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Resort fee

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A resort fee, also called a facility fee,[1] a destination fee,[2] an amenity fee,[3] or a resort charge, is a separate mandatory (i.e. not optional) fee that a guest is made to pay by the accommodation provider per-day per-room in order to receive the key to their room rental which, often times, the guest has already paid for either in full or in part during the initial booking process (sometimes as a non-refundable payment). The fee is charged at the hotel in addition to a base room rate.

Resort fees are illegal in many countries, however, in other countries, including the United States, as of 2017 there is currently still a lack of any specific legislation that either allows or outlaws resort fees.

Definition

A resort fee is a daily mandatory additional charge that the hotel separates out from the advertised price. Consumer advocates equate this to paying a second room rate.[4] The average resort fee costs $24.93 per day.[5][6]

A resort fee is collected separately from the advertised room rate. A guest may pay in advance with a credit card for a room online. There he is paying the advertised room rate and all necessary taxes. This guest may assume that is the final price of the hotel. When the guest arrives at a hotel with a resort fee, he will be forced to pay the additional resort fee for his entire stay at the front desk when he checks in.

Sometimes this concept as referred to as drip pricing.[7] One price is advertised out front to lure in a customer but when the customer goes to book there are then mandatory unavoidable fees, taxes and other add-ons that incrementally drip and increase the original advertised price.

The resort fee can be more than the advertised cost of the room.[1]

There is no limit to what the resort fee can be. Two hotels in Florida have resort fees of over $100 per day.[8]

Location

Resort fees are a unique concept to North America.[citation needed] Though mostly found in tourist destinations in the United States, some resorts in Mexico and the Caribbean also charge resort fees. A handful of hotels in Canada have also recently taken up the practice.

Since resort fees are a concept unique to North America, they are just starting to be spread to the rest of the world through North American brands.

Resort Fees are most prevalent in tourist locations. Resort fees are usually seen as a nuisance by travelers. Since regular business customers whose loyalty is important may go elsewhere if charged these fees, the resort fee tends to be located largely in tourist areas. Resort fees in tourist areas affect unsophisticated travelers who do not know about hotel billing and do not travel often.[9] They also affect international tourists who are unfamiliar with the breakdown of a US hotel bill and who may not speak English.[10]

Resort fees are also commonly located in tourist areas where there is resort fee collusion. These are areas where every hotel decides to charge resort fees. Currently resort fees apply to all 62,000 rooms on the Las Vegas Strip.[11]

Resort fees are not found just at resorts. Many budget hotels also charge resort fees. The Days Inn in Miami Beach, the Super 8 in Las Vegas and the Hotel Pennsylvania in New York City are all two star hotels that charge resort fees.[12]

Background

Hotels have long charged guests for specific amenities at a hotel.[13] Examples include $10 to enter the pool, $5 to watch a movie or a $2 bottle of water. In 1997 some resort hotels began to charge mandatory fees.[14] A mandatory resort charge would be to charge every guest $10 for entering the pool regardless of whether or not they planned to use it. This enables the hotel to advertise itself as costing $90 but in reality the hotel costs $100. The hotel would demand $10 as a resort fee for use of the pool when the guest arrived at the hotel.

Benefit to Hotels

The major benefit to the hotels is the profit. Resort fees brought in $2.47 billion to the hotel industry in 2015.[15]

As trends in how consumers book hotels change, hotels attempted to recoup losses from customers who do not book directly with the hotel. Online hotel search and booking tools like Expedia, Travelocity and Hotel Tonight take a percentage of a reservation and then pass the reservation on to the hotel.[16]

Expedia owns Hotels.com, Hotwire, Orbitz, Travelocity and Trivago.[17] Priceline owns Booking.com.[18] That means that most search tools that potential customers of US based hotels will be using one of these companies. All of these companies do not have the resort fee included in the price listed when you search by price.[19]

A hotel loses a certain percentage from every reservation made on one of these sites. Hotels that charge resort fees yet are listed on these hotel search and booking sites only list their advertised rate and not their resort fee. This is because the hotel booking site takes a percentage of that advertised rate. When the hotel collects the resort fee at check in, separate from the rate purchased for online, the hotel collects 100% of that profit.

Resort fees also affect travel agents. Travel agents can earn commission on the advertised rate of the hotel. They do not collect a percentage of taxes or fees. Furthermore, travel agencies legally need to know what the resort fee for each hotel is so that they can properly pass it on to their clients. Failure to do so could result in a lawsuit to their agency. Individual travel agents have found it difficult to keep up with changing hotel resort fees.[20]

Resort fees have been very profitable for hotels. MGM Resorts International stated the following regarding Las Vegas hotel rooms during a Q1 2011 conference call:

"Our RevPAR (revenue per available room) in the first quarter was up 16%, including resort fees. Excluding resort fees, REVPAR was up 11% in the quarter year-over-year."[21]

Benefits to Consumers

The hotel lobby, the American Hotel and Lodging Association, has stated that the resort fee provides many benefits to consumers.[22]

Hotels say that customers like that many features and amenities of the hotel are included in the resort fee so it eliminates nickel and diming although there is no proof that any services are included in these fees which leads many consumers to deem this as dishonest pricing.

