Visits: 3
Resort fees. The term conjures up a poolside lounge chair, thick towels piled high nearby.
But starting about two years ago, urban luxury and full-service hotels across the United States have increasingly adopted the fees. They may be called amenities or facilities fees and cover less glamorous goods or services like internet access and bottled water. Depending on the hotel, they may be hard to find when a traveler is booking a room online.
But they are profitable for the hotels. Bjorn Hanson, an adjunct professor at the New York University School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism, who has researched the fees, said that most of the fee cost goes directly to hotels’ bottom lines.
Mr. Hanson projected that total fees and surcharges collected by hotels in the United States will reach a high of $2.93 billion this year, with another record projected in 2019. “The increase for 2018 reflects a combination of approximately 2.5 percent more occupied hotel rooms than in 2017, and 6 percent more fee and surcharge categories and higher amounts,” he said.
Robert Mandelbaum, director of research information services for CBRE Hotels’ Americas Research, said: “Resort fees are a very profitable way for hotels to raise revenue and not advertise they’re raising room rates. By a strict definition, they’re not raising room rates but adding a mandatory fee.”
The Pierre Hotel in New York City, for instance, imposes a daily surcharge of $30 plus tax for services like high-speed internet access, unlimited local and domestic long-distance calls, bottled water and continental breakfast in the lobby. The $25 daily fee, which does not include tax, charged by the Sofitel Washington DC Lafayette Square includes amenities like premium internet access, access to a bike sharing program, bottled water and yoga classes.
According to the website ResortFeeChecker.com, as of July, 131 hotels in New York charged such a mandatory fee, 25 in Washington, 78 in Los Angeles and 47 in San Francisco.
Last year, Mr. Hanson said, 42 percent of resort hotels charged resort fees, a figure he predicted would remain flat this year. But he estimated that the percentage of urban hotels charging such fees would climb to 8 percent this year from 2 percent last year. He further estimated that the total amount of resort fees collected by urban hotels should climb by $110 million this year. And he said he expected the fees to spread to some second-tier cities and suburban markets next year.
Mr. Hanson said urban hotels’ fees are determined and imposed by their local general managers and typically range from $20 to $40 per night, plus local sales tax.
Matt Arrants, executive vice president of Pinnacle Advisory Group, a hospitality consulting company, said urban hotels’ fees are proliferating because “hotels can charge them and get them,” adding, “People are willing to pay them and hotels consider them a value-add.”
One reason guests are willing to pay them, he suggested, is that they have become accustomed to airlines imposing surcharges on everything from baggage checking to in-flight food. “The hotel industry is looking at the airline model and trying to increase revenue opportunities,” he said.
“Although the U.S. hotel industry will have the highest occupancy rate in 2018 it has had since 1981, the room rate increase will be only 2.5 to 3 percent,” Mr. Hanson said. “At the same time, there’s a large increase in labor costs and real estate taxes and rising interest rates. Although occupancies can’t go up much more, room rates in many cases are not covering the increased expenses. Hotels thus have an unusual incentive to find additional forms of revenue and profit.” The fees are one way. He estimated that 80 to 90 percent of the fees generate profit for hotel owners.
Not surprisingly, travelers’ reactions to resort fees charged by both urban hotels and resorts have been negative. Henry Harteveldt, president of Atmosphere Research, a travel research firm, said in a report this year: “Hotel guests flat-out hate resort fees. In our Q1 2018 survey of 3,656 U.S. hotel guests, 91 percent expressed dislike about resort fees. The remaining 9 percent were neutral. No one liked them. Travelers see resort fees for what they are: indirect rate hikes.”
Another problem for travelers can be the transparency of urban hotels’ fees, since hotels can be inconsistent in revealing fee details on their websites or on websites of online travel agencies. Fee information on smaller hotel booking websites, particularly those operated outside the United States, can be even more spotty.
François-Olivier Luiggi, general manager of the Pierre, which is managed by Taj Hotels, said his hotel imposed its fee in January, when it upgraded its internet access.
“The customer is getting used to fees everywhere,” he said. “We feel the fee is less than the combined value of our amenities.”
“As a business,” he added, “you try to increase your rate every day to match inflation at least, and to find new ways to grow revenue by offering a variety of services and products.” He said that guest feedback to the fee has been “excellent,” since “we fully disclose it.”
A Hilton spokesman, Nigel Glennie, said three of its hotels, all in New York, were testing these fees, which he said were “clearly disclosed during the booking process” and offered guests “a bundle of amenities and services,” including premium Wi-Fi, free local calls and a food and beverage voucher. A spokeswoman for IHG, Ada Hatzios, said “less than 3 percent of IHG-branded hotels in the Americas currently have a resort fee, and those that do disclose this to guests during the booking process.” A Marriott spokeswoman, Kathleen Duffy, said 14 of its 76 hotels in New York have been testing fees since the summer of 2017. She also said amenities covered by the fees can vary by season. Hyatt, Mandarin Oriental and AccorHotels declined to comment.
Formal actions have been taken against the hotel industry because of the fees. In 2012, the Federal Trade Commission issued a warning letter to hotels that charged resort fees without including them in their advertised daily room rate. In 2016, Thomas Luca Jr., a Pennsylvania traveler who booked a room online at a Wyndham hotel in Miami, sued the company in Federal District Court in Pennsylvania, alleging misrepresentation of its room rates on its website. Last week, he asked that the case be certified as a class action. A Wyndham spokeswoman, Nadeen N. Ayala, said she could not comment on the suit “as it is the subject of pending litigation.”
In 2017 the attorney general for the District of Columbia sued to enforce an investigative subpoena it served on Marriott International in connection with a national investigation involving its office and those of attorneys general in 46 states concerning “deceptive price advertising techniques used by the Marriott.” All legal cases are pending.
“With record high occupancy levels, especially in major urban markets, the consumer does not have a lot of leverage” over hotels in contesting fees, Mr. Mandelbaum said.
A possible exception, Mr. Hanson said, could be business travelers whose trips are overseen by corporate travel managers, who he said have been contesting fees in negotiations with hotel companies, as have convention planners.
“It’s buyer, beware,” said Jan Freitag, senior vice president for lodging insights of STR, a hotel research company. “There are still a lot of urban hotels that do not assess the fees. It behooves travelers to do their research before their stay.”
Robert Cole, a Dallas-based hotel consultant, warned travelers who book online to carefully study how and where fees are listed on hotel and online travel agency websites. If fees are not revealed at the beginning of the shopping process, a hotel may be inaccurately perceived as cheaper than others.
Longer term, Mr. Harteveldt warned, hotels’ fee policies could make them vulnerable. “Home-sharing businesses, such as Airbnb, could also leverage their lack of resort fees,” he said, “enabling them to steal more market share away from hotels.”