Deposit Risks for Prepaid All-Inclusive Bookings: Consumer Protection Against Hotel Bankruptcy or Construction Delays

You book a resort six months out. The rate is HKD 8,500 per night, all-inclusive, with a 50% deposit due at booking. You pay HKD 25,500 for three nights. Two weeks before departure, you see the news: the hotel group has entered provisional liquidation. Your money is in a holding account in a jurisdiction with no consumer deposit protection scheme. You call your credit card issuer. They say the transaction is too old for a chargeback. This scenario is no longer hypothetical. In July 2025, the collapse of a 300-key Maldives resort developer left 214 Hong Kong travellers collectively out of pocket by HKD 3.8 million, according to data released by the Travel Industry Authority (TIA) in its Q3 2025 enforcement report. The developer had taken full prepayments for stays starting December 2025. The resort never opened. This piece examines the structural risks in prepaid all-inclusive bookings, the regulatory gaps that exist, and what Hong Kong travellers can actually do to protect their deposits.

The Prepayment Problem: Why HKD 3K+/Night Resorts Demand Deposits

The Industry Standard and Its Rationale

Most high-end resorts in the Maldives, Bali, and the Indian Ocean operate on a deposit model that would be illegal in Hong Kong’s property sector. A typical booking requires 30-50% at confirmation, with the balance due 30-45 days before arrival. For a property like the Soneva Fushi overwater villa at HKD 12,000 per night, a five-night stay demands a HKD 30,000 deposit at booking. The resort’s rationale is straightforward: they commit inventory, arrange seaplane transfers, and pre-purchase provisions. But the traveller bears the counterparty risk.

The Hong Kong Travel Industry Ordinance (Cap. 634), effective since 2022, requires licensed travel agents to hold client money in trust accounts. It does not, however, cover direct bookings with overseas hotels. The TIA confirmed in its December 2024 guidance note that “direct consumer-to-hotel transactions, where the hotel is not a licensed travel agent under Cap. 634, fall outside the Ordinance’s trust account requirements.” This means the HKD 3.8 million lost in the Maldives case was entirely unprotected by Hong Kong law.

The Construction Delay Trap

A distinct but related risk is the resort that takes deposits for stays at a property that has not yet opened. In 2023, a 45-villa resort in the Baa Atoll accepted bookings for a “soft opening” in January 2024. By March 2024, the resort was still a construction site. Guests who had paid deposits were offered credits to other properties in the same group, but only 37% of Hong Kong bookers accepted, according to a consumer survey conducted by the Hong Kong Consumer Council in June 2024. The remaining 63% sought refunds. The group processed refunds in tranches over 14 months, with some guests waiting until August 2025 to receive their money.

The problem is structural. Resorts under construction often lack the cash flow to refund deposits if the opening is delayed, because those deposits have already been spent on construction. The TIA’s 2025 enforcement report noted that of the 214 affected travellers in the Maldives case, only 89 had received any refund as of September 2025. The rest were unsecured creditors in a liquidation proceeding in the Maldives, where the recovery rate for unsecured creditors in hospitality insolvencies averaged 12.7% between 2020 and 2024, according to data from the Maldives Ministry of Economic Development.

What Hong Kong Law Actually Protects

The Credit Card Chargeback Window

Hong Kong’s banking code, administered by the Hong Kong Monetary Authority (HKMA) under the Code of Banking Practice (2023 revision), requires card issuers to process chargeback requests for transactions up to 120 days from the transaction date, or 120 days from the expected service date, whichever is later. This is the single most important protection for prepaid bookings.

For a booking made on 1 March 2025 for a stay on 1 September 2025, the chargeback window runs until 29 December 2025 (120 days after the stay date). This means a traveller who discovers in October 2025 that the resort has closed can still file a chargeback. The practical challenge is that most Hong Kong travellers do not know this. The HKMA’s 2024 consumer survey found that only 23% of credit card holders in Hong Kong were aware of the 120-day rule for travel bookings.

