Consumer Advocates Declare War on Hidden Hotel Fees

"Stop hotels from hiding part of their true prices from consumers and business travelers." That's the message Kevin Mitchell (of the Business Travel Coalition) and I sent to the Federal Trade Commission (FTC) late last month. Our targets, of course, are the mandatory "fees" that hotels add to the room rates they post. Supposedly, these are independent fees rather than integral parts of the hotel's true prices. The most common are "resort," "housekeeping," and "Internet access" fees, but business travel columnist Joe Sharkey recently identified mandatory fees for grounds-keeping and a "bell captain" fee.

Our objection to these fees is simple: If they're mandatory, they should be included in the hotel's base room rate. As it works now, these fees are yet another case of "split pricing," or as the FTC calls it, "drip pricing." You know how it works: A hotel that wants to collect, say, $200 a night for a room, instead posts a phony rate of $170 a night, then adds one or more mandatory fees to make up the $30 difference. The problem, of course, is that it's the phony $170 price the hotel posts online and submits to the online pricing sites; you don't find out about the true $200 price until later—maybe not until you've made a nonrefundable purchase. Hiding the fees from their initial price displays, even when shown before final purchase and sometimes not even then, is clearly deceptive. A related deception is failure to include a value added tax (VAT) in displayed prices for European hotels.

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As we note in our submission to the FTC, mandatory artificial "fees" and hidden VAT make a hotel's posted rate appear to be below its true price often enough to drive consumer choices in the travel marketplace. This widespread drip pricing damages almost all important stakeholders in the marketplace for hotel/resort accommodations:

  • Consumers and corporate travel managers find it difficult to determine the true cost of a stay in advance and to make accurate price comparisons among competitive hotel/resort options.
  • Online travel agencies are unable to provide accurate side-by-side price comparisons, and they are, therefore, often unable to present true final prices, even at the time of consumer purchase commitment. Instead, they are reduced to issuing vague "you may be subject to additional fees and charges" disclaimers.
  • State and local taxing authorities are deprived of revenue because they collect taxes on only the carved-out partial price rather than the true full price.
  • Online travel agencies and other travel agencies are deprived of a portion of earned commissions for the same reason.
  • Hotels that display rates in an honest manner suffer in side-by-side price displays when competitors display artificially low rates. As a result, some honest suppliers feel pressure and reluctantly adopt the drip-pricing model in order to appear competitive.

We note several precedents for government action against drip pricing: The U.S. Department of Transportation prohibits airlines from carving out part of the true fare into phony "fuel surcharges" and such; the Florida attorney general forced cruise lines to abandon carving phony "port charges" out of their featured rates, and the Federal Trade Commission took action against a tour operator that was carving out a phony "tax and service" charge.

We want to reemphasize that we aren't asking any government agency to dictate which services hotels should or should not offer or the prices they should charge for any individual service. Instead, our principle is simple: If consumers have to pay it, hotels should include it in their posted prices.

The FTC does not investigate individual claims. But if you've been hit with unexpected fees or been misled in an online price comparison, you can add your voice by submitting a complaint online at ftccomplaintassistant.gov and specifically mentioning "drip pricing." Or, if you disagree, feel free to tell that to the FTC, too.

DISCLAIMER: I took this action as an individual and independent consumer advocate, not as a representative of Smarter Travel Media LLC or Tribune Media Services.

Ed Perkins Seniors on the Go is copyright (c) 2012 Tribune Media Services, Inc.

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