What is travel fraud?

Travel fraud refers to various scams or deceptive activities perpetrated by fraudsters targeting the travel industry. In 2023, travel and leisure was the number two industry across the globe with the highest rates of suspected fraud at 36%. On top of that, cyberattacks against hotel companies have led to huge data breaches just in the last year. Stolen credentials and data from these breaches can then be used to make new, fake accounts to perpetrate fraud in the travel industry.

Travel fraud leads to direct financial losses, reputational damage, and potential legal and regulatory issues. With fraudulent activity only expected to increase, it’s more important than ever for businesses in the travel and hospitality industry to protect themselves and their customers from sophisticated fraudsters.

How does fraud affect the travel industry?

In 2020, payment fraud cost airlines ~1.2% of annual revenue, or around $1 billion every year. That number has only increased as more people travel around the world—and as more people look for too-good-to-be-true deals on travel and hotels. Airline fraud attacks have a 60% correlation with the average transaction amount, showing that higher transaction costs are more likely to be targeted by fraudsters.

Often, fraudsters are targeting airline tickets themselves through online travel booking platforms, looking for cheap ways to fund a vacation. Cybercriminals abuse loyalty programs, stolen credit card numbers, and other personal data to book a trip for free.

Businesses in the travel industry that do nothing to prevent travel fraud are likely to see:

• Financial losses: Fraud causes direct losses from fraudulent bookings, chargebacks, and unauthorized transactions, as well as operational costs from investigating fraud cases.
• Reputational damage: Fraud damages customer trust, as travelers will be hesitant to book through the business again, and brand image will be impacted by negative publicity.
• Regulatory & compliance issues: Fraud compromises customers’ personal information in data breaches, which leads to regulatory fines and legal consequences.
• Negative customer experience: Fraud can disrupt normal operations and lead to service delays or cancellations. Additionally, customer support teams handling fraud cases will likely have longer response times—and lower customer satisfaction.

Why is tourism targeted for fraud?

Any industry with high transaction amounts is a good target for fraudsters who want the most “return on investment”. Tourism, therefore, is a prime target for fraud. Here are the main reasons:

• High transaction volume: Tourism involves both a high volume of transactions (bookings, reservations, and purchases) and significantly high transactions (flight tickets, hotel stays, and vacation packages).
• Seasonal peaks: Peak travel seasons come with huge spikes in the number of transactions, making it much easier to hide fraudulent activity.
• Diverse payment methods: Tourism businesses often accept many different types of payments, which increases the potential attack surface, and transactions are often cross-border in nature, making it harder to detect fraud.
• Complex supply chain: Tourism, as an industry, involves many intermediaries (travel agents, tour operators, and online booking platforms) and relies heavily on third-party vendors for services like accommodation and transportation. Both of these things complicate the verification of transactions and create vulnerabilities that can be exploited.
• High customer turnover: Many tourists are one-time or infrequent customers, so there’s no way to establish patterns and detect anomalies for that customer.
• Sensitive data handling: Tourism transactions involve sensitive data like passport details and credit card information, making it a good target for identity thieves.
• Weak security practices: Security measures across different regions and businesses are disparate, leaving gaps for fraudsters to exploit. Additionally, smaller businesses might lack enough resources to implement robust fraud prevention measures.

Most Common Types of Travel Scams

Here are the most common types of travel fraud:

• Fake booking websites: Fraudsters can create websites that look like legitimate travel booking sites to steal personal and financial information from users.
• Phishing: Scammers send emails pretending to be from legitimate travel companies, enticing recipients to click on malicious links or provide sensitive information.
• Chargeback fraud: After booking a trip or purchasing travel services, the fraudster disputes the charge with their credit card company to get a refund, while still utilizing the services.
• Fake travel agencies: Fraudulent agencies offer fake deals or trips, collecting payments from victims without delivering any actual services.
• Account takeover: Fraudsters use stolen credentials to access and exploit legitimate travel accounts, redeeming loyalty points or making fraudulent bookings.
• Bot attacks: Automated bots can be used to scrape travel websites for pricing data, book and hold inventory, or generate fake accounts and reviews.

How to Spot Travel Fraud

Travel fraud can be spotted with a mix of advanced fraud detection tools and monitoring, combined with an understanding of common fraud indicators.

Behavioral Analysis

Behavioral analysis looks at the actions and behaviors of an account, searching for suspicious signs such as:

• Unusual booking patterns: Look for multiple bookings from the same IP address or email address, especially if the bookings are for different names or payment methods.
• Rapid-fire transactions: A high volume of transactions completed in a short period can indicate automated bot activity.
• Odd travel routes: Bookings with illogical travel routes or last-minute changes might suggest fraudulent activity.

Payment Anomalies

Identifying payment anomalies can indicate fraudulent activity, especially payment fraud and account fraud. Look for:

• Mismatched billing & shipping addresses: A discrepancy between the billing address and the destination or shipping address can be a red flag.
• Multiple card attempts: Several failed attempts with different credit cards may indicate a fraudster testing stolen card details.
• Unusual payment methods: Use of less common payment methods or frequent use of virtual cards could signal fraud.

