The ancillary fee circus is coming to town!

By | March 29th, 2016

Mention the word “ancillary fees” to someone like John Cashman, and I can promise you his eyes will glaze over. Yours too?

They shouldn’t.

Ancillary fees are the travel industry’s code word for deception. As in, we keep our base fares and room rates low, then sock you with extra fees. They’re fees that ought to be included in the price, like the ability to carry a bag on the plane or use the hotel pool, and they add up to tens of billions of dollars in ill-gotten profit.

Think of it as the Ancillary Fee Circus.

From the perspective of a consumer like Cashman, it’s simple: the fees shouldn’t be stripped away from the product and then added on afterwards because it leaves him with the impression the product costs less than it does. But if they do it, then they should at least make the fees refundable.

As you can probably guess, I’m writing about Cashman’s problem for a reason. The latest Federal Aviation Administration Reauthorization Bill promises to improve the disclosure of these controversial fees, and new regulations on the horizon might even require that airlines and hotels make these fees transactable. Currently, you have to pay for these fees directly, but not through a travel agency.

An agency like Expedia.

Cashman used a flight credit to book tickets through Expedia on Virgin America and had confirmed premium main cabin “select” seats, a $200 value. For some reason – it’s not clear why – he lost those preferred seats when he changed his flight and used his credit to rebook through Expedia. Repeated requests to get a refund from Expedia have gone unanswered.

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I’m not going to keep you in suspense. Our advocacy team will jump in and see what it can do. Expedia should at least respond, don’t you think? Even if to just say “no.” (We’re guessing that since the upgrade was purchased directly through Virgin, he’s chasing the wrong company, but we’ll find out soon enough.)

But Cashman’s problem is an excellent example of the ancillary dilemma. It’s worked out great for airlines and hotels. They get to fool their customers with low rates, and then they pile on the profits afterwards.

By the way, I should add that there are some customers who actually prefer these stripped-down tickets because they don’t want any of the amenities, like the ability to check a bag or sit in a seat with a humane amount of legroom.

These consumers think they’re being clever, but they are really just falling for deceptive marketing. The cost to provide these services is not in line with the amount of the fees. Not having these “optional” items leaves you with less than half a product. In journalism terms, it would be like writing a headline but then charging you extra for the story. Some of you say, “But I just read the headlines.” Come on. It’s not a story, and you know it.

Ancillary fees, particularly the way they’re presented today, haven’t worked out so well for customers. They’re often poorly disclosed and added on at the end of the transaction. You can’t easily compare prices between hotels or airlines, which is exactly what companies want. You also end up paying more for the product after the fees are added on. Double bonus to the company.

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Cashman deserves a refund, of course. But should the government get involved in regulating this multibillion dollar scheme? The problem is, there’s more than one problem:

  • Ancillary fees are often poorly disclosed or undisclosed until a guest is presented with a folio or invoice. The Federal Trade Commission is a pushover when it comes to pricing displays.
  • The fees are the result of an elaborate price game, removing something that used to be included and then adding it back as an expensive fee. Prices are never lowered during the process. The net result? Higher prices for everyone and higher profits for the company.
  • While companies refund tickets quickly, in accordance with federal law, the ancillary fees for seat reservations or checked baggage get stuck in the system. If airlines had their way, they’d keep the money; after all, aren’t these fees nonrefundable?>

The only practical solution is a simple rule that clearly defines the product (an airline ticket is a seat, a seat reservation and a checked bag), requires the company to disclose the full price of a product up front (not at checkout), and enjoins the carrier to refund all fees promptly whenever a flight is canceled, whether by the airline or the customer.

The net effect would be an end to the deception. Airlines would be free to call the fees whatever they wanted, but they’d have to enumerate all costs at the start of the booking process. No games, no gimmicks.

It’s too bad the government needs to step in and do this. But we’ve seen where laissez-faire deregulation got us. Companies are allowed to surprise you with fees and then keep the money, even when they shouldn’t. They can hide behind travel agents like Expedia. Maybe it’s time for this circus to leave town.

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