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Fees, surcharges in US reach record level

New research indicates fees and surcharges collected by U.S. hotels are expected to increase by approximately 4% to a record level of US$2.55 billion in 2016.

Notably, the research from Dr. Bjorn Hanson, clinical professor at the NYU School of Professional Studies, shows that hotels and resorts are increasingly charging for:

  • “Guaranteeing” a specific type of room (e.g., a room with a king bed, a room on a high floor), typically subject to availability;
  • Early check-in, primarily for resorts, which is more common in Las Vegas;
  • Unattended surface parking in suburban locations;
  • Holding checked luggage.

Following the 2015 record of US$2.45 billion, total fees and surcharges collected by U.S. hotels in 2016 will establish a record level, but the percent increase will be the lowest since 2009.

The increase for 2016 reflects a combination of approximately 2% more occupied hotel rooms than in 2015, more categories of fees and surcharges, and higher amounts charged, but lower fees and surcharges for high speed Internet access, for a total increase of approximately 4%.

Fees and surcharges emerged as a common industry practice around 1997, and a notable event in the history of fees and surcharges was when energy surcharges were introduced for a large number of hotels in 2000. Since then there have been numerous categories of fees and surcharges introduced.

For groups there have been increased charges for bartenders and other staff at events, special charges for set-up and breakdown of meeting rooms, and administrative fees for master folio billing.

U.S. lodging industry fees and surcharges have increased every year except for brief periods following 2001 and 2008 when lodging demand declined.

Fees and surcharges are highly profitable; many have incremental profitability of 80% to 90% or more of the amounts collected.

Some fees and surcharges are sometimes unfairly called “hidden” or “surprise,” but disclosure on websites, confirmation emails, “tent” cards in guest rooms, room service menus, and guest service binders continues to increase in the nature of the disclosure. One of the reasons for the sense that some of these fees and surcharges are “hidden” or “surprise” is because the categories are often established and the amounts are set hotel-by-hotel rather than by brand, and both can change frequently.

In 2012, the Federal Trade Commission (FTC) Division of Advertising Practices issued 22 warning letters to the hotel industry about disclosure of resort fees. The FTC is currently focused on resort fees.

Senator Claire McCaskill announced in February 2016 that she is introducing legislation targeting what she refers to as “deceptive hotel fees” that are “bait and switch” practices that resort guests are “slapped with,” based on hearing from “hundreds of Missourians.”

There are occasional statements that it would be better to include resort and other fees and surcharges in room rates, but there are several reasons this is not the general practice, including that the higher room rate would subject the fee amount to municipal occupancy taxes; room rates change frequently and are closely monitored by many travelers but resort and other fees and surcharges change less frequently; and the focus of many travelers is on the room rate.

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