Resort fees back in the spotlight due to Marriott, Wyndham lawsuits

Today’s travelers thrive on comparison shopping, and a $1 difference in rate is often enough to swing bookings in a different direction. Hotels are well aware of this, which is why some have taken to charging incremental fees for additional amenities. The spa, the gym, the business center — hotel guests pay for these amenities, even if they don’t use them.

The most common fee of all is the “resort fee,” known equally for its ubiquity and ambiguity. Fees like these are a sore spot for some travelers, and consumer groups have been known to periodically take a swing at these fees in hopes they will go away for good. Three years ago they came close, and a new spate of lawsuits is rekindling the debate over whether or not these fees need to be added directly to room rates.

In 2015, the Federal Trade Commission found that resort fees are not required to be included on advertised hotel rates. This decision placed hotels apart from airlines and travel agents, who are both required to include all incremental fees in their final advertised prices. But a number of consumer groups continue to reject the FTC's view.

One year later, in 2016, plaintiff Thomas Luca Jr. sued hotel giant Wyndham Worldwide Corporation and its subsidiaries for failing to clearly notify consumers of resort fees before including them on a final bill. According to Dan Prywes, partner at law firm Morris, Manning & Martin, this pending lawsuit still has yet to be certified as a class-action suit, and discovery on the suit is now underway.

In Wyndham’s answer to the plaintiff’s class-action complaint, Wyndham states that its terms of use agreements and websites “speak for themselves, and therefore no further response is required. Wyndham denies that plaintiff can maintain this action as a class action and denies that any class can be certified.” In the legal documentation, Wyndham denied a number of allegations put forth by the plaintiff, and maintains that its rates and fees are clearly disclosed.

Meanwhile, an investigation by 46 state attorney generals and the D.C. attorney general is poring over Marriott International’s practices regarding resort fees. The D.C. attorney general’s office is leading the charge, which began in June of 2016, and has accused Marriott of failing to comply with a subpoena to produce documentation regarding its resort fee practices in June of this year, and many aspects of the case remain sealed by the D.C. Superior Court.

At the time of the D.C. attorney general’s accusations, Marriott released a statement that said: “In accordance with the FTC’s guidance, we fully disclose resort fees to customers as they are shopping for hotels and before they complete their booking. We have been cooperating with the District of Columbia’s request of information… any reference to the contrary is factually inaccurate.”

Consumers dislike hidden fees and surcharges for a number of reasons, but most of all they complicate comparison shopping.

The Dispute

The resolution of these cases remains to be seen, but the repetitive resurrection of this discussion says two things: One, consumers remain unsatisfied by the hotel industry’s current treatment of resort fees; and two, the future of resort fees (and any incremental fee, for that matter) could be in limbo. Prywes said he expects courts to find the claims filed against Marriott and Wyndham alleging that disclosure is required in the initially-advertised rate as a form of overreach, though he cautions hotels against becoming overconfident.

“To me, this is paternalistic overreach,” Prywes said. “If resort fees ever grew to be unsustainable for consumers, one of two things could happen: Either the industry would react by restructuring its pricing or a competitor would rise up to offer a better deal, disclosing all fees up front in the listed room rate.”

To date, Bjorn Hanson, clinical professor with the New York University Jonathan M. Tisch Center for Hospitality and Tourism, said only two hotel brands come to mind that include all fees in the up-front room rate: Virgin Hotels and Loews Hotels.

“I’ve heard people say for 20 years that if fees and surcharges grow too great a competitor will come and fill the gap, but it has never happened,” Hanson said. “They always say it is likely to happen, but it hasn’t happened—so therefore it is not likely to happen.”

Hanson said the biggest issue he sees with incremental fees is their affect on comparison shopping over the internet, which grows complicated depending on the amenities offered at one property versus another. However, if fees and surcharges were ever added directly onto a hotel’s room rate, the guest would end up paying a higher occupancy tax and a higher rate overall, and in an environment where a $1 difference in rate shifts guests preferences, this is a big deal.

“A $2 difference in room rate, over everything else I studied, shifted market share the most,” Hanson said. “It didn’t matter if it was a luxury or economy hotel, it still shifted.”

Jumping Through Hoops

Adding fees and surcharges to quoted rates presents a number of other challenges to hotel operators as well. For instance, which fees are to be added to the room rate, and which are to be charged on property as part of operating? What about parking fees? What about instances where rates change rapidly, sometimes up to 20 times per day in some properties? Hanson said over a 10-year period he encountered a few instances of customers with legitimate complaints, where fees and surcharges were not clearly disclosed, but said it was often through an online travel agency and in those cases the fee was waived.

“Years ago, when Wyndham began charging the ‘amenities tariff,’ I began looking into this and I couldn’t find a situation where rates weren’t up front about additional fees,” Hanson said.

Hanson also said consumers spent much of their outrage over resort fees when they were first implemented in the industry, but today he sees much of the consternation over these fees coming from the state level. On top of this, Hanson makes the case that the industry’s inability to raise rates due to the pace of supply growth is still good for consumers, and when combined with resort fees rates are still lower than they would have been under normal periods of inflation.

“Rates are barely keeping pace with inflation, and if you conflate room rates with growth in amenity, fees you may see some similarities,” Hanson said.