Posted by Ric Garrido

Making the travel industry news this week is a warning letter from the Federal Trade Commission (FTC) to 22 hotel operators

that their online reservation sites may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms.

http://www.ftc.gov/opa/2012/11/hotelresort.shtm

Resort fees are an additional service charge covering a variety of property specific amenities and benefits for items like pool access, pool towels, wired in-room internet and property wifi, parking, bottled water, newspaper, fitness room access and more. 

I read that none of the hotel warnings went out to a Starwood Hotel.

An example of a resort fee that is “kind of” prominently displayed?

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St. Regis Bahia Beach Resort, Puerto Rico $789 per night posted room rate.

Click on the Select Your Rate button and you see the nightly resort fee.

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St. Regis Bahia Beach Resort $60 Nightly Resort fee applies to both nights paid with cash or Award Stays using points.

 

InterContinental Alliance Resorts Hidden Resort Fee

The Venetian and The Palazzo Las Vegas are InterContinental Alliance Resorts, and loyalty program partners with IHG Priority Club Rewards.

Here are the webpages in the reservation process prior to seeing resort fee.

WebPage 1, Priority Club Rewards Reservations: Search for Las Vegas shows $149 rates for The Venetian and The Palazzo Hotels.

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The Palazzo $149, The Venetian $149 for Jan 2, 2013.

WebPage 2, Priority Club Rewards Reservations: Select The Palazzo and rate shows as $149 per night.

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King Bed Luxury Suite $149. These are comfortable sizable rooms and at 720 sq. ft. larger than the average luxury hotel suite (550-600 sq. ft.). I have stayed in this style suite at The Palazzo.

WebPage 3, Priority Club Rewards Reservations:

Select Luxury Suite $149 rate.

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WebPage 4, Priority Club Rewards Reservations:

Select Luxury Suite $149 rate again and the reservation page asks for credit card billing information.

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There is no mention of a mandatory daily resort fee on the final reservations page for The Palazzo prior to submitting your credit card for the reservation confirmation.

This consumer might easily arrive at the hotel and first learn about the $20 mandatory resort fee at hotel check-in.

Go Back to WebPage 3, Priority Club Rewards Reservations:

$149 Best Flexible Rate is the link you missed.

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WebPage 3a, Priority Club Rewards Reservations:

Click on Best Flexible Rate and not the “Select Rate” button to find the seemingly hidden resort fee information.

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The Palazzo Resort fee and cancellation policy is hidden in the Best Flexible Rate text link.

RATE DESCRIPTION:

Best Flexible Rate

149.00 (USD) Per Room Per Night

TAX: 12% per night not included in rate effective 2 January, 2013 thru 3 January, 2013

12 PERCENT OCCUPANCY TAX PLUS

20.00 USD per night not included in rate effective 2 January, 2013 thru 3 January, 2013 Resort fee includes local and toll free calls, unlimited in-suite internet access, daily newspaper and access to Canyon Ranch fitness center for up to 2 guests per suite. This fee does not apply to Prestige Level suites.

DAILY RESORT FEE PLUS TAX.CALL HOTEL FOR ADDITIONAL INCLUSIONS AND INFORMATION.

3 PERSON(S) PER ROOM MAXIMUM

DESCRIPTION:
Take advantage of our best unrestricted publicly available rate; It allows you to change or cancel your reservation without worry if your plans change. Restrictions may apply based on individual hotel policies.
Thank you for making your reservation on our web site.

RULES:
CHECK-IN TIME: 1500
CHECK-OUT TIME: 1100 A deposit of 1 night is due at time of booking.

CANCELLATION POLICY:
Canceling your reservation before 6:00 PM (local hotel time) on Sunday, 30 December, 2012 will result in no charge. Canceling your reservation after 6:00 PM (local hotel time) on 30 December, 2012, or failing to arrive will result in forfeiture of your deposit. Taxes may apply. Failing to call or show before check-out time after the first night of a reservation will result in cancellation of the remainder of your reservation.

