Hotels Warned on Hidden Fee Scams

“We believe that online hotel reservation sites should include in the quoted total price any unavoidable and mandatory fees, such as resort fees, that consumers will be charged to stay at the hotel. While a hotel reservation site may breakdown the components of the reservation estimate (e.g., room rate, estimated taxes, and any mandatory, unavoidable fees), the most prominent figure for consumers should be the total inclusive estimate.” The Federal Trade Commission (FTC) sent this in a “Warning Letter” to 22 hotel operators on November 28. FTC did not identify the hotels in question, but it could find lots of candidates.

This is a great step forward for travelers—provided the hotels comply. Earlier this year, two prominent advocates in travel—Charlie Leocha of the Consumer Travel Alliance and Kevin Mitchell of the Business Travel Coalition—joined me in requesting that the FTC take such action, and whether we had any substantial influence on that action is irrelevant: It’s the action that matters.

FTC addressed the issue of hidden hotel fees as part of a broader examination of what it calls “drip pricing” and I normally call “split pricing.” However you label it, the way it works is simple: A supplier cuts out an arbitrary portion of the real price, gives it a plausible label, features the reduced price in postings, and treats the part taken out as a mandatory “fee.” Airlines tried it with “fuel surcharges,” but the Department of Transportation called a quick halt; cruise lines tried it with “port charges,” but the Florida attorney general took action to prohibit it. So far, however, the hotels have been successful in doing it with “resort” fees, as well as others such as “concierge” or “housekeeping” fees. Fortunately, the FTC has now moved in on those hotels.

Let’s be clear about one basic fact: Drip or split pricing is a scam. The Florida attorney general said as much, calling it “inherently deceptive.” Once a fee is mandatory, it becomes an integral part of the total price, and the fact that the perpetrators give the artificial carve-out a plausible name doesn’t alter that fact.

The FTC move is a welcome start. As of right now, however, compliance is minimal. A check of several hotel websites on November 29 showed that although they charged a resort fee, they were not including it in the featured prices. They did show the fees fairly prominently on subsequent booking pages, but the hotels were clearly not in compliance with the requirement. Maybe it’s too early to expect compliance—some hotel chains may even be challenging the ruling—but so far, no go.

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The FTC letter did not specifically address what is becoming an increasingly contentious issue: The extent to which hotels are required to include resort fees in prices they post to the GDS computer systems that most online travel agencies (OTAs) use as the basis of the rates they display. Again as of November 29, typical initial displays of rates—the ones you use as the basis for price shopping—did not include mandatory fees. As with the individual hotel displays, the postings on Expedia, for example, showed extra fees on the booking screens, but not in the base-list prices. A few entries were posting “no resort fees” on their first displays, but this is clearly a voluntary move to highlight differences with competitors.

For now, the situation is this: The FTC started the ball rolling by issuing a warning, but so far it’s only a warning. The letter “encourages” compliance at this time but does not enforce it—yet. The letter concludes, however, that the FTC may take action and seek redress for any violations. And the FTC encouraged that consumers encountering the fee scam post a complaint at FTCComplaintAssistant.gov, or call 877-382-4357. We can certainly hope that this represents the beginning of the end to a nasty scam.

Ed Perkins writes for SmarterTravel as an independent advocate. His opinions are his own and do not necessarily represent those of Smarter Travel Media LLC.

Ed Perkins on Travel is copyright (c) 2012 Tribune Media Services, Inc.

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