U.S. hotel fees, surcharges expected to reach record levels in 2017

Fairfield Inn & Suites by Marriott New York Manhattan/Times Square lobby

Following the 2016 record of $2.6 billion, total fees and surcharges collected by U.S. hotels are forecast to increase to another record level of $2.7 billion in 2017. Data from the Jonathon M. Tisch Center for Hospitality and Tourism at the NYU School of Professional Studies found that fees and surcharges were higher than forecasted for 2016. Although occupied guestroom nights were lower than anticipated, fees and surcharges were higher, with the largest increase in cancellation fees, according to the department's trend analysis report. 

The increase for 2017 reflects a combination of approximately 2 percent more occupied hotel guestrooms than in 2016, slightly more categories of fees and surcharges charged. About the same amounts were charged although fees and surcharges for high speed Internet access were lower. Meanwhile, more fees were collected for cancellations, leading to a total increase of approximately 5 percent. 

The 17-year surge of hotel fees and surcharges

Fees and surcharges emerged as an industry practice around 1997 and accelerated when energy surcharges were introduced for a large number of hotels in 2000. There have been numerous categories of fees and surcharges introduced in the past 17 years.

Virtual Event

Hotel Optimization Part 3 | January 27, 2021

With 2020 behind us and widespread vaccine distribution on the horizon, the second half of the new year is looking up, but for Q1 (and most likely well into Q2) we’re very much still in the thick of what has undeniably been the lowest point of the pandemic. What can you be doing now to power through and set yourself up for a prosperous 2021 and beyond? Join us at Part 3 of Hotel Optimization – A Virtual Event on January 27 from 10am – 1:05pm ET for expert panels focused on getting you back to profitability.

Examples of fees and surcharges include, resort or amenity fees, early departure fees, reservation cancellation fees related to timing of cancellation, early check in fees, Internet access fees, telephone call surcharges, business center fees (including charges for receiving faxes and sending/receiving overnight packages), room service delivery surcharges, mini-bar restocking fees, charges for in-room safes, automatic gratuities and surcharges for other than all-inclusive resorts, baggage holding fees for guests leaving luggage with bell staff after checking out but before departure, charges for a non-binding guarantee for a specific guestroom type, and charges for unattended parking. For groups there have been new or increased charges for bartenders and other staff at events, special charges for set-up and breakdown of meeting rooms and administrative fees for master folio billing. 

An increasingly common and relatively new fee or surcharge is for early check-in, primarily for resorts, more common in Las Vegas. Other more recently introduced fees and surcharges include charging for unattended surface parking in suburban locations and holding checked luggage. The industry also has become stricter about cancellation of reservations with fees for cancelling within two days of arrival as most common, but three days for an increasing number of hotels. 

Issues with “hidden fees”

U.S. lodging industry fees and surcharges have increased every year except for brief periods following 2001 and 2008 when lodging demand declined. Fees and surcharges are highly profitable, many of which have incremental profitability of 80 to 90 percent or more of the amounts collected. Some fees and surcharges are sometimes called “hidden” or “surprise,” but disclosure on websites, confirmation emails, “tent” cards in guestrooms, room service menus and guest service directories continues to increase in the nature of the disclosure. In interviews for this update, the issue is more about unpopularity of fees and surcharges rather than fees and surcharges being “hidden." One of the reasons for the sense that some of these fees and surcharges are “hidden” or “surprise” is because the categories are often established and the amounts are set hotel-by-hotel rather than by brand, and both can change frequently.

The U.S. government weighs in 

An increasing number of state attorneys general are evaluating or investigating the industry practice of fees and surcharges in response to consumer complaints and visible reporting. Other initiatives have included:

  • In 2012, the Federal Trade Commission Division of Advertising Practices issued 22 warning letters to the hotel industry about disclosure of resort fees. Despite recent statements by industry executives to the contrary, the FTC currently is focused on resort fees.
  • Senator Claire McCaskill announced in February 2016 that she is introducing legislation targeting what she refers to as “deceptive hotel fees” that are “bait and switch” practices that resort guests are “slapped with,” based on hearing from “hundreds of Missourians.”

Finding a solution

There are occasional statements that it would be better to include resort and other fees and surcharges in room rates, but there are several reasons this is not the general practice. These include that the higher room rate would subject the fee amount to municipal occupancy taxes, frequently changing room rates are closely monitored by many travelers, but resort and other fees and surcharges change less frequently, and the focus of many travelers on room rate. Other occasional comments relate to whether or not it is the role of government to mandate how businesses, such as hotels and resorts, price their goods and services if fees and surcharges are disclosed.

The estimated amounts of fees and surcharges collected are summarized below:

Year     Amount (in billions)

2017      $2.7 billion (forecast)
2016       2.6 
2015       2.45 
2014       2.35 
2013       2.1
2012       2.0
2011       1.85
2010       1.7
2009       1.55
2008       1.75
2007       1.75
2006       1.6
2005       1.4
2004       1.2
2003       1.0
2002       0.55
2001       1.0
2000       1.2

These amounts are estimated based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases and information available on hotel and brand websites.