One thing the sharing economy won’t share: Transparent pricing

By | May 8th, 2016

If you thought comparison shopping was hard with traditional travel companies, just try the sharing economy.

Lightly regulated companies such as Airbnb and Uber can make it as difficult as traditional travel sites — and sometimes even harder — to determine the final price you’ll pay, let alone compare prices on other forms of transportation or accommodations.

And if you don’t think these companies will fight for their right to do whatever they want, cast a glance toward Austin, Texas, where Uber and Lyft just ceased operations because of unfavorable legislation. They aren’t messin’ around.

Related: Frequently asked questions about hotels.

With travelers booking summer travel in one of the most competitive lodging markets in years, the flaws of these sharing sites have never been more apparent. The fix, unfortunately, isn’t. It includes careful reading and thoughtful legislation — if that’s possible.

Dave Curtis, a retired music executive from Flossmoor, Ill., was looking for an apartment in California on Airbnb recently when he noticed the problem.

“The property might say on the general search page that it’s $150 per night,” he says. “But that doesn’t include any of the additional fees. You only see those fees when you click through to book the property individually.”

Curtis says these price quotes amount to “false advertising,” not unlike a mandatory resort fee imposed on a hotel room after the booking process has already started.

Airbnb quotes a low, per-day rate when you search for properties. For example, four nights in an apartment in San Antonio were listed at a low rate of $88 per night. Clicking on the property to make a booking revealed that it didn’t include a $25 “cleaning fee” and a $45 “service fee.” Both are mandatory. That brought the actual rate to about $105 per night.

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An Airbnb representative said the company shows a lower per-day price because sometimes hosts have fees that are not based on the daily rate, such as cleaning costs or fees for adding extra guests to a reservation. The costs are often fixed regardless of the length of the reservation, so they’re not reflected in the daily rate shown in search results.

Uber, the popular taxi alternative, doesn’t quote exact fares on its app. Instead, it offers a range of prices. A recent fare estimate for a pickup at New York’s JFK Airport to Manhattan pulled up a price of between $82 and $159. Lyft, another ride-hailing app, also offers a price range. For a ride from Los Angeles International Airport to Santa Monica, Calif., for instance, costs were estimated at between $22 and $30.

Factors including weather and the type of service used, such as a car or limousine, cause the prices to vary. But Jim Fellers, an Uber driver from Portland, Ore., says passengers also receive an initial estimate because of varying traffic conditions. The benefits, including a no-tipping policy, friendly drivers and no money changing hands at the end of the ride, outweigh the imprecise rate, he says.


“I have yet to meet one rider who isn’t enthusiastic about Uber,” he adds.

But the truth is, just because there’s an app and it’s called the “sharing” economy doesn’t mean it’s any more transparent than a traditional way of traveling. And experienced travelers, such as Qiana Martin, know it.

“These are fine-print items that maybe are overlooked by bookers if they are not familiar with the nuances of these platforms,” says Martin, an author and professional speaker based in New York. Among the pitfalls: cleaning or direct-deposit fees that are often disclosed late in the booking process or charges for extra passengers.

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The trick isn’t just to know what to expect when booking through a sharing site but also to know when a “legacy” site can do better.

“I’m constantly weighing the benefits of a legacy booking versus a sharing site,” Martin says. “Can I have a four-to-five-star experience at someone’s unique flat as opposed to a booking at a three-star hotel for the same price? Or can I simply reserve a room at a hip hotel for the cost of renting a room in a cool high-rise?”

Leisure travelers are easily duped into paying more for their sharing accommodations. Katherine Eakes, a dietitian who works for a restaurant-review website, found a room on Airbnb recently and, like Curtis, discovered only after selecting the property that it would cost $80 more per night than the initial price quote.

“I don’t believe they are good at disclosing the full price,” she says.

The technique of offering an initial price or estimate and then increasing it as the consumer goes through the booking process is referred to as “drip” pricing by the Federal Trade Commission. It’s an issue the agency has struggled with. In 2012, the government held a conference on drip pricing, and the FTC later warned hotels that not disclosing a full price “may” violate the law by misrepresenting the price consumers can expect to pay for their hotel rooms.

But the agency stopped short of requiring hotels to include all mandatory fees in the initial price quote, saying only that they must disclose a full price before the booking is made. In recent weeks, the agency has recommended that Congress address the resort fee problem. If lawmakers do, it could also affect sharing sites and the way they represent their prices.

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The sites are just taking a page from the rest of the travel industry, where a “race to the bottom” is in progress, according to Andrew McConnell, the co-founder of Rented , a property-rental site. Customers are baited with a low fare and then have required fees and surcharges added on to the final price.

The reason is simple: People book the cheapest rooms. So travel companies have every reason to offer a stripped-down, unbookable rate and then pile on the fees later. After all, they argue, you wanted it that way.

“Thus, despite people saying they prefer all-in pricing, their search and booking habits suggest the exact opposite,” McConnell says.

