Time to include mandatory fees in hotel prices?

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.

Christopher Elliott

Christopher Elliott is an author, journalist and consumer advocate. You can read more about him on his personal website or contact him at chris@elliott.org. Got a question or comment? You can post it on the new forum.

More Posts - Website - Twitter - Facebook - LinkedIn - Google Plus

  • Frank Palmer

    Hey Chris,
    Is it just me or is something wierd going on with this post. There are no comments yet the poll says:
    Yes.96% (3217)No.4% (141)
    Seems like a lot of votes with no comments.

  • backprop

    Yes, and I wasn’t able to vote; the results just showed up.

  • Edward Boston

    Maybe the FTC should not just focus on one industry but pass a sweeping law that says *ANY* advertised price must include any mandatory fees.

  • Nikki

    The 4% that voted no probably have a vested interest in this. *cough* No desk clerk should be made to explain those charges, especially in the face of an angry guest. You want to sit there and add fees, fine. Roll them up in the room rate, or be man/woman enough to stand at the desk and explain to a pissed-off guest why you’re choosing to nickel and dime them.

  • disqus_A6K3VBf8Zn

    96% Favored The Position and 4% opposed. What is wierd? The vast majority want all basic charges listed and no surprises.

  • Charlie Funk

    We are a society that would bite our grandmother on the arm for a $1.00 discount, many knowing the cost of everything and the value of nothing. Shoppers literally will book a $2000 package with one supplier over another for a $25 difference, totally ignoring any service or amenity differentials.
    A major reason for these ancillary fees, be it airline tickets, hotels, or automobiles, is that these fees lie outside the amount on which tax is paid. In some cases, hotel room tax can be as much as 17% or more, based on the room rental cost. A $5.00 ancillary fee (resort fee) that was rolled into the room rental would become a $6.00 fee to yield the same profit because of this tax. Checked luggage fees, premium seating fees, etc. are likewise not subject to federal airline ticket taxes. By making so many items a la carte and not part of the taxable amount, the funds available to operate airports are significantly reduced. I am amazed that congress has not acted to roll up all these amounts to preclude this tax avoidance. Does someone have compromising photos of key legistlators or something? LOL

  • ExplorationTravMag

    There are actually 143 people who think it’s better to be surprised with additional fees? I think you know you’ve made it as a writer if the opposition regularly trolls your site looking to take part in your polls, not to take part in the discussion but to skew the polls. Sad, really, that they’re more concerned with THAT than actually doing the right thing.

    Unfortunately, these arbitrary fees seem to be the wave of the future and are here to stay. The resorts and hotels charging these (and, yes, it’s pretty much all of them) are making a fortune on them and there’s no reason to stop. It used to be your room rate covered everything… Now, it seems it only covers the four walls.

    My guess is, in the future, you will be charged a surcharge for sheets, blankets, running water, toilet paper, etc.

  • http://elliott.org Christopher Elliott

    No, it turns out I had already asked this question in a previous post. It’s an existing poll.

  • TexanPatriot1

    Disturbing: 143 people who voted No, must be resort or motel owners who want to rip us off by charging hidden fees…..

  • JimDavisHouston

    Marriott is notorious for hidden fees. I used to be a loyal member, until I dropped them 2 years ago because of the crazy fees.

  • Nikki

    rofl – ohhhhh if only. lmao

  • JimDavisHouston

    Bullseye Edward.

  • TonyA_says

    But the traveler pays the tax. Are you saying we should be happy since we are not paying taxes on these fees?

  • Bill___A

    These “resort fees” need to be embedded into the hotel rates, particularly with respect to the priceline quotes. It is good that Marriott shows them in their quote, but even better if they don’t have them.
    When they “break out” fees, do we demand a refund if the service doesn’t work? For example, if they have a $35 bed fee and the bed is hard, or a $20 television fee, does one take that badk if the TV is of poor quality?
    I ask this because there’s an upcoming conference that I would normally attend. It is a technical conference and at every technical conference I ever go to, the internet works extremely slowly because of all the “techies” on it. Although this is expected, I have a huge problem with this hotel’s “resort fee” which is for internet, amongst other things…and I am very sure that they willnot be in a position to deliver it.
    I would not pay for internet in a hotel anyway because I have an unlimited data plan on my SIM card.
    I am actuallyplanning on not going to this conference because of the resort fee. It isn’t the amount of money, it is the ethics of forcing someone to pay for something that’s optional and they don’t need..and that you can’t deliver. Thoughts?

