REPORT FROM THE U.S.—Whether to bundle resort fees into room rates or separate them is a source of debate in the hotel industry, but experts agree that transparency and full disclosure are musts.
This topic gains even more exposure as consumer awareness of fees grows and the industry is poised to collect record amounts of fees and surcharges this year.
That debate on resort fees received a new push in July when the Federal Trade Commission responded to a nonprofit group that it isn’t considered deceptive practice if resort fees aren’t bundled into advertised room rates. However, those resort fees still need to be prominently disclosed (See Sidebar below: “Resort fees not deceptive if disclosed, says FTC”).
So the question for hoteliers then becomes: To bundle or not to bundle?
To bundle
Toni Repetti, an assistant professor at the University of Nevada, Las Vegas’ William F. Harrah College of Hotel Administration, recently wrote for Hotel News Now about two studies she and her fellow researchers conducted. The first looked at resort-fee practices and their effects on guests at Las Vegas hotels. The other focused on the amounts of resort fees and how they influenced hotel guests.
The first study showed that 41% of the respondents wanted a price that bundled the nightly rate plus the resort fees and included all of the amenities, she said. Only 25% wanted it separated. The remaining 34% said it didn’t matter to them because they would end up paying the same amount no matter what.
When the researchers included the actual dollar amounts in the second survey, the percentage of respondents in favor of bundling jumped from 41% to 67%. However, 88% of respondents said the fee itself wouldn’t make them switch to another hotel without one.
“When you separate it out, they think they’re paying for something they’re not using,” Repetti said. “If they’re not using the fitness center or the water in the room, they feel they’re not getting a value. They feel like they’re losing out on something.”
When hoteliers bundle the fee with the rate, guests have the perception that they’re paying for their stay and all of these amenities are included. The cost to the consumer is the same, only the perception changes, she said.
Not to bundle
While bundling has its advantages, Bjorn Hanson, a clinical professor at New York University’s Preston Robert Tisch Center for Hospitality and Tourism who has researched resort fees since 1997, said he’s not sure that adding resort fees to room rates would be the best practice.
“When we look at how guests make a decision, often room rate drives the decision,” he said.
People are “hypersensitive” to room rates, he said. At any price level, from luxury to economy, $2 can shift market share, he said. If resort fees are disclosed separately, that allows guests to factor them in to their decision-making process. If one hotel has a $40 fee with certain amenities, but another has a $30 fee for a similar set of amenities, guests can choose which one is better for them.
Room rates change frequently while separate resort fees don’t, he said. Would bundling mean the resort fee fluctuates? On the other hand, it might be more difficult to change the room rate as necessary if fees are bundled.
Though she recommended bundling as the best route, Repetti advised operators who choose not to should communicate the value and benefits made available by the separate resort fee, whether it’s for the Wi-Fi or access to the fitness area.
“You have to convince the customer it will be of value to them,” she said. “That’s where the struggle is going to come in.”
One possible approach would be to explain the difference in the tax rates between room rates and resort fees, she said. In some states, the government taxes rooms at a higher rate than it does resort fees, so if an operator bundles the resort fee into the room rate, then the amount for the bundled resort fee would be taxed at the higher rate.
Handling disclosure
The industry is close to best practices for informing guests about resort fees, Hanson said, and that can depend on the reservation channel. In his research, Hanson said, when calling to make a reservation, 100% when there is a resort or amenities fee, the hotel disclosed the existence of the fee and what it provided.
“That’s hard for guests to complain they’re not informed,” he said.
Online isn’t as cut and dried. Even if the resort fee is disclosed, guests might not see them or think to look for them, Hanson said.
“It can be prominent, but they can miss it or not really pay attention at the time,” he said. “Then it’s considered hidden.”
If a third-party website handles the reservation and doesn’t disclose the fee, he said, the hotel gets blamed even though it could be doing a good job through its own channels. With so many reservations going through third parties, Hanson said he wonders how hoteliers can control that.
Adding to guests’ confusion is that resort fees don’t exist at every hotel, he said. When they do, there’s no standard fee, so they can vary from hotel to hotel, even within the same brand. Other times, a hotelier might implement a resort fee after a guest has booked a future reservation, and the technology in place generally does not keep track of that. The best practice in that scenario would be to honor the original price, he said.
Resort fees not deceptive if disclosed, says FTC
By Bryan Wroten
The Federal Trade Commission sent out warning letters in 2012 to 22 hotel operators that it determined quoted “total” prices that failed to included mandatory resort fees. It followed up with letters to others in the travel industry that failed to adequately disclose resort fees or failed to include the fees in the final calculation of the total price for the stay.
Those efforts resulted in “significant improvement” to travel website displays, the FTC wrote. Numerous companies now prominently disclose resort fees early in the booking process next to the advertised room rate. These websites also will add the resort fee to the total price shown for the stay, which would show guests the exact amount they will pay for their stay before completing the online reservation.
“It is deceptive for companies to bury the resort fee in fine print or to wait to inform consumers of the resort fee upon checking in or checking out of the hotel,” an FTC representative wrote, sent in an email to Hotel News Now.
Rosanna Maietta, senior VP of communications and public relations for the American Hotel & Lodging Association, said in an email that resort fees are fully disclosed at the time of booking and remain transparent, whether consumers book online or direct to property. The fees cover the costs of a range of amenities, she wrote, and they are grouped together at a better value for guests who would likely pay more if they were priced individually. Resort fees have steadily declined over the past decade, she said, and a recent survey shows 7% of hotels charged mandatory resort fees in 2014.