Credit cardPKF (UK) LLP and the Centre for Counter Fraud Studies at University of Portsmouth (CCFS) have produced a document titled, “the resilience to fraud of the UK hotel sector”.

The document was based upon a series of questions to hotels with the results shown both statistically and graphically.

The survey was supported by HOSPA, the Hospitality Professionals Association, formerly BAHA.

Report Background

There are just over 46,000 hotels and guest houses in the UK, and the hotel industry is a significant sector of the economy, with an annual turnover of around £40 billion. Applying figures derived from the latest global research showing that an average of 5.7% of expenditure is lost to fraud and error, such losses could cost the hotels’ sector more than £2 billion a year.

Each time the Government’s national fraud Authority make their annual estimate, the figures rise as the estimation improves, and it is already likely that the £1.9 billion losses estimated for the travel, leisure and transportation sectors in January 2011 will be superseded in January 2012. It is a serious issue for companies operating within the sector and one that has far reaching consequences for the health and financial stability of our industry, as well as the quality and price of the service that consumers enjoy.

 Across the UK economy as a whole, the Government’s National Fraud Authority estimates that £38.4 billion is lost to fraud, with £1.9 billion of the losses relating to the leisure, travel and transportation sectors

A summary of the survey results is below:-

Hotel companies performed best in the following areas:

  • 88% of respondents indicated that they had adopted a ‘zero tolerance’ approach
  • 85% indicated that they had arrangements in place to ensure that suspected frauds were promptly reported
  • 85% also indicated that they considered applying all types of sanctions where fraud was found to be present
  • Over 76% had a clear policy on the application of sanctions
  • 69% had reports concerning fraud discussed at board level
  • 89% of respondents indicated that they had adopted a ‘zero tolerance’ approach

Hotel companies performed worst in the following areas:

  • Only 30% sought to estimate the cost of fraud or used losses estimates to make judgements about how much to invest in countering fraud
  • Only 23% reviewed the effectiveness of counter fraud work
  • 35% ensured that counter fraud staff regularly refreshed their skills
  • 88% stated that they had a zero-tolerance approach but only 38% monitored the development of anti-fraud cultures (potentially a worrying contrast between rhetoric and reality)
  • Less than 40% deployed analytical intelligence techniques to detect fraud
  • 27% sought to estimate the cost of fraud or used losses estimates to make judgements about how much to invest in countering fraud

Jim Gee, director of Counter Fraud Services at PKF, chair of the Centre of Counter Fraud Studies at University of Portsmouth and co-author of the report, said that

“hopefully the loss of £2b to the industry through fraud was large enough to grab the attention of hotel bosses at a time when the sector was facing an increasingly challenging operating environment.” 

“The good news is that these losses can be reduced,” he said. “Research shows that fraud can be cut by up to 40% within 12 months. Hoteliers need to be proactive in their approach to tackling fraud – responding and reacting to individual incidents is not enough. To successfully minimise fraud, organisations need to take steps to change human behaviour and to remove opportunities for fraudsters.

Find the full report here.

Also see 77% of Hospitality Sector Mistakenly Believe They Are PCI Compliant.

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