  • Bill___A

    Chuck, it is a lot because of rules requiring penalties related to the fare amount in Europe.
    With respect to hotels, it is basically theft.

  • JoshuaTree

    And we have exactly the system we asked for by our behavior.

  • JoshuaTree

    Cut off your nose to spite your face. Miss a chance to better yourself because of a resort fee. The fact that this decision crossed your mind labels you an idiot.

  • Bill___A

    That’s enlightening. I guess like the some other idiots, I will attend a different conference at another place with the same content that doesn’t have a resort fee.
    Patronizing these places only encourages them.

  • Bill___A

    Maybe Chris will start to charge a “rebuttal fee” when someone calls us an idiot and we want to reply.

  • http://www.facebook.com/CarverFarrow Carver Clark Farrow

    Would you change your decision if the room rate was $35.00 higher instead?

  • http://upgrd.com/roadmoretraveled MeanMeosh

    There are, believe it or not, still plenty of hotels, even in touristy places like Hawai’i and Jackson Hole, that don’t charge “resort” fees. The best way to fight these fees is to simply refuse to patronize establishments that charge them. Go a step further, and e-mail the establishments you passed over telling them that they didn’t get your business because of their practice of charging deceptive “resort” fees.

    But to answer the question at hand – I’m not a Big Government guy at all, but absolutely yes, the government needs to step in and regulate this. If a fee is mandatory, it needs to be included in the base price. Period. Anything less is nothing less than deceptive advertising.

  • TonyA_says

    Interesting you ask. The fuel surcharge across the Atlantic (or Pacific) is about 500 bucks and that has not stop me or others from traveling by air. If I can afford to pay for the fee, then so be it. It the affordability that matters.

  • ClareClare

    “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…”
    It doesn’t need to be this way. A hotel with a savvy marketing strategy could IMO manage to take the “moral high-road” here and convince customers to patronize them because they’re transparent!
    It reminds me of Nordstrom’s department-store chain. In Oct and Nov, when everyone else in the mall is already decked out in red and green, Nordstrom’s isn’t (or at least, it wasn’t–don’t live near one any more so don’t know). Instead, they used to take full-page newspaper ads calmly explaining that customers wouldn’t see any Christmas-glitz in their stores until after Thanksgiving, “because we believe in celebrating one holiday at a time.” Take THAT!
    You might argue that Nordstrom’s loses money by not running pre-Christmas-sales when everybody else is, etc. But I know many people who like me, were/are so impressed by their principles that we all made a point to shop there when possible. Similarly, a hotel chain could potentially attract a lot of appreciative customers if it told the world “we don’t sneak added fees onto your bill. The price you’re quoted is the price you pay, period.” Turn it into a big advertising campaign, why not? And if it’s a big enough chain, it can sit down with the pricelines of the world and negotiate a better way to do business, or else do no business with them.
    In business, you don’t have to be like everybody else–think outside the box!

  • RG

    I can see the Spirit Airlines guy starting a hotel chain. Rooms are $5, but if you want a key to the room, that is an extra $200.

  • http://elliott.org Christopher Elliott

    I love that idea. I could finally find a way to make money off this site! ;-)

  • 46Shasta19

    If anything is mandatory in any category it needs to be a part of the total price and if it is taxed that needs to be right up front also.

  • Bill___A

    The fuel is at least provided. There is no way that the hotel will be able to provide the internet, for which their mandatory fee is charged. If you want to compare this to airlines, let’s say you have paid the airfare, taxes and fuel surcharge, and that they supply meals a la carte – and you have paid for the meal. They don’t provide the meal, the plane is full. Would you expect a refund for that meal you paid extra for? Imagine they made everyone pay extra for the meal whether they wanted to eat it or not (and yes, I know in an “all inclusive” fare everyone pays, but I am talking here about if you pay a fee SPECIFIC to a meal and it is NOT provided….the hotel is forcing a fee SPECIFIC to providing internet, water and a newspaper…it is about ethics.

  • TonyA_says

    Disclosure and the new DOT rules has not stopped Spirit from charging more fees.