MGM Resorts International senior vice president Mr. Alan Feldman,[23] has said:

“We have heard negative feedback from guests, but we’ve also heard positive feedback, from guests who are happy that they are no longer paying à la carte for different services. They don’t feel nickeled and dimed.” [24]

No tourist has come forward to publicly state that they enjoy resort fees.[25]

Exchange for Service

Hotels have stated that tourists are paying a resort fee for a variety of amenities at the hotel. The American Hotel and Lodging Association said that resort fees pay for a range of hotel amenities, from pool use, gym access, towel services, to Wi-Fi and newspapers.[26] They state resort fee is a payment for a group of services.

Consumer advocates such as the National Consumers League [27] and Travelers United [28] have stated that since this is a mandatory fee, it is not an exchange of service. A guest could decline all of the services allegedly offered by the resort fee and still be forced to pay the mandatory resort fee. These advocates state that there is no exchange of service. It is simply an additional amount that the hotel collects on top of the advertised room rate.

Disclosure of Fees

Resort fees have been criticized by consumers for not being fairly advertised prior to purchase.[29]

Katherine Lugar, President and CEO of the American Hotel and Lodging Association[30] said:

“throughout the booking process, hotels are transparent about costs, fees and taxes.” [31]

This assertion has been debated by consumer advocates. They argue that though hotels may list a resort fee, they do it at the very end of the booking process in extremely small print.

Charlie Leocha, President of Travelers United, said

“The charging of mandatory resort fees by hotels results in a misrepresentation of the true price of the hotel room.”[32]

Sometimes hotels improperly list the fee as a tax.[33] The Arizona Grand Hotel in Phoenix, Arizona lists their resort fee under the taxes section of their website.[34] A resort fee is not a tax.

Consumer advocates have noted that if consumers choose to book their hotel based on price-based search tools on Expedia, Priceline or Hotel Tonight, the resort fees are left off in the initial price comparison search. A hotel could be anywhere from $10 to $50 more expensive per night but it is not listed with the advertised price.[35]

A Priceline spokeswoman Flavie Lemarchand-Wood said the practice of tacking added fees onto the advertised price after a hotel is selected is not deceptive.

"We are compliant in disclosing the fees prior to purchase. It is very important [for the consumer] to read everything on the page"[36]

Expedia, Priceline and Hotel Tonight do not take commission from the resort fee. These online booking companies have no incentive to publish the resort fee. The hotel takes the entire amount of the resort fee. These companies are further disincentivized since if one site begins to add the resort fee to the advertised rate, it will look like the price on that site is higher and consumers would go to a competing online booking site.[37]

Consumers groups such as Travelers United and Kill Resort Fees contend if a hotel charges a mandatory fee, it should be included the nightly room rate.[38] Hotel rating systems such as AAA have taken a policy of deducting points from a hotel being reviewed if they charge resort fees.[39] AAA has said resort fees are a major annoyance of travelers.[40]

Taxes

Since resort fees are a mandatory fee that is not included in the advertised room rate of the hotel the fee is often priced differently. Since a portion of the room rate is separated out, that portion is not considered for taxes. This is lost revenue for the city and state. A hotel in New York City that charges resort fees only has the Javits Center Tax and the New York City occupancy tax apply to the advertised rate of the hotel.[41] If the resort fee is $50, that is $50 that is not being used in the calculation of those taxes. Resort fees in New York City are only being charged the sales tax for the state and city and not the occupancy tax.[42]

Legality

United States

In the United States, the legality of charging resort fees has been a decades-long issue of contention. Currently there is no U.S. law that allows for hotels to charge mandatory fees in addition to their base room rate. However, there is also no law banning this practice.

Numerous bodies have authority on this issue in the United States, including the U.S. Congress, state legislatures, the Federal Trade Commission, and the National Association of Attorneys General. None of these bodies, however, has thus far taken any legal action regarding resort fees.

Europe

In most of Europe, including Great Britain and all member states of the European Union, it is illegal to charge, or advertise the requirement to pay, mandatory fees which are not included as part of the total room rate, such as resort fees.[43]

Australia

In Australia, under the Australian Consumer Law, it is illegal to charge, or even advertise it is a requirement to pay, mandatory fees (including resort fees), if they were not reflected in a total cost as a single figure at the time of booking. Under Australian law, any fees that are mandatory and are able to be calculated, including resort fees, must be included as a part of the total price in a single figure at the time of booking, deliberately doing otherwise are grounds for prosecution for misleading and unconscionable conduct.

When advertising the sale price of a consumer good or service (i.e. non business-to-business transactions) a price "must state the total price of the good or service as a single figure, which is the minimum total cost that is able to be calculated. This should include any tax, duty, fee, levy or other additional charges."[44] Due to this requirement under Australian law, unlike the U.S., consumer goods and services always have ticket prices which reflect the actual monetary cost which a consumer pays out of pocket, with no additional tax or fees calculated on top at point of sale.

