The Bottom Line on Resort Fees
Just because you didn’t see yet another headline about resort fees in the trade press within the past 24 hours does not mean this contentious subject has been resolved. Hardly. In fact, hoteliers say despite all the consternation, resort fees are here to stay. As a corporate travel manager or finance chief, you have to address this issue. But how?
If you’re feeling fleeced, you’re not alone. By now everyone in the travel industry knows Washington, DC’s attorney general has sued Marriott over these “deceptive practices,” and Nebraska’s AG Doug Peterson has followed suit with a suit against Hilton. Peterson noted, “They failed to heed warnings from the Federal Trade Commission [to stop the practice known as drip pricing] and the mounting complaints from their own customers.” Peterson wants Hilton to fully disclose pricing up front for all rooms plus pay fines and restitution.
Interestingly, although resort fees have been trending upward worldwide, they are against the law in certain places such as Europe and Australia.
What are resort fees?
Resort fees aren’t exactly new. Back in 2014, The Points Guy suggested that “hotel resort fees are one of the gravest offenses to savvy travelers.” What’s different now is that lodging properties across the board are instituting new fees under all sorts of guises. Since these hotels are not resorts (or even located in a resort-ish setting), they use fuzzy terms such destination fees, urban fees, amenity fees, and facility fees. This assortment of nomenclature makes it difficult to detect the fees or compare pricing among hotels.
Everyone knows they will have to pay local sales and lodging taxes on top of the room rate, but unwary shoppers don’t realize there will be that third, possibly hefty, resort fee as well.
What makes it even harder to detect the fees is that many properties hide them in the fine print or don’t disclose them at all until it’s time to pay. Surprise! No wonder the furor has grown so loud. It’s bad enough that the fees can vary dramatically from one hotel to another, in terms of what you’ll pay as well as what you are supposedly paying for. While you care about the amenities your business travelers get while on the road, let’s zero in on the monetary side of the equation to understand the direct impact on your bottom line.
Inability to predict costs in advance is surely irritating to consumers. But for your business, this is a financial disaster. There is no way to budget adequately, control spending, or forecast future travel expense without complete, accurate data. For a consumer, inadvertent over-spending on a hotel stay is a one-time annoyance. For businesses that rely on travel to conduct business, the problem repeats itself over and over and over.
The more your people travel, the worse it gets. If T&E represents the second or third largest line in your budget, your entire growth strategy could be in peril.
Why do resort fees exist?
Resort fees feel like nothing more than bait-and-switch pricing. But hotels see the fees as a smart business move. Since competition for guests is based primarily on room rate, the fees enable hotels to advertise a low rate while actually earning more per night for the room. How much more? The suit against Marriott cites fees ranging from $9 to $95 – per night, not per stay.
Separating room costs this way benefits hotels in two ways:
- They retain competitive advantage because they can advertise a temptingly low room rate.
- They pay less in sales and lodging taxes, because those rates only apply to the advertised room rate. For example, if the room costs $200 and the resort fee is $50, the hotel is taxed on $200. If the fee were simply included in the room at $250, the hotel would pay 20% more in taxes.
Some hotels claim they have to charge these fees to cover costs of offering the amenities as well as rising costs for labor, insurance, real estate taxes and interest rates. But researchers dispute that, saying their findings show most of the money goes directly to the property’s bottom line. So while the hotel saves money and increases profitability, municipalities and tourism organizations that depend on these taxes say they are being cheated out of badly needed revenue. This isn't penny pinching. We’re talking millions of dollars here.
And that’s why the hotel industry says you can expect to keep seeing resort fees. In fact, the lawsuits filed against Marriott and Hilton don’t even aim to eliminate the fees, just require properties to disclose them clearly, up front.
What can you do about resort fees?
As a business person, you can easily understand the hotels’ desire to find new revenue streams, save money and increase profits. And, yes, avoid paying taxes, too, if possible. But your business comes first. If certain hotels don’t have your best interests at heart, you must take steps to protect your bottom line.
For your corporate travel program, “advertised” room rates really don’t matter. You need to know the actual cost your company will be paying. If you’re a large organization or your business trips are heavily concentrated in one or a few locations, you have negotiating power with suppliers. As an expert on corporate travel, Tim Knowling, VP of Partnerships at Lola.com emphasizes the importance of negotiation.
"If your company does enough business with a particular hotel property then it makes sense to work with the sales team at that hotel to get a corporate rate. As part of those discussions, make sure that any resort fees are waived for that negotiated rate.” (Ask for free breakfast, too, he suggests, but not until you secure that no-fee room rate.)
But what if your company is too small or your travel too scattered or infrequent to give you “volume valuable” negotiating juice? You can follow the same advice experts are now giving consumers:
- Look for properties that still don’t charge resort fees (ResortFeeChecker can help)
- Look for hotels that disclose extra fees up front, so you can figure out the total cost ahead of time
Regardless of your company’s size, Knowling also recommends that you complain up-line about resort fees. “Let the hotel properties and chains know you do not like these fees,” he advises, “and that you will move your bookings to properties that do not charge them.” He explains that many hotels are independently owned and have franchise/marketing agreements with the major chains.
Naturally, “the hotel owners want to maximize the revenue generated by the property. If they see business decline because of these fees, they will be vocal about it with their hotel brand.” With that, they can become your strongest ally.
What will happen next? Stay tuned. The only advice we can offer for now is caveat emptor!