And that’s where critics say government regulation can help, ending a problematic cycle and saving travelers from themselves. A simple rule that prices must include all mandatory fees would give everyone a clear picture of what they’re spending without putting any one site at a disadvantage.

Should sharing sites be held to the same standard as legacy companies?

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  • James Gerber

    The worst violators of transparency are the opaque booking sites. I looked for a hotel room in San Diego and got an email for $88/night near the airport for a 4 star hotel so I clicked. The rate immediately increased to $129 before I even put in my dates! Then I noticed I would have to commit before I found the fees and even then, I would not know until I paid and even then not until I checked out! It turns out the fees were $30 for “resort” and $30 for parking and smaller amounts for phone service and the in-room safe. After taxes, the rate balooned from $88 to over $200!

  • Mel65

    Ouch! Few things irritate me more when trying to plan my vacation budget than crud like this! Irrespective of taxes, my rate should be what is quoted. Period.

  • AJPeabody

    The argument that some fees are not based on a per day basis and so are left out is BS. When searching you put in the days you want for your stay, so the number of days is known and the non-daily fees can be easily prorated. After all, the site is a computer!

    As for consumers choosing the lowest price, saving money is the first principle of using the sharing economy. The answer to hidden drip pricing is to quote two prices initially: the base price and also the all in every drip included price. The $88 room that balloons to $200 would be quoted as “$88-$200.”

    And, since no one will leave the race to the bottom voluntarily, legislation/regulation is the only workable method.

  • Robert Delvo

    Andrew McConnell, the co-founder of Rented

    The reason is simple: People book the cheapest rooms. So travel companies have every reason to offer a stripped-down, unbookable rate and then pile on the fees later. After all, they argue, you wanted it that way.
    SURE….sparky. Everyone wants to be lied to up front. Then we want to hunt and peck and waste our time and raise our blood pressure to see how much our stay will really cost. Then after that we need to data mine through your 14 page website to locate on page 13 3/4 that if we do some thing crazy like bring a car, a computer or a companion (wife) then you will want more money for doing these unusual things. I believe that there should be a law that every possible charge the hotel can incur is listed on PAGE ONE. Then like a buffet you pick your charges you want after all the mandatory charges are listed 1st. Then tell me about all the other “stuff” you offer like windows that open etc.

  • Maxwell Smart

    it seems many places on airbnb base their pricing on similar hotels/condos/houses etc., BUT as everyone knows, there’s no one price for hotels/condos.
    Many are cheaper through a wholesaler. Have looked at 2 recently, where didn’t do airbnb as they were way too expensive.
    OK, some are a different experience.
    Also, some pricing is completely wrong when do search. See a low price, then when click on, it’s nothing like the price, in the initial search & we not talking cleaning fees, but rather 4 or 5 times the rate on the initial search. Maybe a typo ? Maybe not.

  • Peter Varhol

    You know as well as I do that there is no such thing as the “sharing economy”. The name is strictly a marketing ploy. No one is sharing anything. No one is driving along and getting a notification that a total stranger is going the same direction. And no one happens to be going on vacation overseas for a month and offering their home to a total stranger for that period.
    What these are is a way to be a taxi or a hotel without complying with the applicable local regulations. To be fair, those regulations may be antiquated, burdensome, or unfair, but let’s call these businesses what they really are – businesses.
    As long as we believe that we are getting a deal, we are complicit. In fact, we are getting what we pay for, risk and all. Often that isn’t a bad thing, but we need to participate in these business models with our eyes open.

  • LFH0

    The Airbnb price structure is interesting. The cost is, essentially, a polynomial of the form ax + b = c, where a is the daily rate, b is the fixed cost, and c is total cost. So the company advertises the price as being the incremental daily cost (i.e., taking the first derivative of the polynomial), which leaves the fixed cost undisclosed. I might be more mathematically sophisticated, and have a desire to understand this and other non-linear pricing models and structures, I suspect that many, if not most, consumers would have understanding (see, e.g., the misunderstanding of our progressive income tax structure by the general public, which is effectively another variation of a non-linear polynomial). And to require advertising to present multiple coefficients and constants would confuse more than assist. I see two alternatives, neither of which are satisfactory. First, a company could present the average daily rate based on the typical number of nights booked. But this would then give a cost that is too low for short stays, and a cost too high for longer stays, resulting in other types of complaints and misrepresentation. Second, legislation could prohibit any type of cost model other than linear. But if some costs to the hotelier are truly constant, and not a function of the nights booked, then this type of legislation would cause a mismatch between business costs and revenues. I don’t see an easy answer to the non-linear pricing issue.

  • Steve Rabin

    The so-called sharing economy companies are very interesting–they want to be providers, but not regulated as such, operating in the gray areas of the laws. Effectively they want the best of both worlds. They want to provide the service, but at the same time when there is a hint of regulation, they play the “we don’t provide the service, the independent contractors do” card.

    By the way, Uber does not have a no-tipping policy, they just never emphasized it–there was a court settlement a couple of weeks ago that will make it easier for drivers to solicit tips.

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