Time to include mandatory fees in hotel prices?

by Christopher Elliott on September 4, 2012


Like many resort hotels, the Marriott San Juan Resort and Stellaris Casino in San Juan, Puerto Rico, adds a fee to its daily room rate to cover amenities such as bottled water, a casino coupon, local phone calls and wireless Internet.

And as is the case at many resort hotels, it doesn’t matter whether you drink bottled water, want to visit the casino, make a phone call or use the Internet. Marriott’s fee is mandatory.

Resort fees are routinely hidden on travel and hotel sites, but nowhere, as Steve McEvoy recently discovered, are they more dramatically concealed than on such so-called “opaque” sites as Hotwire and Priceline.

When McEvoy booked a room at the Marriott through Priceline, a site that doesn’t reveal the name of the hotel until you’ve paid for a non-refundable reservation, he was told that he’d pay only $150 a night. But his e-mail confirmation said that he’d be billed an extra $22 in fees — that, in effect, the surcharge was part of the room rate. “Is anyone trying to write a law to prevent this from happening?” asked McEvoy, a transportation consultant who lives in Philadelphia.

As a matter of fact, yes.

The lack of disclosure of these extra charges, a longtime source of frustration for travelers, is getting some attention from a group of consumer advocates led by Ed Perkins, a syndicated travel columnist and former Consumer Reports editor. In a letter sent to the Federal Trade Commission this week, Perkins asked the agency to rule that these fees are “unfair and deceptive.” An FTC decision on the matter would close a loophole that collectively costs travelers tens of millions of dollars every year.

The way some resort fees are broken out and disclosed is commonly referred to as “drip” pricing. This means that a company initially advertises only part of a product’s cost, then reveals additional mandatory charges later, as a consumer goes through the buying process. And hotels aren’t the only ones to use this price-tag sleight of hand; you can also find it in the automobile sales and financial services industries, among others.

Drip pricing is a special concern to the FTC. This spring, the agency hosted a workshop on the issue and solicited complaints from consumers, a potential sign that it may soon act to curb this practice.

Perkins hopes that the government will start with hotels. One reason, he said, is that negotiating your way out of resort fees and other required surcharges used to be possible. But “increasingly,” he wrote, “hotels stonewall guests on these fees.”

A representative for the American Hotel & Lodging Association, the trade organization for the U.S. hotel industry, said that the organization couldn’t speak about the issue until it consulted with its members.

The FTC didn’t respond to a request for a comment on Perkins’s letter. A Priceline representative declined to comment on its resort-fee disclosure practices, although in past cases, the company has said that it believes the way it displays mandatory fees after a purchase is sufficient.

Asked about Priceline’s disclosure, a Marriott representative pointed to his company’s Web site, which prominently shows a resort fee but calculates it as part of the price after a room is selected. Marriott can’t control how these fees are displayed on Priceline, he added. “We provide the rate and applicable fees,” he said. “The online travel agency determines how to display it.”

The hotel industry’s best argument for charging resort fees is that everyone is doing it. If one resort stopped, and displayed a true price, then it would lose business to competitors whose rates look cheaper because they don’t include a resort fee in their base price.

But fixing the resort fee problem might require creative thinking on the FTC’s part because of a layer of other players, notably online travel agencies, which determine how rates get advertised and displayed. It’s worth noting that resort fees have survived despite widespread public criticism and threats of lawsuits. Simply put, this is one hotel fee that refuses to die.

Perkins said that government action isn’t without a precedent. After fuel prices spiked, for instance, many airlines started carving out a portion of a true airfare by labeling it a “fuel surcharge” and excluding that amount from their price promotions and displays, he said. The Transportation Department stepped in, forcing airlines to quote an “all in” fare.

Cruise ships stopped drip pricing in the mid-1990s after Florida’s attorney general investigated “port fees” that covered more than the actual dockage costs. Turns out they also covered cruise lines’ operating expenses for fuel, fresh water and wages. Six cruise lines agreed to stop drip pricing in Florida.

The timing on the current effort couldn’t be better. Not only are hotels and online agencies taking a harder line with guests who grumble about resort fees, but the success of these extras is also emboldening some non-resorts to match them. John Kazlauskas, a writer from Los Angeles, recently had to pay a $5 resort fee on a $33-a-night motel room in Anaheim, Calif., that he found online. “It is truly ridiculous,” he told me.

