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How resort fee lawsuit could backfire for hotels, consumers

Hotels call them mandatory resort fees, amenity fees or destination fees. But in a new lawsuit, the attorney general of the District of Columbia calls such fees “deceptive” and an “unlawful trade practice” when not fully disclosed with the initial price quotation appearing on a reservation website. 

Many consumers certainly dislike resort fees, and feel that the way they are disclosed makes room-rate comparisons more difficult. 

The lawsuit, filed on July 9 against Marriott International in superior court, follows an investigation of resort fees by the attorneys general of all 50 states, plus the District of Columbia, that has been underway for about three years.

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Daniel I. Prywes is a partner with the law firm of Morris Manning & Martin LLP in Washington, D.C., who has written on legal issues surrounding resort fees.

The D.C. lawsuit alleges that it is unlawful for Marriott to initially advertise a room rate that does not include all mandatory fees, even if such fees are disclosed later in the reservation process before the transaction is completed. The attorney general claims that practice violates D.C.’s tough consumer-protection law.

The new lawsuit also claims, based on several examples, that Marriott-owned or franchised hotels have misled consumers through the disclosure of resort fees in small print or in ways that suggested that the resort fees were government-imposed. Further, the lawsuit claims that Marriott-owned or franchised hotels have in some instances misleadingly represented that mandatory resort fees cover certain amenities that, in fact, are subject to additional charges or are offered on a complimentary basis.

According to the lawsuit, Marriott has 189 owned or franchised properties worldwide that charge mandatory resort fees, which range from US$9 to US$95 per day. The lawsuit also claims that Marriott has “reaped hundreds of millions of dollars from expanding its use of resort fees over the past decade.”

The suit seeks an injunction against Marriott’s advertising of “daily hotel room rates that do not include mandatory resort fees in the price advertised for rooms at its hotels.”  It also seeks restitution of allegedly illegal resort fees paid by D.C. consumers, as well as hefty civil penalties allowed under the D.C. consumer-protection statute. The suit alleges that Marriott has “charged resort fees to tens of thousands of District consumers over the years, charging those customers well in excess of a million dollars.”

This is the first lawsuit by a consumer-protection agency challenging the way that mandatory resort fees are disclosed during the reservation process. But the hotel industry has known for years of regulators’ concerns about the way that mandatory resort fees are disclosed, and the D.C. Attorney General’s office had previously publicly stated its concerns and intentions to bring an enforcement lawsuit. Expedia is also reportedly taking action to give higher rankings on its reservation website to those hotels that do not charge mandatory resort fees on top of the quoted room rate posted initially on its website.

Yet many hotels continue to charge mandatory resort fees that are not disclosed in the room rates quoted up-front on reservation websites.

It remains to be seen how the industry reacts to the D.C. attorney general’s shot across its bow. The legal risks associated with resort fee disclosure practices have just increased significantly. The outcome of the D.C. lawsuit may drive a wide change in advertising practices. At the minimum, hotels should ensure that mandatory resort fees are disclosed prominently and clearly at some point before a reservation is finalized. 

That is not to say that the D.C. attorney general will necessarily prevail on its aggressive claim that the initial quoted room rate must include any mandatory fees. The suit must overcome the general principle that consumer-protections laws do not protect consumers from injuries they could reasonably have avoided.

Marriott will likely argue that consumers can reasonably avoid mandatory resort fees by abandoning a reservation once a resort fee is disclosed before the transaction is finalized. One prior lawsuit brought by an individual consumer against a Las Vegas hotel was dismissed in 2013 on this ground, coupled with the court’s finding that the eventual pre-purchase disclosure of the resort fee was not “inconspicuous.”

A consumer class-action suit (filed in 2016 in Pennsylvania federal court) against the Wyndham hotel group also challenges resort-fee disclosures, and is being settled, though terms have not yet been submitted to the presiding court.

The D.C. lawsuit may ultimately be counterproductive for consumers because, if successful, consumers’ ability to make informed pricing decisions could decrease.  Specifically, if mandatory resort fees are eliminated under legal pressure, hotels could respond by charging guests a la carte for individual charges for commonly used amenities that would not be disclosed in the quoted room rate. That practice would provide consumers with less prominent pre-purchase disclosure than exists when a resort fee covering a bundle of amenities is disclosed before a transaction is completed. The D.C. attorney general’s office has given no indication that it has even considered whether its lawsuit could have this negative impact on consumer choice.

Finally, if the District of Columbia is successful in its lawsuit, or reaches a favorable settlement in which Marriott agrees to change its practices, the ripple effect will be far-reaching. Other State attorneys general would be likely to assert similar claims against Marriott as well as other hotel chains. Class actions by consumers are also likely. The industry is just at the beginning of a lengthy, and likely expensive, legal odyssey.  

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