Hotel fees tend to go up when business is good. If occupancy is riding high, operators can get away with the addition of bite-sized charges to guest bills, but today’s industry is looking like it wants a bigger mouthful. A new study conducted by Bjorn Hanson, clinical professor at the NYU School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism, is forecasting fees and surcharges will reach a new record of $2.55 billion in 2016. This follows 2015’s record haul of $2.45 billion, but Hanson actually expected 2016’s total to be even higher based on the industry’s 2-percent rise in occupancy.
“I thought because of the increase in demand this year that the increase would be larger,” Hanson said. “I didn’t anticipate the effect of expanded loyalty programs and their providing amenities such as free internet.”
Despite this, the increased diversity in the categories of fees being applied to guests, paired with higher amounts charged overall, still allowed surcharges to increase 4 percent last year. Hanson said hotels are running out of new ways to charge guests for services and amenities, and at this point much of the increase can be attributed to fine-tuning the process.
Charge it to the Game
The modern equivalent of the hospitality surcharge began in the 1990s with what was referred to as an “amenities tariff” levied on guests at a Wyndham resort located in the Caribbean, but was popularized by MGM International’s Las Vegas casino hotels. Surcharges like these gradually trickled into properties of every segment until they became a fixture of the industry.
But how long can these charges remain? Hanson pointed to market retractions felt during 2001 following the 9/11 attacks, and again in 2008 after the global financial crisis as periods where fees and surcharges fell by as much as 45 percent. The prevailing belief is that hotels shed their extra charges out of necessity in order to secure bookings, but Hanson said they dropped the practice out of respect for the economy.
“There is a desire to retain [these fees], but hotels are sensitive not to offend guests at the brand or individual property level,” Hanson said. “They have a high sensitivity to cultivating repeat business.”
While Hanson said he believes most surcharges have already been “invented,” some of the more fringe fees are popping up in unlikely places. “Unattended surface parking” fees for guests who wish to use property parking lots are becoming more common, with hotels installing gates with electronic keycards to lend credence to the charge.
“The largest increases in parking fees came from suburban areas, as much as a 40-percent increase over last year,” Hanson said. “They experimented with parking fees there and it was tolerated.”
In Plain Sight
Hidden fees, however, are being seen by travelers in a different light. Charles Leocha, co-founder and president of Travelers United, an advocacy group, is working with the Federal Trade Commission on an overhaul of the current presentation of surcharges in hospitality. Currently, the FTC allows hotels to add required fees to their room rates as long as the surcharges are disclosed before the room is booked. Leocha argues that if a hotel lists a room rate online but it comes attached with a mandatory fee, then the hotel is guilty of false advertising.
“I’ve been working since 2012 trying to get the FTC to change their stance on this, and I believe we are close,” he said. “Every day they delay making an announcement on determining whether or not false advertising is taking place is costing Americans.”
Leocha’s stance is that it isn’t enough for hotels to disclose fees during booking. Instead, Travelers United is pushing for additional charges to be directly included on quoted rates.
“I don’t want to protect or empower the [online travel agencies] necessarily, but they are currently the only place where consumers can comparison shop,” Leocha said. “We are also working with the attorney general, and if they decide to move on fees and surcharges before the FTC so much the better.”
While Hanson said there has not been a marked rise in hidden fees, he detailed other new practices, such as charges for “guaranteed room types,” which are anything but guaranteed. “If a guest isn’t checked out, they can’t offer the room,” Hanson said. “Instead, coupons or one-time refunds are offered, and over time inventory management will improve.”
Fees rarely have an impact on satisfaction scores. “Some guests are still surprised due to a lack of due diligence on their part, and it comes up in occasional TripAdvisor scores, but there is no overall reflection on satisfaction scores unless attributed to other issues,” Hanson said.