 

The FTC is weighing in on this issue of hidden resort fees in the online reservations systems of hotel operators.

FTC Warns Hotel Operators that Price Quotes that Exclude ‘Resort Fees’ and Other Mandatory Surcharges May Be Deceptive

The Federal Trade Commission has warned 22 hotel operatorsthat their online reservation sites may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms.

The warning letters cited consumer complaints that surfaced at a recent conference the FTC held on “drip pricing,”a pricing technique in which firms advertise only part of a product’s price and reveal other charges as the customer goes through the buying process. According to the FTC letters, “One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or internet access, sometimes referred to as ‘resort fees.’ These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions.” The warning letters also state that consumers often did not know they would be required to pay resort fees in addition to the quoted hotel rate.

“Consumers are entitled to know in advance the total cost of their hotel stays,” said Federal Trade Commission Chairman Jon Leibowitz. “So-called ‘drip pricing’ charges, sometimes portrayed as ‘convenience’ or ‘service’ fees, are anything but convenient, and businesses that hide them are doing a huge disservice to American consumers.”

The letters strongly encourage the companies to review their websites and ensure that their ads do not misrepresent the total price consumers can expect to pay.

http://www.ftc.gov/opa/2012/11/hotelresort.shtm

The text of the FTC warning letter to hotel operators is below. I highlighted the passage I think I illustrated with this post showing how The Palazzo reservations system appears to a consumer.

Division of Advertising Practices

November , 2012

[Company Name]

[Attn: President or CEO]

[Address]

 

WARNING LETTER

Dear _______________:

The Federal Trade Commission (“FTC”) has investigated whether certain hotel operators are violating Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C.§ 45(a), by misrepresenting the hotel room reservation price quoted to consumers.

On May 21, 2012, the FTC held a conference on “drip pricing,” defined broadly as a pricing technique in which firms advertise only part of a product’s price and reveal other charges later as the customer goes through the buying process. At the conference, FTC Chairman Jon Leibowitz asked consumers to share their drip pricing stories with the FTC. One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or internet access, sometimes referred to as “resort fees.” These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions.

Specifically, consumers complained that they did not know that they would be required to pay resort fees in addition to the quoted hotel room rate. Several stated that they only learned of the fees after they arrived at the hotel, long after making a reservation at what they believed to be the total room price. Others paid for the reservation in advance, and only found out after they arrived at the hotel that they would have to pay additional mandatory fees.

FTC staff has reviewed a number of online hotel reservation sites, and has confirmed that some hotels exclude resort fees from the quoted reservation price. Instead, the “total price” or “estimated price” quoted to consumers includes only the room rate and applicable taxes. At some of these sites, the applicable resort fee is listed nearby, but separate from, the quoted price. In others, the quoted price is accompanied by an asterisk that leads consumers to another location at the site – sometimes on the same page, sometimes not – where the applicable resort fee is disclosed, typically in fine print. A few sites fail to identify applicable resort fees anywhere, and instead inform consumers that other undefined fees may apply.

These practices may violate the law by misrepresenting the price consumers can expect to pay for their hotel rooms. 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.

We reviewed your website at __________ and found that in at least some instances mandatory resort fees are not included in the reservation rate quoted to consumers. We strongly encourage you to review your company’s website to ensure you are not misrepresenting the total price consumers can expect to pay when making a reservation to stay in your hotel. Please be advised that the FTC may take action to enforce and seek redress for any violations of the FTC Act as the public interest may require.

Thank you for your attention to this matter. Please direct any inquiries concerning this letter to Annette Soberats at asoberats@ftc.gov or at 202-326-2921.

Very truly yours,

Mary K. Engle

Associate Director for Advertising Practices

Federal Trade Commission Hotel Operators Letter

Ric Garrido, writer and owner of Loyalty Traveler, shares news and views on hotels, hotel loyalty programs and vacation destinations for frequent guests. You can follow Loyalty Traveler on Twitter and Facebook and RSS feed.

