In an Era of ‘Resort Fees,’ FTC Steps into the Breach
29 Jun, 2016By: Mary Helen Sprecher
Possible Removal of Hidden Charges Could Result in Change in Pricing Structure at Hotels, Resorts and More
It’s a New Year’s resolution a few hotels might have made – but didn’t. Now, the Federal Trade Commission seems poised to see they do.
An alarming rise in mandatory resort fees has pushed the FTC to consider sanctioning the controversial surcharges known as ‘resort fees.’ And those traveling to sports events are set to reap the benefit.
An article in The Huffington Post noted that in 2012, the federal government’s consumer protection agency allowed hotels to add required fees to their room rates as long as the surcharges were disclosed before the room was booked. But it created a loophole that allowed properties to quote a low initial room rate online and then add the mandatory fees later in the process, which consumer advocates argued was unfair and deceptive.
Shortly after the first of the year, however, several major hotel chains, sports facilities, convention centers and management companies ran afoul of the Federal Communications Commission after fed-up consumers complained about being unable to access wi-fi without paying exorbitant rates. And at that time, the FTC warned 22 hotel operators that their online reservation sites may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms. Warning letters, published on the FTC site, cited consumer complaints that surfaced at a recent conference the FTC held on “drip pricing,” a pricing technique in which firms advertise only part of a product’s price and reveal other charges as the customer goes through the buying process.
According to the FTC letters, “One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or internet access, sometimes referred to as ‘resort fees.’”
Mandatory fees, the FTC noted, could be as high as $30 per night, “a sum that could certainly affect consumer purchasing decisions.” (As a side note, the Washington Post found that some hotel fees could be as high as $50, and a few in the $100 range.) Many visitors learned about the extra fees only upon check-out.
Now, the agency is poised to announce a policy shift that would require resort fees to be included in the initial price quote — a move that would effectively end resort fees (at least as they are now known.) And oddly enough, it’s a position that even the hotel industry seems to be warming to.
HuffPo notes, “Customers have fought the fees for more than a decade, but earlier this year, they found a friend in Washington when Sen. Claire McCaskill (D-Mo.) introduced the Truth in Hotel Advertising Act of 2016, a proposed law that would prohibit hotels from advertising a room rate that doesn’t include all mandatory fees. The bill also gives the FTC the authority to enforce the prohibition and state attorneys general the power to bring a civil action in federal court against violators.
At the same time, there have been whispers that the hotel industry is pushing for counter-legislation that would explicitly permit hotels to charge resort fees. If either of these bills were enacted, they would override any policy decisions made by the FTC.
An article in Meetings & Conventions stated that in 2015, U.S. hotels were projected to make a record $2.47 billion from all fees and surcharges, according to a study by New York University's Tisch Center for Hospitality and Tourism.
But, adds the HuffPo article, change is afoot, at least in some hotels. Niki Gross, managing director of the Whitney Peak Hotel in Reno, Nev., says guests would be disappointed by a $25-per-night fee that covered things like phone charges, Wi-Fi and so on.
“It’s somewhat akin to opening a new toy or electronic device and reading that batteries aren’t included,” she says. “Rather deflating.”