Hidden fees are costing U.S. consumers billions of dollars every year. And airlines and hotels are among the prime offenders. That’s according to the National Economic Council’s new report, “The Competition Initiative and Hidden Fees” (.pdf file here).
Why should you care? Three reasons, as cited by the Council:
First, there is a systematic transfer of wealth away from consumers to the firms that rely on the fees. Second, the economy itself, to the degree it relies on accurate prices to direct resources to their highest uses, becomes less efficient. And finally, the competitive process itself is dulled, as the true price-cutters have trouble beating out rivals when everyone is hiding their real prices.
The report calls out the airline and hotel industries, specifically, for the former’s current reliance on “ancillary fees,” including mandatory baggage and ticket-change fees, which totaled $22.5 billion in 2015, and for the latter’s resort fees, which totaled more than $2 billion in 2015.
No doubt these fees are annoying – consumers routinely refer to them as nuisance fees, or worse. But calling them “hidden” seems an inapt characterization. In most cases, they’re hidden in plain sight, in the fine print linked to the main selling proposition, the advertised price, with an asterisk. But the report’s main point remains valid: The real price, the all-in price, should be disclosed up-front.
While the report focuses on prices and how those prices are communicated, the implications go beyond pricing and advertising, raising questions about the product itself.
If disaggregating a product, like airline transportation, into separate modules, which are priced and sold as a base service and a raft of add-on services, results in a pricing scheme that can’t be clearly and honestly communicated to consumers, then maybe it’s time to reaggregate the product.
Reader Reality Check
Is it time to get back to a simpler, all-inclusive product?
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After 20 years working in the travel industry, and 15 years writing about it, Tim Winship knows a thing or two about travel. Follow him on Twitter @twinship.