Verifying User Details

Discrepancies between a user’s settings, such as a mismatch between the user’s shipping address and their IP-based location, can indicate fraud. Look for:

• Incomplete or fake contact information: Inconsistent or obviously fake information (e.g., nonsensical email addresses, phone numbers that don’t connect) can be a sign of fraud.
• Unusual email domains: Use of temporary or disposable email addresses can indicate a lack of legitimate customer intent.
• High-risk geolocations: Bookings originating from high-risk regions known for fraud should be scrutinized more closely.
• VPN or proxy usage: Detection of VPNs or proxies might indicate someone is trying to hide their true location.

Technical Indicators

Automated bot and online fraud detection tools can dig into the technical information in every request:

• Bot detection: Advanced bot detection systems can identify patterns typical of automated scripts, such as identical keystroke timings or mouse movements.
• Device fingerprinting: Tracking device information can help identify if multiple bookings come from the same device but are masked as different users.

Transaction Monitoring

Focusing on red flags in transactions can stop payment fraud in its tracks and protect your business from the associated costs, like chargebacks and chargeback fees.

• Velocity checks: Implementing velocity checks to track the speed and frequency of transactions can help identify suspicious activity.
• Suspicious booking trends: Monitoring trends such as high numbers of bookings for expensive, refundable trips that are subsequently canceled can reveal fraudulent intentions.

Machine Learning

Machine learning can sort through all of the signals you gather to identify patterns that indicate fraud.

• Pattern recognition: Machine learning models can analyze vast amounts of transaction data to identify patterns that are indicative of fraud.
• Real-time alerts: These systems can provide real-time alerts on suspicious activities, allowing for immediate investigation and action.

How to Choose the Right Tool for Travel Fraud Prevention

Before choosing a tool, assess the needs of your business. Determine the types of travel fraud your business is dealing with—such as chargebacks, fake bookings, or account takeovers. Also consider the volume and frequency of transactions, to get an idea of the scalability your business requires from a fraud prevention tool.

Travel fraud can be performed by both automated and manual traffic—bots and humans, essentially—so your tool should be able to detect both types. Look for a travel fraud prevention tool that includes these core features:

• Behavioral analysis: Sophisticated fraud can be very discreet, particularly when a fraudster is able to take over an existing account. Look for a tool that analyzes user behavior and flags anomalies.
• Machine learning & AI: Advanced, ML-powered analytics help identify and adapt to new fraud patterns, keeping your business safer.
• Real-time monitoring: Detecting fraudulent transactions in real time is the best way to combat fraud and prevent negative impacts on your business. Choose a tool that provides real-time detection and alerts.
• Bot detection: Effective bot protection means high accuracy and no compromises on either security or customer experience.
• Multi-channel protection: Customers are interacting with your business on websites, mobile apps, and via APIs. Choose a tool that can protect transactions across all channels.
• Integrations & compatibility: The tool should easily integrate with your existing systems, preferably using robust APIs and SDKs. Choose a tool that is also compatible with other security tools you might be using.

Other features to look for include minimal user impact, compliance with various regulations for data privacy, a proven track record, strong customer support, and scalability.

Techniques to Fight Travel Scams

Online fraud can be sophisticated and discreet. Fighting travel fraud involves combining advanced technology, best practices, and vigilant monitoring.

Advanced Technology

The best technique against travel scams is a powerful fraud prevention tool, complete with bot mitigation, real-time monitoring, and user verifications. Tools that use machine learning and AI to detect and adapt to new fraud patterns will keep you one step ahead of fraudsters. You can also utilize multi-factor authentication to protect customer accounts. Additionally, dynamic risk scoring can adapt responses based on the perceived risk of a transaction or user behavior.

Best Practices

Many fraud schemes involve phishing or spear phishing, which aim to manipulate users or employees into divulging sensitive information. To combat scams, your employees need to be trained to recognize fraudulent activities and customers need to be informed about potential scams.

Another best practice is collaboration and information sharing across the industry. You can utilize shared databases and block lists to identify (and stop) known fraudsters, and participate in industry networks to share information about emerging trends and countermeasures.

Ensure your processes and tools are compliant with regulations, particularly data privacy regulations like GDPR and CCPA, to safeguard customer information and build trust. You should also conduct regular security audits to identify and mitigate any vulnerabilities in your architecture.

Vigilant Monitoring

Fraud can happen at any time, which is why it’s important to review every single transaction or request. The best way to do this is with a powerful fraud prevention tool that can automatically perform this task—only contacting you when action needs to be taken. Ensure your tool includes detailed reporting and analytics on your traffic, as well as real-time monitoring and instant alerts.

Protect Your Business Against Travel Fraud with DataDome

The DataDome Cyberfraud Platform includes our robust bot protection solution along with Account Protect, which digs deeper into potential account fraud activity. This comprehensive platform combines machine learning, real-time monitoring, and behavioral analysis to protect against even the most sophisticated travel fraud scams. DataDome’s integrated CAPTCHA and invisible challenge Device Check protect customers while preserving the customer experience. Account Protect also integrates with your login protection tools like multi-factor authentication to react automatically when suspicious activity occurs.

To learn more about how the DataDome Platform can protect your business against threats like travel fraud, book a demo or start a free trial today.