14 Responses

  1. About damn time! If airlines are required to include all mandatory fees in search results, hotels should be required to do the same. Resort fees are the fuel surcharge of the hotel industry…

  2. Why am I not surprised that casino hotels owned by extreme right-winger Sheldon Adelson would try to stick it to the little guy with hidden fees?

  3. Any idea if this is going to affect Priceline? I sure hope so. I might even start using them if they were to get rid of the ‘additional’ fees charged by hotels.

    Comment by Jeffrey C. on November 30th, 2012 at 3:43 pm
  4. I refuse to pay “mandatory” resort fees for amenities I don’t use. I usually ask to have the fees waived at checkout, and am 75% successful. If the fees and amenities aren’t optional, they should be built into the price of the room. I hope the FTC can help with this issue.

  5. So basically they should have sent letters to about 75% of the hotels in Vegas.

    Glad to hear the FTC is doing something about it

  6. @jon – curious where you have had success having the resort fee removed?

  7. Brent – Opryland in Nashville, Starwood properties such as the Phoenician. Sometimes it requires a discussion with a manager. It’s not always easy, but they often times back down with persistence. I only ask to have fees removed if I truly did not use what the fees covered, or if the amenities were sub par.

  8. Ugh, about damn time! I wish they would include it in the room rate or just unbundle it and charge for things we actually use. I had to pay the $60 resort fee per night at the W Vieques a few weeks backs. It said it included round trip transfers from the airport, but its not like I am going every day back and forth to the airport which I might add is less than 5 minutes away so why do I have to pay for it everyday?

  9. @PSL
    If you go on the Venetian site, which is the only one that Adelson has any control over, on the first page that shows room types and prices, the mandatory resort fee is disclosed directly under the price.

  10. I don’t care how prominently the “resort fee” is shown on the website. If it isn’t included in the shown price or quote, it shouldn’t be on the bill. You seem to think it is fine that Starwood shows the “base rate excludes” the $60 resort fee, but I don’t see it saying what the base rate is, it just shows the room rate per night. A room rate of 15K starpoints + $275 could be a base rate of 15K starpoints and $215 + $60 resort fee. Or a base rate of 15K starpoints and $150 + $60 resort fee + $15 phone fee + $10 towel fee + $40 bed fee which would come to what you are quoted as a “room rate”.

    Would you accept going to a restaurant and seeing a $4 steak dinner special and have on the back page a notice of a mandatory $10 fork fee, $10 knife fee and $5 for a napkin fee? Much less them advertising on their sign a $4 steak dinner special?

    Too bad the FTC’s letters only say they *may* violate the law.

  11. Europe is leading the way with forcing hotel reservations sites to display the total room rate up front.

    I find resort fees totally objectionable. The fact that a $60 resort fee at a place like St. Regis or W in Puerto Rico is mandatory on paid and award stays and does not earn loyalty points is outrageous.

    I do not think any mandatory fees imposed by the resort should be allowed on top of the published rate posted on the website.

  12. @jon – good to know. Thanks for sharing

  13. The mandatory resort fee is a sneaky way that chains like Starwood and Marriot use to cheat customers who stay with points. If the resort fee were bundled into the price, then it would be part of the redemption on points. By separating out the fee, the chains have found a clever way to keep getting at least some revenue. It’s egregious and I hope the FTC bans the practice.

  14. @Shaz… Agreed. Resort Fees need to be abolished, period. I don’t see how anyone can defend the practice. It makes absolutely no sense.

    Think if it were the practice in any other business? What if… you buy a ticket to a basketball game for $100 and there is an $8 charge for the use and maintenance of the bathrooms?

    What if the next time you go to buy gasoline the price on the pump is $3.50 per gallon, but there is an additional charge of .25 per gallon “flammability” fee as this product is dangerously flammable?

    I think everyone here remembers how you felt the first time you encountered the Resort Fee… the feeling of WTF? It’s really gotta be reeled in. Perhaps this is the first step? Let’s hope.

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