The FTC cracked down on hotels charging mandatory fees for items like Internet access , newspapers and use of on-property fitness centers and pools .
how the case will affect the practice of charging resort fees .
Ceasing the practice may actually benefit hotels financially by protecting them against potential class-action lawsuits contesting the pricing . Indeed , the hotel industry experienced this a decade ago with the “ energy surcharge ” cases , where hotel companies experiencing a spike in energy costs added an energy surcharge to the bills . Eventually , Marriott International , Starwood Hotels & Resorts Worldwide , Hilton Worldwide and Hyatt Hotels Corp . had to settle a class-action suit against them in 2002 for the surcharge . Likewise , legal attacks were made for “ service charges ” added to banquet and restaurant bills by hotels where only a portion of the charge was passed through to employees as tips , and the rest was kept by the hotel .
“ The practice of mandatory resort fees has all the earmarks for this kind of classaction case ,” says Jim Butler , partner and chair of the Global Hospitality Group at the Jeffer Mangels Butler & Mitchell law firm . “ The sooner hotels put this practice in their rearview mirrors , the safer they will be from such suits . Some hotels may opt to make a much clearer disclosure of the mandatory charge , but this will likely not satisfy classaction plaintiffs ’ counsel .”
Disclosing , not discontinuing Since consumers often view eight to 10 websites before finally booking a hotel , according to the 2011 Cornell University study “ Search , OTAs , and Online Booking : An Expanded Analysis of the Billboard Effect ,” hotel companies may choose to keep the mandatory fee separate from the quoted room rate to keep their rates at a level competitive with their peers . The FTC is only requiring disclosure of the fees in the quoted price , not the actual room rate .
“ When we look at the performance of hotel websites in terms of booking performance , ADR can shift demand ,” says Bjorn Hanson , divisional dean and clinical professor at New York University ’ s Preston Robert Tisch Center for Hospitality , Tourism and Sports Management . “ Hotel companies will not risk having a US $ 200 rate when others have US $ 160 .”
Hanson also notes that adding the mandatory fees to the rate would increase occupancy taxes , and it would be difficult logistically for hotel companies to add it to the rate given how rates fluctuate .
While guests may complain about having to pay more , for hotel operators the extra revenue stream of amenity fees may be too enticing to resist , and Hanson says he expects the practice to increase internationally . “ More resort amenity fees are likely to be seen around the world ,” Hanson predicts . “ Ultimately it is a revenue-enhancing practice .”
Whether other governments will crack down on these fees like the FTC remains unclear , although similar actions have happened in the past . In 2010 the U . K . Office of Fair Trade forced airlines to stop adding a surcharge for debit-card transactions in latter stages of online purchases .
“ The Office of Fair Trade described the airline payment surcharges as ‘ drip pricing ,’” says Alexandra Kamerling , a partner at DLA Piper UK . “ Where there may be additional costs associated with a good or service , the trader should be careful to ensure that this is clearly noted to the customer prior to a purchase being made .”
GLOBAL UPDATE
KEY DATES
21
MAY
2012
28
NOVEMBER
2012
THE FTC HOLDS A CONFERENCE ON “ DRIP PRICING ” AND HEARS CONSUMER COMPLAINTS ON MANDATORY RESORT FEES .
THE FTC ANNOUNCES IT MAILED WARNING LETTERS TO 22 U . S . HOTEL OPERATORS ABOUT NOT DISCLOSING MANDATORY RESORT FEES .
HOTEL COMPANIES
WILL NOT RISK
HAVING A
US $ 200
RATE WHEN OTHERS HAVE
US $ 160 .
— BJORN HANSON
www . hotelsmag . com March 2013 HOTELS 9