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SOME BACKGROUND INFO
Resort fees are a mandatory fee forced upon hotel customers. Hotels hope to gain as much money from guests as they can so they try to trick consumers into paying two room rates. One is the published rate, the other is called a "resort fee." Hotels force the guest to pay this extra rate, in addition to the room rate, before the guest is able to get the key to the room. Resort fees are the most common term used for this tactic. Others include facilities fee or a transaction fee. The rate is usually a set amount (ex: $30 extra dollars + tax per night) but the fee also shows up occasionally as a percentage (say an extra 15%) on top of the total hotel bill. Resort fees are a form of drip pricing that has long been verboten in other forms of travel. Hotel fees brought in 2.47 billion dollars for the hotel industry in 2015 according to Dr. Bjorn Hanson of New York University.
Specific fees have long been charged by hotels to gain access to items not covered by the advertised rate. Many hotels often had a pool and fitness center where guests could be charged $10 a day if they were interested in using the pool or gym. This allowed guests who just wanted to sleep at a hotel to simply pay the advertised rate yet it allowed a guest who wanted to hang out at the pool all day a simple extra cost of $10 a day to use the pool.
About ten years ago some enterprising hotels began to get imaginative about how they could earn more money yet stay competitive. A few hotels in touristy areas started to charge everyone for the pool, even if they had no intention of swimming in it. They called this extra $10 pool fee a "resort fee." It was intentionally left out of the total advertised price of the hotel to make it look like the hotel's price was less than it actually was. This allowed the hotel to get an extra $10 per day per room yet when customers called the hotel to see the price, the hotel would remain competitive as it was advertised for $10 less than it actually cost. Now everyone, resort loungers and business travelers, were forced to pay this fee. The fees started low, often at $10 per night. Then they started to creep up. When some hotels in an area started to take up this "resort fee" tactic, others joined as well as they too wanted to make it look like their hotel cost less than it actually did.
One of the greatest factors leading to the rise in creative pricing by hotels is the internet. As an ever increasing number of consumers turned to the internet and online booking deal sites to lock down their travel, hotels started to see a certain percentage of their revenues reduced. Prior to the internet, many people would simply call a hotel where they wanted to make a reservation. The hotel would get 100% of the cost of the reservation. A few customers might have gone to a travel agent. Travel agents generally took about 10 percent of a reservation. So hotels would still get 90% of the reservation cost.
Now, with the rise on online bookings hotels are scrambling to catch up. Online booking takes a much bigger commission than a travel agent ever did. Booking agents online (like Expedia, Priceline, Hotels Tonight, etc) typically take about 25% of the total cost of the reservation for a hotel. That means that hotels are scrambling to keep their margins up while online booking soars. Instead of coming up with their own technological solution, they are coming up with convoluted double pricing schemes.
Hotels argue that installing wireless internet has been expensive. Millennial customers report that after a clean bed their number one interest in a hotel is free access to high speed internet. So what is a hotel to do? Ten years ago many hotels charged specifically for internet. No one could access internet in a hotel without breaking out a credit card. Now to lure millennial consumers, many hotels no longer have a paywall blocking internet usage in a hotel. A guest can just open his laptop and log in. What hotels do instead now is advertise online that there is free high speed wifi. What they do not advertise is that the wifi is allegedly covered in a "resort fee" payable to the front desk at check in. So the internet is not free. Essentially resort fees are a conniving new way to charge for wireless internet. The paywall is now the front desk agent who hands you your keys.
WHY DO PEOPLE PUT UP WITH THIS SHIT?
Hotels make the bread and butter of their income through return customers. There are business travelers that spend hundreds of nights a year in hotels. Hotels need to earn those guests loyalty to continue a solid stream of income for the hotels. They do not need to bend over backwards to please tourists. Tourists are likely to visit a destination once in their lives. They are unlikely to ever come back and so the hotel has no interest in earning their loyalty. So they do not advertise the actual rate of the hotel online and load up the hotel fees in destinations like Orlando, Key West, Miami, Las Vegas, Aspen, Napa Valley and Hawaii. Hotels know they can take advantage of tourists who will visit this area once in their life and will never be back. Most Americans would consider themselves lucky to visit these places once in their life. Hotels know that and so they do not seem to mind double charging customers with a trick resort fee.
