Scrutiny of resort fees is heating up as U.S. state attorneys general press an industrywide investigation into how the mandatory charges are disclosed during the reservation process.
In an era when online booking sites with price comparisons compel hotels to advertise low room rates, the fees – for such amenities as gym and pool use, beach towels and WiFi – offer a way for to recoup revenue, says Lauren Wolfe, counsel for Travelers United, a consumer advocacy group. But they’ve been showing up on guests’ hotel bills since the late 1990s, taking off around 2008 when behemoth Las Vegas resorts introduced them, Wolfe says.
Now, District of Columbia attorney general Karl Racine is leading the offensive in concert with counterparts in 46 states. In recent months, Racine battled Marriott International over another issue – the amount of data the hotel giant is obligated to produce as part of the investigation. That dispute surfaced in public filings as Racine sought to enforce a subpoena served on the hotel giant. The attorneys general are investigating other chains as well, a spokesman for Racine says.
Hotel operators are watching to see whether Racine and other state attorneys general reach settlements with one or more chains or bring enforcement actions. Other complaints filed by consumers are pending. For example, a consumer suit against Wyndham Worldwide in U.S. District Court in Pennsylvania seeks class-action status.
“We’re waiting for the other shoe to drop,” says Los Angeles hospitality lawyer Jim Butler, a partner at Jeffer Mangels Butler & Mitchell.
At issue is when in the reservation process and how conspicuously hotels should disclose the fees. Consumer advocates say if they aren’t disclosed as part of the room price, they should be displayed prominently nearby. Some hotels reveal the fees in fine print or on hard-to-find locations on the website. Many disclose them only as the reservation is being completed, which still gives the consumer opportunity to walk away. But as a practical matter, most don’t. “They’ve made a booking decision and the hotels know that,” says Christopher Elliott, a consumer advocate specializing in travel.
The practice of charging mandatory resort fees has grown during the past five to 10 years, according to Randy Greencorn, founder of resortfeechecker.com, which tracks the charges. It is expanding to metropolitan areas such as San Francisco and New York, where the add-ons are termed a “facility charge” or “amenities fee,” he says.
The number of U.S. hotels tracked by resortfeechecker.com that charge the fee — mostly 4- and 5-star properties — rose 16% to 1,081 in the 12 months ended December 2017. The average fee rose 11.1% to US$21.97 in the same period. Some luxury resorts charge fees of US$40 and US$50 a night, and two properties charged US$100 or more as of August, according to the site. Greencorn estimates that 7.1% of 54,000 U.S. lodging facilities charge fees.
Resort fees must be included in base rates in the European Union and Australia, Wolfe says, and they are becoming more common at Caribbean, Canadian and Mexican hotels.
The American Hotel & Lodging Association (AHLA) also estimates that 7% of hotels charge a fee but says the practice has declined over the past decade. “Resort fees are fully disclosed up front and clear to the consumer at the time of booking and remain transparent,” AHLA says.
The Federal Trade Commission (FTC) in 2012 investigated the broad problem of “drip pricing,” where companies advertise only part of a price and reveal other charges later. The agency said this misrepresents the price consumers can expect to pay for their rooms. Hotel reservation sites should include in the quoted total price any unavoidable and mandatory fees, the commission said. According to a January 2017 report by the FTC’s Bureau of Economics, “Separating mandatory resort fees from posted room rates without first disclosing the total price is likely to harm consumers by increasing the search costs and cognitive costs of finding and choosing hotel accommodations.”
Lawyers following the issue say an FTC enforcement action is unlikely in light of President Donald Trump’s penchant for deregulation. However, states are carrying the baton forward.
The current jumble with varying degrees of disclosures is confusing, says the spokesman for D.C. attorney general Racine. “The fees should be disclosed consistently across the industry and across booking sites so consumers get to shop with the knowledge they need.”
On the other hand, consumers have grown accustomed to add-on fees, a constant on sites that sell tickets to entertainment and sporting events, says Dan Prywes, an attorney at Morris, Manning & Martin in Washington, D.C.
Hotels are concerned how far the state attorney generals will push the point. The AGs are taking a conventional approach to consumer protection if they require hotels to disclose mandatory resort fees before a reservation is made final, and not just in fine print, Prywes says. However, they are on more tenuous legal ground if they assert hotels must disclose fees upfront along with the initial advertised price.
Many large chains have begun prominently posting their resort fee at the top of web pages that list room rates. “Marriott clearly and prominently discloses the existence and amount of the resort fee through all reservation channels, from the time of reservation to check-in,” the company said in a September filing in the D.C. case. Its disclosure “fully complies with FTC guidance and state consumer protection laws,” Marriott said.
Hospitality attorney Butler says resort fees are no doubt annoying to consumers, but that doesn’t mean they’re deceptive or illegal. Just as Southwest Airlines differentiated itself from competitors with its “Bags Fly Free” policy, hotels can tout that they don’t charge fees and turn that distinction to a competitive advantage. “We can always give our business to another hotel,” Butler says.
By HOTELS Contributor Judith Crown