Add-on fees have been a fact of life for most resort guests in the United States. But now that the practice has spread to hotels in major cities, regulators are taking notice.
In July, District of Columbia attorney general Karl Racine filed a lawsuit against Marriott International in superior court following a three-year investigation of resort fees by attorneys general across the country. The suit argues that Marriott cannot legally advertise a room rate that does not disclose all mandatory fees, regardless of whether those fees appear later in the reservation process. The attorney general contends that the practice runs afoul of the city’s consumer-protection law, that Marriott hotels have misled consumers, and that the company should pay restitution to D.C. consumers and heavy civil penalties.
Shortly after that, Nebraska Attorney General Doug Peterson filed a similar lawsuit against Hilton, accusing the company of deceptive pricing, “hiding the true price of hotel rooms” and engaging in the “unlawful trade practice of drip pricing” by failing to reveal daily mandatory charges until later in the booking process. Peterson wants Hilton to advertise more transparently, pay restitution to affected Nebraska consumers and pay civil penalties for violating the state’s consumer-protection laws.
“The legal risks associated with resort fee disclosure practices have just increased significantly,” observed Daniel Prywes, a partner with the Washington, D.C., law firm of Morris Manning & Martin LLP. “At the minimum, hotels should ensure that mandatory resort fees are disclosed prominently and clearly at some point before a reservation is finalized.”
Bjorn Hanson, a New York-based researcher and lodging consultant who has tracked resort fees since they first became popular, said most resorts are already doing a good job of making sure travelers know about fees before they book a room.
“Most consumers are aware there may be a resort fee, so they are attentive to them, and resorts have gotten used to what level of disclosure is enough,” he noted; such fees, however, are “much less common” outside the U.S., he said.
Sean Hennessey, CEO of Lodging Advisors, New York City, said he thinks “hotels have gotten a lot clearer about fees at the time of booking, and trying to manage customers’ expectations. Having guests surprised or annoyed by those fees is not a good long-term strategy.”
Opting out
As more urban hotels adopt the practice of adding a daily fee — typically calling it an urban fee or destination fee — some consumers may feel blindsided. In 2018, Hanson reckoned, urban hotel fee revenue grew some 400%, and the practice continues to escalate.
Meanwhile, the two lawsuits have ignited a storm of snarky consumer media coverage that depicts hotels as greedy and consumers as unsuspecting victims. Marriott CEO Arne Sorenson, in a video posted on LinkedIn, acknowledged that consumers don’t love resort fees, but that they are not going away. In reality, Hanson pointed out, the fees help operators survive in a climate where a 2% growth in room rates is not keeping pace with three of the biggest costs — labor, property insurance and real estate taxes. Hotels also like the fees because they typically are not subject to franchise royalties or travel agency commissions — yet — although Booking.com is working on a way to change that.
Robert Cole, senior research analyst for lodging and leisure travel at Phocuswright, said research shows that add-on fees are “a tremendous dissatisfier among consumers.” The real issue, he said, “is that you can’t comparison-shop effectively because you have no way of knowing what the price of a room will be without taking multiple steps.”
Cole, like other critics of the practice, argues guests often neither need nor appreciate the bottled water, pool access, Wi-Fi, newspaper or other benefits bundled under these fees, but they can’t opt out because the fees are mandatory, unlike airline charges for checked bags, for instance.
Mark Grenoble, president and CEO of 360 AMI, an asset management company, said being able to show value makes the fees more palatable to guests. “I won’t stay in a hotel that charges me for Internet use, but if it’s part of a fee that covers other things, I’ll pay that,” he said.
Regardless of what the fees cover, Hennessey thinks properties that don’t impose them could be at a disadvantage, even if their room rates are competitive. “If you see two hotels on Expedia, one with a resort fee and the other without, most consumers will choose the cheaper hotel based on the rate before the fee is added,” he observed.
He thinks the industry overall needs to settle on a standard for disclosing fees before regulators intervene.
If the District of Columbia does prevail against Marriott, Prywes said, “the ripple effect will be far-reaching.” He said other states would likely pursue claims against Marriott and other hotel chains, and consumer class-action suits might follow.
And in the end, ironically, the consumer might end up paying more: Add-on fees are not subject to occupancy tax, Hanson pointed out, so folding them into the advertised rates — as the District of Columbia’s lawsuit would require — would bump up the tax burden on travelers.