The practice of imposing mandatory resort fees has been getting a fair amount of attention lately. The attorneys-general in the District of Columbia and Kansas are suing Marriott and Hilton over them, MGM is raising its fees in Las Vegas and the CEO of Caesars issued a warning that the fees may be approaching a critical tipping point. Several consumer advocate groups are calling for government intervention and the press is highlighting the issue in some not very positive ways.
Resort fees are an additional hotel charge listed separately from the standard room charge and are not usually subject to room taxes or agent commissions. According to the resorts that charge them, the fees are intended to offset the cost of providing pools, gyms, spas, and other amenities and are added to the room charges regardless of whether the guests use any of the amenities. Critics claim it is a duplicitous practice and lacks the transparency that travelers expect. According to one report, in 2018 resort and other fees and surcharges amounted to $2.9 billion in hotel revenue.
The D. C. attorney general accused Marriott of charging consumers hidden fees, alleging that Marriott is engaged in “an unlawful trade practice” by using what the U.S. Federal Trade Commission has labeled “drip pricing.” Marriott is fighting back; CEO Arne Sorenson says the fees are fully disclosed before a customer books a room; “It’s frustrating of course because we have had resort fees at resorts in our system for over a decade.” Sorenson says that the litigation will hang on whether the fees are open and transparent or hidden as the AG claims. He further states that Marriott has a policy that insures the company gives the customer many times the value of the fee in added value services. The lawsuit is not likely be settled any time soon. Marriott has a great deal at stake. In the meantime, the accusations are not affecting the stock price which is up 33 percent for the year.
Nebraska’s complaint alleges that Hilton violated consumer protection laws by engaging in deceptive practices and misrepresenting its room rates. The state maintains Hilton has harmed Nebraskans since 2012; “For years, Hilton has misled consumers in Nebraska regarding the true cost of Hilton hotel rooms,” Nebraska Attorney General Doug Peterson said in a statement. “They failed to heed warnings from the Federal Trade Commission and the mounting complaints from their own customers.” Hilton takes exception to the charges, claiming that fewer than 2 percent of its properties worldwide charge a resort or destination fee and those fees are always full disclosed.
In Las Vegas, the practice is center stage because MGM just raised its fee by $6 a day, Caesars is uncertain about the right amount and Wynn Las Vegas has stopped charging for parking. The fees charged to tourists rarely raise the ire of the Las Vegas press, but fees that Las Vegas locals pay are a source of negative media attention. When the Strip resorts started to charge locals to park, it sparked a flurry of angry responses. Some of those may have reached the ears of industry leaders. When Wynn discontinued parking charges earlier this year, the company said, “We have come to believe that charging additional parking fees is counter to the personalized service we provide.”
In its latest earnings call, Caesars weighed in on resorts fees. CEO Tony Rodio said, “Over time, at some point there’s going to be the straw that breaks the camel’s back. I don’t think we’re there yet, but I want us to be very judicious and cautious about taking those rates any further. It’s certainly a revenue stream that’s hard to walk away from and it’s been accepted at this point, but we’re getting pretty high.” That is the dilemma, the fees are very attractive to the hotel industry, but very off putting for the travelers.
Travelers do not want to pay additional fees for parking, pool, baggage check, cancellation or any of the other dozens of creative ways hotels increase their revenue. However, with the increased cost of borrowing, payroll, utilities, taxes and other operating expenses that to remain in business hotels need to increase revenue. Raising the room rate is the most obvious response, but room rates are very competitive especially in the internet era. To compete with other hotels in the region, each hotel needs a competitive rate. The added fees are not advertised and that leaves hotels competing on a rather artificial basis. It is understandable, even forgivable. However, as Rodio says there may be a limit to what customers will tolerate or regulators will allow. I am only certain of one thing in this debate; regardless of the type of charge, the consumer needs to be fully informed before the purchase. Fooling or deceiving customers is never a good-long term strategy, not for hotels, airlines, grocery stores or any business.
