers are primed to trust and accommodate, not to interrogate and verify.
Fraudsters understand this psychology intimately. They know that a charming demeanor or a sympathetic story can lower a host’s guard more effectively than any technical exploit. They’ve studied the industry and understand that hospitality professionals are trained to say yes, to believe the best in people, and to prioritize the guest experience above all else
The Relationship-Building Trap
Hospitality is built on building relationships and reading people. Operators pride themselves on their ability to assess character and create connections. But sophisticated fraudsters understand this and use social engineering tactics, building rapport, telling compelling stories, or creating urgency, to exploit the relationship-building instinct.
Consider real-world examples from platforms like Airbnb: the “fake profile” scam, where guests create fake identities to book properties with malicious intent. Or the “threat of a bad review” scam, where guests threaten to tarnish reputation with negative reviews unless undeserved refunds are offered. These schemes work because they exploit the relationship-building instinct and the fear of reputational damage.
The irony is striking: the skills that make someone great at hospitality, empathy, trust, relationship-building, can become liabilities when facing sophisticated bad actors.
Hospitality professionals are trained to trust, to say yes, and to build relationships. These are their superpowers. But they’re also the exact vulnerabilities that sophisticated fraudsters exploit.
The Sophistication Shift: When Fraud Became Accessible
Fraud in hospitality isn’t new. What’s new is how accessible and sophisticated it’s become.
The Barriers Have Collapsed
AI hasn’t just made fraud more sophisticated, it’s made it more accessible. A person with no technical background can now use AI tools to create fake documents, generate convincing personas, or automate social engineering attacks. The speed of AI development means new fraud tactics emerge faster than the industry can adapt. By the time operators understand one threat, fraudsters have moved on to the next.
The Scale of the Problem
Chargeback fraud resulted in approximately $25 billion in disputed transactions in 2023, with friendly fraud accounting for nearly 40% of all chargebacks in the travel and hospitality industry.
Fraud in hospitality isn’t new, but AI has fundamentally changed the game. What once required sophistication and resources now requires a laptop and internet connection.
The Path Forward: Reclaiming the Industry
Here’s the good news: this is solvable. Understanding why hospitality is vulnerable is the first step to defending against the threats it faces. Operators who understand the structural characteristics and psychological dynamics are better equipped to recognize red flags and make smarter decisions.
While hospitality’s structural characteristics create vulnerabilities, they also create opportunities for technology to level the playing field. Modern verification tools, AI-driven risk assessment, and behavioral analysis can augment human judgment without replacing it. They can catch sophisticated fraud at scale while preserving the trust-first, relationship-driven culture that makes hospitality beautiful.
Individual operators can’t solve this alone. Tech vendors and platform builders have the power to arm operators with smarter defenses. By embedding verification, risk assessment, and fraud prevention into their platforms, they can close the gap between threat sophistication and defensive capability. This isn’t about adding friction or making hospitality less welcoming. It’s about making smarter decisions faster.
Hospitality’s greatest strength is also its most exploitable vulnerability. But understanding this paradox empowers us to build smarter defenses. The question isn’t whether we can solve this, it’s whether we’ll act fast enough to stay ahead of the threat.
