Red Flags at Your Red Roof

Real Estate|Retail

By Steven Franz

What is the top priority of every thriving hotel property?  You got it – customer service.  A good hotel manager wants to spend most of his or her time meeting and greeting guests rather than monitoring check-in procedures or authorizing guest refund requests.  Better customer service equals more repeat business.  Except that focusing only on customer service can come at a hefty price of exposing the hotel to fraud risks.  Dishonest employees, guests or vendors take advantage of missing or flawed anti-fraud controls.

Let’s look at some examples -

  • Refund fraud - In one instance, a hotel accounts receivable clerk was found to have been fraudulently processing guest refund requests by forging the hotel manager's signature, and having the refund money credited to her own credit card account. This scam was allowed to continue to the tune of $45,000 because the hotel manager failed to comply with the rule requiring him to review the listing of guest refunds paid.  The controller neglected to review the refund requests prior to payment, and the refund process allowed refunds to be credited to credit card accounts that didn't belong to the legitimate guests.
  • Bogus travel agencies - Reservation employees process a huge volume of reservations each day on behalf of the hotel.  Some of those reservations come from legitimate travel agents who are on the list of pre-approved agents and from whom the hotel will accept reservations and pay commissions to.  A dishonest reservations employee who has been around long enough to know the system could set up a phony travel agency with his or her home address or PO Box for receiving checks.  If management authorization isn’t required for additions to the list of approved travel agents, the reservation employee is unchecked in bypassing the approved list or can even add his or her own name without being detected.
  • Inventory theft - High-priced items such as seafood, steaks and alcohol are favorite targets for theft by dishonest food and beverage staff. Controls for reducing the disappearance of food and beverage inventory must, of course, include tighter physical security. However, other measures must also be implemented, such as requiring honest employees who spot co-workers stealing to report the theft, as well as strict policies calling for immediate termination of anyone caught misappropriating inventory.

While customer service is indeed the ultimate factor determining the survival of a hotel property, neglecting anti-fraud controls is bound to shrink the bottom line, no matter how wonderful guests think their visits are.

© 2014 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.


You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2019 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.