Additionally, by virtue of Australian anti-price drip laws, it is also not sufficient, and it is illegal, to add a mandatory fee (including resort fees) in circumstances where it was only disclosed and added to the final single figure in the late stages of a booking process. This price-dripping practice constitutes a bait and switch tactic which is misleading and detrimental to both consumers and competitors. Any mandatory fee must be included in the single figure which is advertised, it must be disclosed, and the disclosure must be early on in the booking process.

In order to protect Australian consumers, heavy penalties are applied and enforced (up to hundreds of thousands of dollars) for each instance of a breach of the Australian Consumer Law provisions.

U.S. Federal Trade Commission

The Federal Trade Commission (FTC) is the US government organization with authority to regulate the hotel industry. On the subject of resort fees, FTC attorney Mamie Kresses said

"The fees are not illegal as long as they're disclosed."[45]

What constitutes a clear disclosure, however, has been a matter of debate between the hotel industry and consumers.

In 2012, the Federal Trade Commission advised 22 hotel operators that their online rate quote totals, which did not include certain fees, may need to be updated to comply with FTC regulations.[46]

Since then the FTC has taken no legal action on resort fees. Consumer advocate Chris Elliott wrote

"The FTC has failed to protect consumers from what is perhaps the most dishonest fee in the travel industry."[47]

In 2016, FTC Chairperson Ramirez wrote a letter to Congress on the subject of resort fees and said:

“in my view……the most efficient and effective means to mandate the type of industry-wide requirement you propose would be through legislation.”[48]

US Senator McCaskill introduced the “Truth in Hotel Advertising Act of 2016” in the US Senate on February 25, 2016.[49] The purpose of the bill is to "prohibit unfair and deceptive advertising of hotel room rates, and for other purposes."[50]

The Federal Trade Commission (FTC) published a report on the harm of resort fees on January 5, 2017.[51] The report concluded "that consumers are likely being harmed by the hotel industry practice of disclosing mandatory resort fees separate from posted room rates, without first disclosing the total price."[52]

Challenges to Resort Fees

Due to the increasing use of resort fees at hotels, many consumers have begun to challenge them being applied to their hotel bill.[53] This has been done by asking the hotel desk manager to remove the fee, by disputing the fee with the guest’s credit card company or by suing the hotel in small claims court.[54]

Consumer travel advocate Christopher Elliott advises anyone who was blindsided by an add-on fee to dispute the charge with their credit card company. While the booking sites may allow small-print disclosures, some credit card companies have taken the consumer's side in these disputes and reversed the charges. Moreover, merchants that have a high volume of disputed charges can run afoul of credit card providers, which in egregious cases have the ability to terminate a vendor's right to accept credit cards.[55]

Kill Resort Fees, an advocacy group working to eliminate resort fees, stated that all resort fees should be challenged.

Lauren Wolfe, Founder of Kill Resort Fees, said that

"Resort fees are the equivalent of being charged a second room rate. No law exists protecting hotels ability to charge two room rates for one night so all of these second rates also known as resort fees should be challenged by consumers."[56]

Other Policy Issues Created By Resort Fees

The main issue debate surrounding resort fees involves whether or not they are properly disclosed before booking. Hotels charging resort fees create two additional unique issues.

Resort Fees Allow Many Hotels To Collect Less Taxes

Taxing issues regarding resort fees depend on their location. In some states, like Nevada and California, hotel resort fees are taxed the hotel occupancy rate. This is the tax rate that is used for hotel rooms.[57] Guests in these states are paying and being taxed for two hotel rates for one night. In other locations, like New York City, the advertised hotel room is charged hotel occupancy tax but the resort fee is taxed at the sales tax rate.

Forty-two hotels in New York City charge resort fees.[58] All of those hotels charge 14.75% hotel occupancy tax on the advertised room rate. They also only charge 8.875% sales tax on the resort fee. That means that each hotel in New York City that charges a resort fee is not passing 5.875% of tax on to the city for every reservation. This has been calculated to a loss of $8,826,000 to the city in lost tax revenue per year.[59]

Resort Fees Are Turning Tourists to Home Shares

Since many tourists are unable to compare hotel prices when resort fees are involved, tourists in resort fee prominent locations have now begun to turn to home shares over hotels. Home sharing platforms such as Airbnb, HomeAway and VRBO do not allow hosts to split their pricing into two. Tourists looking for one total price when searching for a place to stay have been able to find that through home shares.[60]

Despite the tax losses to cities that have resort fees and the fact that these fees are directly causing consumers to turn to platforms where a clear price is presented, no bill currently exists to ban resort fees in any city in the United States.[61] Share Better, an organization that advocates to reduce home shares due to affordable housing issues, has not advocated for a ban on resort fees for any of the bills they are working on throughout the country. Resort fees are one of the leading causes of tourists turning to platforms like Airbnb over a hotel.[62] Share Better is funded by Unite Here!, the hotel worker's union, and the American Hotel and Lodging Association, the hotel lobby.[63][64]

Organizations

Organizations Advocating For The Ability of Hotels to Charge Resort Fees

- American Hotel and Lodging Association[65]

- American Gaming Association[66]

Organizations Advocating Against Resort Fees

- Kill Resort Fees[67]

- Travelers United[68]

- National Consumers League [69]

References

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