SO WHAT IS HAPPENING ABOUT THIS?
The Federal Trade Commission (the FTC) regulates deceptive and unfair pricing in the hotel industry. In 2012, the FTC warned 22 hotel operators that their online reservation sites "may be in violate the law by showing deceptively low estimate of what consumers can expect to pay for their hotel rooms." They specifically warned against drip pricing where, as the FTC says, "firms advertise only part of a product's price and reveal other charges as the customer goes through the buying process." Today most major hotels in tourist areas continue to use drip pricing to lure customers to book at their hotel. Today the advertised initial searchable hotel rate on Expedia or Hotels Tonight will does not include any forced resort fees. Those fees are only shown later on in the booking process, a form of drip pricing. The FTC can only act on the laws that Congress passes. The FTC might listen but they are not acting to conclusively eliminate drip pricing and deceptive fees across the country. For more info on that, watch this FTC panel on resort fees from June 12, 2015 (Morning Session, fun starts at 2:07). No enforcement action has been taken by the FTC regarding resort fees. No rules have been passed by the FTC protecting consumers from resort fees. The FTC advocates that people make sure they know about fees by calling their hotel before booking. Under their FTC travel tips section online, they say "If you're not sure whether a website is showing you the total price, call the hotel and ask about a 'resort fee' or any other mandatory charge." That would have been a great idea in 1957. According to research company Criteo's Travel Flash Report, 40% of American travel bookings were on mobile devices in 2014. Today people use their phone to find an app so that they can immediately book a room without talking to anyone. With resort fee pricing running rampant, people are unable to use these online booking agents (Expedia, Booking, Hotels Tonight, etc) to quickly and accurately find a hotel in their budget. It is time that America step up and offer fair hotel pricing online and on the phone. The White House's National Economic Council released a report on resort fees in December 2017 that said "such fees can be fraudulent or deceptive; at a minimum, they make prices unclear, hinder effective consumer decision making, and dull the competitive process." Since then, we have a new President. He and his administration are yet to issue a public statement on hotel resort fees. The current President charges hotel resort fees at three of his hotels totaling in $66,168 per day. Due to the fact that the President is currently profiting from resort fees, it is unlikely for his FTC to act on the issue.
Congress (save us!) has gotten involved to end this nonsense. Senator Claire McCaskill introduced a bill to end resort fees on February 25, 2016. This was a noble attempt but Congress would have to reintroduce this bill. We have faith but sure are not going to rely on the US Congress for action. In good news, 46 state Attorney Generals along with the AG of Washington, DC have joined suit to investigate resort fees. This is long multi-state litigation that could take years for results. Local and state governments have a unique new role to play in this matter. With little federal action likely in the next few years, they have the ability to ban hotel resort fees and empower themselves to collect all of the tax revenue they deserve.
WHAT DO CONSUMERS WANT?
Consumers want to be able to use mobile booking sites to quickly search for a book a hotel within their set budget. When opening the Booking.com app on a potential customer's phone, the traveler should be able to quickly search for all hotels in Las Vegas under $150 a night and book it. That initial rate of $150 should screen for all hotels under $150 including taxes and fees. Anything else is an inaccurate, unfair and deceptive search. Drip pricing and hotel fees do not allow Americans to use their true technological potential when booking hotels online. According to the Criteo Travel Flash Report, "mobile bookings are increasing at astonishing rates in every travel sector, with the exception of hotel reservations. That’s still the domain, for now, of desktops." When fine print is needed to figure out the price, guests are forced to use a totally separate form of technology to book hotels. American travelers deserve better.