Fraud could cost the UK hotel sector over £2b annually

Hoteliers need to take steps to better protect themselves against fraud, according to a report published jointly by PKF Accountants and University of Portsmouth.

The Resilience to Fraud of the UK Hotel Sector survey investigates how well the industry protects itself against fraud, highlighting where it is getting it right and identifying areas for improvement.

Using a 50-point scale, the report finds that the hotel industry lags behind the rest of the corporate world in terms of fraud resilience, achieving an average score of 25.4 points, compared with 30.6 points for the private sector as a whole.

As a result of the report's conclusions and a separate study by the same authors, PKF and University of Portsmouth estimate that fraud could cost the UK hotel sector more than £2b each year.

While the report showed that 88% of respondents had a "zero tolerance" approach to fraud and 85% had arrangements in place to ensure that suspected frauds were promptly reported, it also highlighted that hotels could do much more to improve their counter-fraud activities.

Stuart Collins, national hotels partner at PKF, said: "Fraud is a serious issue for hotel companies and one that has far-reaching consequences for the health and financial stability of the sector, as well as the quality and price of the service that consumers enjoy.

"Reducing fraud losses is one of the least-painful methods for hotels to minimise business expenditure in the current economic environment because fraud costs - unlike expenses relating to staffing, property and utilities - are unnecessary and unproductive. Moreover, as fraud costs have not historically been given a particularly high priority by management, there is significant scope for losses to be reduced in the sector as a whole."

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.

● The Resilience to Fraud of the UK Hotel Sector, due to be published on Monday, is written by Jim Gee, Dr Mark Button and Graham Brooks.

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By Janet Harmer

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