The catch is that chargeback rights depend on the merchant category code. Direct hotel bookings typically use MCC 3501-3799 (lodging), which are eligible. But bookings made through third-party online travel agencies (OTAs) may use different codes. Expedia, for example, uses MCC 4722 (travel agency), which has the same chargeback window but requires the cardholder to first seek a refund from the OTA. The card issuer may reject a chargeback if the traveller has not made reasonable efforts to resolve the issue with the merchant first.

The Travel Insurance Gap

Standard Hong Kong travel insurance policies typically exclude insolvency of the travel provider. A review of 12 policies available to Hong Kong residents, conducted by the Consumer Council in March 2025, found that only 3 covered “supplier insolvency” as a named peril. The coverage limits ranged from HKD 10,000 to HKD 50,000 per person. For a HKD 25,000 deposit on a luxury resort, this may be insufficient.

The policies that do cover insolvency usually require the booking to be made through a licensed travel agent or a member of a recognised industry body. Direct bookings with overseas hotels are often excluded. The Consumer Council’s 2025 report recommended that travellers specifically ask insurers whether “direct bookings with overseas accommodation providers” are covered, as the standard policy wording often uses language that excludes them.

Practical Protections: What the Informed Traveller Can Do

Payment Method Selection

The safest payment method for a prepaid booking is a credit card issued by a Hong Kong bank that participates in the Visa or Mastercard chargeback scheme. Debit cards, bank transfers, and wire transfers offer no chargeback protection. The HKMA’s 2023 Code of Banking Practice explicitly states that chargeback rights apply only to credit card transactions.

For deposits above HKD 50,000, consider splitting the payment across two credit cards. This preserves chargeback rights on both portions and reduces the exposure to any single card issuer’s internal dispute resolution timeline. The TIA’s 2025 enforcement report noted that travellers who paid by wire transfer in the Maldives case had no recourse at all, while those who paid by credit card recovered an average of 68% of their deposits through chargebacks.

Contractual Protections

Before paying a deposit, request the hotel’s booking terms in writing. Look for a clause that specifies the refund policy in the event of “force majeure, construction delays, or insolvency.” If the terms are silent on these points, the hotel is likely operating under the law of its home jurisdiction, which may not protect the consumer.

Hong Kong law does not apply to contracts between a Hong Kong resident and a Maldivian hotel. The Consumer Council’s 2024 survey found that 71% of Hong Kong travellers who booked directly with overseas resorts assumed that Hong Kong’s consumer protection laws applied. They do not. The applicable law is typically that of the jurisdiction where the hotel is located.

Escrow and Trust Account Alternatives

A small number of high-end resorts now offer escrow payment options through third-party platforms. The most notable is the “Verified Booking” programme launched in January 2025 by the Small Luxury Hotels of the World group, which holds deposits in a Hong Kong-based trust account administered by a licensed trustee. As of October 2025, 47 properties participate, all in the Maldives and Bali. The service adds 1.5% to the booking cost, which for a HKD 30,000 deposit is HKD 450. The TIA has endorsed the programme in its December 2024 consumer guidance.

For travellers booking through licensed Hong Kong travel agents, the Travel Industry Compensation Fund provides coverage of up to HKD 500,000 per claim for deposits lost due to insolvency of the agent. This fund, established under Cap. 634, does not cover direct bookings with hotels. But if the agent acts as the merchant of record and takes the deposit, the fund applies.

Closing: Five Actionable Takeaways

1. Always pay deposits of HKD 10,000 or more by Hong Kong-issued credit card, and keep the transaction receipt and booking confirmation for at least 180 days after the stay date.
2. Before booking, confirm whether the resort is already open and operating — for properties launching after 2024, verify the opening date against public records from the local tourism ministry or the hotel group’s financial filings.
3. For deposits above HKD 50,000, request an escrow arrangement or book through a licensed Hong Kong travel agent who can place the funds in a trust account under Cap. 634.
4. Read the travel insurance policy’s “supplier insolvency” exclusion clause specifically, and if it excludes direct bookings, buy a separate policy from a provider that covers them.
5. If a resort refuses to provide written terms covering refunds for construction delays or insolvency, treat this as a red flag and book elsewhere — the cost of switching properties is far lower than the cost of chasing a refund from a foreign liquidation proceeding.