Although no one tracks resort fees by hotel, they’re part of a class of extras referred to as “ancillary” fees. A recent New York University study projected that the American hotel industry would earn nearly $2 billion in ancillary fees this year, nearly quadruple the $550 million it collected a decade ago.

Ideally, the government would require hotels, as it did airlines, to include any mandatory fees in their prices. But even if the FTC only issued specific guidance on how and when to disclose the fees, it would mark an important step toward solving one of the most vexing problems facing hotel guests today.

 

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  • theicom

    Once on Priceline I “won” an 8 night stay in Orlando @ $22 per night. When we checked in, a $15 per night resort fee was added, this nearly doubled what I expected to pay.

  • Noblehouse

    I have a hard time understanding the thinking behind
    this. What is a mandatory fee? It is part of the price. The price
    should include EVERYTHING I must pay for. Any service I can choose to add or
    decline can be listed separately from the price.

    What is to stop these people from listing all hotel
    rooms at 1 cent per night and then introducing the “mandatory accommodation fee”
    of $330 per room per night, the “mandatory resort fee” of $600 per room per
    night and a “mandatory my boss needs a new yacht fee” of $70 per guest per each
    time you ride on the elevator.

  • http://twitter.com/johntbaker John Baker

    Sorry but I don’t agree with this business tactic. To let it continue to the extreme, you could have a $0.01 rate with a $1,000 per night mandatory fee. If its mandatory, that is part of the per night fee to stay there. I’m not a aware of another business that can do this.

  • mtaabq

    Mandatory resort fees are a scam and they need to be stopped. We as consumers and hotel guests need to take our business to hotels that don’t charge resort fees or make it very clear to the hotel chains that we aren’t going to put up with this BS any longer. One of the more infamous resort fees I’ve paid was $3 a day to cover in-room coffee, incoming faxes and “self parking”. In other words, I was REQUIRED to pay an add’l $3 a day to park my own car, nevermind the fact that I didn’t drink the in-room coffee or receive any faxes. This is pure profit for the hotel and they know it. By law airlines are required to list the FULL price of an airline ticket; it’s time for hotels and rental cars to get on board with this, also. (Don’t get me started on rental car fees; that’s another story.)

  • DCTA

    You know, it’s a very funny thing – all my systems that I use tell me about “fees” or “drip pricing” – and when I book a client through a tour operator, those fees are always listed on the proposal (prior to payment). I don’t see why the on line booking engines can’t do this as well.

    Now why do they charge these fees? This is a way of getting to a more realistic room rate and not paying the “travel agent” (Priceline or Orbitz for instance) commission on that piece of the rate. It actually lowers commissions out and raises the hotel’s yield on the room.

  • Anonymous

    Rather than a resort fee, how about just charging extra for optional services such as internet, parking, etc? That way, a guest that doesn’t need those services isn’t subsidizing another that does.

    For the comment against “self-park” fees, it’s another way of distinguishing from valet parking fees. There’s a cost to maintain and patrol a parking lot and only those that use it should pay. Guests arriving by taxi, shuttle, tour bus, etc. have no need for the parking lot and should not be forced to subsidize those that do use it.

  • Anonymous

    If it’s mandatory it isn’t a fee; it’s a lie about the price. If they’ll lie about the price they’ll lie about anything. Don’t do business with them, and shut down their bait and switch scheme.

  • Anonymous

    I would never deal with Priceline if there is a possibility of a “resort fee.”

  • Anonymous

    I don’t think this is true. Go to Priceline and bid for a resort in San Juan, P.R. for 150 bucks a night. Note you will see taxes and service fees indicated and then added to get the total price.

    Offer Price Per Room, Per Night: $150.00
    Subtotal: $150.00
    Taxes and Service Fees: $25.27
    Total Charges*: $175.27

  • RP

    Tony you are
    wrong.

    The Taxes
    and Service Fees are to Priceline for their booking of the hotel.
    You still would
    be hit with the ‘optional-mandatory’ service fee at check in.

    If you
    cannot decline a fee then it should be part of the total price.

    Any optional
    fees for extras should also be disclosed before booking.

  • dcta

    Please be clear, BobChi, Princeline is not imposing the “resort fee”, the resort is.

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