  • BobChi

    This should be so obvious. If you say the price is a certain amount, but then you impose additional charges yourself that people can’t avoid, then you have just lied about your price. I have no problem with extra fees for something that adds value to those people who choose to avail themselves of it. But this needs to be optional and clear, not the source of deception and trickery.

  • BobChi

    People need to take ethical stands even if it is at times to their short-term detriment, Fighting for a principle matters in the long run.

  • http://upgrd.com/roadmoretraveled MeanMeosh

    Among hotels, Harrah’s has been doing this for a while now. They have been prominently displaying “NO RESORT FEES” in their advertising to take a dig at their competitors who charge them. I’m guessing they must have seen some kind of an opening to up their market share by going fee free, much as Southwest did with “Bags Fly Free”, but I’d be curious to see if anyone’s tried to quantify just how much extra business they get. I for one gladly went out of my way to stay at Harrah’s last time I was in Reno just to applaud their stand on “resort” fees.

  • jm71

    I would like to see this go a step farther and require that all fees *and taxes* be rolled into the advertised price. Part of the reason localities can get away with high “bed taxes” and such are because the innocent traveler doesn’t really see the impact when they’re doing their destination searches. If city A has a 10% tax and nearby city B doesn’t, let that be obvious when I’m comparing hotels — if city A’s “value” isn’t really 10% higher, and more people book the lower cost city B hotels, such taxes will not be as successful.

  • Dutchess

    No, there seems to be a regular group of people who seem to be of the mindset that companies should be allowed to do whatever they want and the market will sort out all problems. While good in theory, the real world doesn’t always work that way.

    These fees are a joke and are one more way for a hotel to extort money from their customers and another example of the unbundling of the travel industry. Well, it isn’t exactly unbundling if it’s a mandatory fee.

    Could you imagine of you were flying and got to the counter and they told every customer “On top of you airfare, you have a mandatory $25 flight attendant fee. You are required to pay this if you want to board the flight” This is exactly what the hotels are doing.

  • Dutchess

    Of course it would effect your decision. The problem is when you have these fees broken out it makes it impossible to make a true comparison on price. It’s hiding the true cost of the room from the consumer.

  • http://www.talestoldfromtheroad.com/ Dick Jordan

    Nordstrom also seems to consistently follow a policy that “the customer is always right” while most corporations treat the customers as though they are always wrong. As far as I can tell, Nordstrom isn’t losing customers to other retailers and isn’t in any danger of going out of business anytime soon.

  • RITom

    Good work, Tax collectors have figured that out too and know that the entire bill is subject to the hotel tax unless the fee is can AND is charged to non-guests I am surprised the FAA has not tacked on a tax on the baggage fees and all the other fees yet.
    In Rhode Island the Tax authority has caught on and charges sales tax on the property tax that a lease company charges to the individual that they lease a car to (more then 30days).

  • RITom

    Jmastron, I can understand that taxes not be included, because they do change and they are NOT under the control of the hotel. So when you reserve your room in January for July with a 8% hotel tax and the county/state figures that they need to change the hotel tax to 10% effective with the start of the July 1st fiscal year, the hotel has to collect the tax at 10% they can not change it back to 8% — this is a tax they can not control, You as a taxpayer control that.

  • IGoEverywhere

    Yes there should be an absolute cost presented to any traveler in any form of travel. The cruise lines now quote fares with NCF’s, the same as port fees, but far more expensive and get away with it. They overcharge everything. The hotels hide these fees in the small print. It all needs to be controlled.

  • http://www.rockcheetah.com/blog/ RobertKCole

    Well, the FTC just acted and sent a letter to 22 hotel operators warning them about potentially deceptive practices regarding resort fees – http://j.mp/TqzQR9

  • chared99

    No you don’t have to include it in the rate if the hotel does not want to but they should state on there website what the resort fee is, Priceline hides the Resort fee and does not tell a customer that the hotel has one even after booking the room then falsely states that you agreed to “all fees” that the hotel charges when booking the room. Now expedia and hotwire tell you that there is a resort fee but might not tell you how much the fee is; yet I don’t get mad if there is a resort fee, I get mad that they hide it and I only learn about it when I check out of the hotel. Priceline intentionally doesn’t list it because they want you to think there is none, Priceline tactics are dishonest and deceptive