Hotel Resort Fees Make Comparison Shopping Harder, FTC Says

A Federal Trade Commission report says the way some hotels disclose their resort fees may be harmful to consumers.

The report was issued this month by the FTC’s Bureau of Economics. The author, FTC economist Mary W. Sullivan, says that by pricing these services separately from the base price of the overnight stay, hotels make it harder for consumers to reach an informed decision about their purchase.

That increased difficulty can lead consumers to make a more costly purchase than they would have made otherwise, Sullivan says.

She concludes separate pricing for hotel resort fees is “unlikely to result in benefits that offset the likely harm to consumers.”

These hotel resort fees are charged pre-room and per-night. They’re purported to cover the costs of certain ancillary services provided with an overnight stay – services like parking, internet access, or use of an exercise facility.

These services are bundled with the room, and the associated hotel resort fees that cover them are mandatory. Yet hotels sometimes present these fees separate from their base rates during the booking and reservation process. Sullivan notes that these services could be provided without pricing them separately.

Hotel revenues from these fees is on the upswing. By one estimate, the amount of hotel resort fees that consumers paid in 2015 increased by 35 percent over the year before, reaching approximately $2 billion.

Consumer advocates say that by breaking out these hotel resort fees and spreading their disclosure throughout the reservation process, hotels may be giving consumers the impression that they’re getting a better bargain than what they end up paying for.

The report describes two particular pricing strategies known as drip pricing and partitioned pricing. Both strategies have to do with how hotel resort fees are disclosed during the booking process.

With drip pricing, only the base rate for a room is disclosed up front. The consumer isn’t presented with the associated hotel resort fees until later in the booking process.

Partitioned pricing discloses all hotel resort fees up front, at the same time as the base rate. But partitioned pricing does not state the total price of base rate plus fees, leaving that bit of math to the consumer to work out.

Sullivan points out that with pricing strategies like these, consumers can’t simply compare one website to another to find the best buy.

According to the FTC report, the hotel industry defends these fees by saying they’re able to offer services at a discount over what customers would have to pay for them separately. Hotels also say that when resort fees are separate from base rates, consumers end up paying less commission to online travel agents.

But Sullivan says consumers and advocacy groups continue to raise complaints about hotel resort fees.

Consumer groups like Travelers United say that by charging hotel resort fees instead of bundling the cost of services into the room rate, hotels make it harder for consumers to comparison shop. Other reports say the use of hotel resort fees may misled consumers as to the actual cost of their stay.