Hotel fees are on the rise, and so are guests' tempers
Jason Cochran
May 4th 2010 at 2:45PM
Analysts confirm the worst: Hotels have been inspired by the airlines' success at peppering customers with fees. Now they're adopting extra fees as a bigger part of their profit strategies. In an interview with The New York Times, Bjorn Hanson, a professor at New York University, predicts that the annual take from extra hotel surcharges will climb from $1.55 billion to $1.7 billion by next year -- despite the fact that room rates remain depressed.
While hotels have slowly been able to raise their rack rates, they are still nowhere near pre-recession levels. To help make up some of the difference, hotels are hitting guests with ever-increasing, and ever-more creative, surcharges.
We know about the heinous resort fee, which hits customers for up to $30 a day for the very things that made them choose the hotel to begin with, including the swimming pool and the gym. Most of us have heard of fees to receive a fax, or to store a bag in the luggage room for the day, or about the likelihood of being charged for a night's stay if you cancel your reservation at the last minute. All are annoying, and all turn your quoted room rate into a low-ball lie, yet they've become so universal that they are generally accepted.
The Times delivers the unwelcome news that fees are becoming even sneakier. How about a fee of $5.95 for "restocking" the minibar, over and above the usurious price you paid for that pack of peanuts to begin with? Or paying a few bucks because there's an in-room safe? Extra charges for "energy" use (as if your standard room rate doesn't include electricity)? Or shelling out more just to use a towel by the pool? They're all showing up as surcharges, according to Fodor's.
I've also noticed that many hotels don't provide self-parking facilities anymore. Instead, that enables them to charge mandatory valet fees of up to $40 a day.
Also, one hotel in Los Angeles recently tried hitting me with a $250 smoking fee even though I've never smoked a pack of cigarettes in my life. As it turned out, the true smoking culprit was the occupant of the room next door, but I would have accidentally paid that fee if I hadn't gone over my bill with an eagle's eye. Don't fool yourself into thinking that some hotels aren't banking on "accidents" like that.
Customers flock to better value
As customers, we're aware of high room rates but we're in the dark about many fees, so hotels are currently able to experiment on the best way to get your money. That subterfuge is backfiring. Extra fees have traditionally irked pleasure travelers more than business travelers, whose expenses are often absorbed by their employers. But now employers, facing budget cuts, are less likely to cast a blind eye toward being nickel and dimed.
Some businesses are negotiating lower or waived rates for their travelers. Others are simply turning toward stronger value-for-dollar brands, which means hotels that are lower down the star-rating scale. Ironically, in the hotel world, it's the cheaper brands that provide the most free services.
Unlike airlines, which are few, hotels are many, and the hotel industry is finding that brand loyalty is eroding, particularly among business travelers. Stays at the Hilton, which offers a whole array of fees, turn into bookings at the Courtyard, which is less plush but charges a rate that includes most of the things a traveler needs.
Hotels, the Times notes, are quickly learning what Southwest Airlines noticed when it refused to charge customers to check baggage: Customers now prefer brands that don't bleed them. Southwest, in fact, claims its market share rose by $1 billion after its rivals put bag fees in place.
Some new hotel brands are defined by their lack of fees. Hyatt's newish Andaz and Hyatt Place chains intentionally include a lot of free amenities for the price, which the chains rightly equate with true hospitality. Kimpton Hotels recently announced a new strategy to allow guests free late check-out up until 2pm. A few brands, such as Fairmont, waive fees for loyal customers. It charges the common customer for Web access but grants free usage to those with frequent-guest "Gold" status.
Testing the limits
While hotels are trying to figure out at which point customers will push back and flee to more economical properties, they're also trying to remain competitive in a market with depressed room rates by exploring creative ways to make us pay more.
Just as the airline industry, a decade ago, fractured into "low-cost" airlines and legacy carriers, the hotel industry is dividing into two camps: those that are generally all-inclusive, and those that lure customers with a low lead-in price and make their money in the back end.
Customers are quickly realizing that when you search rates on Orbitz or Priceline, the quote from Hampton Inn is more likely to be a final rate, while the one from Westin isn't. As smart consumers avoid the brands with higher star ratings and more fees, is a "luxury-hotel ghetto" being created?
For now, as hotels feel their way through this new income wilderness, most hotel fees remain more negotiable than you think. I recently wrote about what you can do to get out of unwanted hotel fees.
Jason Cochran
May 4th 2010 at 2:45PM
Analysts confirm the worst: Hotels have been inspired by the airlines' success at peppering customers with fees. Now they're adopting extra fees as a bigger part of their profit strategies. In an interview with The New York Times, Bjorn Hanson, a professor at New York University, predicts that the annual take from extra hotel surcharges will climb from $1.55 billion to $1.7 billion by next year -- despite the fact that room rates remain depressed.
While hotels have slowly been able to raise their rack rates, they are still nowhere near pre-recession levels. To help make up some of the difference, hotels are hitting guests with ever-increasing, and ever-more creative, surcharges.
We know about the heinous resort fee, which hits customers for up to $30 a day for the very things that made them choose the hotel to begin with, including the swimming pool and the gym. Most of us have heard of fees to receive a fax, or to store a bag in the luggage room for the day, or about the likelihood of being charged for a night's stay if you cancel your reservation at the last minute. All are annoying, and all turn your quoted room rate into a low-ball lie, yet they've become so universal that they are generally accepted.
The Times delivers the unwelcome news that fees are becoming even sneakier. How about a fee of $5.95 for "restocking" the minibar, over and above the usurious price you paid for that pack of peanuts to begin with? Or paying a few bucks because there's an in-room safe? Extra charges for "energy" use (as if your standard room rate doesn't include electricity)? Or shelling out more just to use a towel by the pool? They're all showing up as surcharges, according to Fodor's.
I've also noticed that many hotels don't provide self-parking facilities anymore. Instead, that enables them to charge mandatory valet fees of up to $40 a day.
Also, one hotel in Los Angeles recently tried hitting me with a $250 smoking fee even though I've never smoked a pack of cigarettes in my life. As it turned out, the true smoking culprit was the occupant of the room next door, but I would have accidentally paid that fee if I hadn't gone over my bill with an eagle's eye. Don't fool yourself into thinking that some hotels aren't banking on "accidents" like that.
Customers flock to better value
As customers, we're aware of high room rates but we're in the dark about many fees, so hotels are currently able to experiment on the best way to get your money. That subterfuge is backfiring. Extra fees have traditionally irked pleasure travelers more than business travelers, whose expenses are often absorbed by their employers. But now employers, facing budget cuts, are less likely to cast a blind eye toward being nickel and dimed.
Some businesses are negotiating lower or waived rates for their travelers. Others are simply turning toward stronger value-for-dollar brands, which means hotels that are lower down the star-rating scale. Ironically, in the hotel world, it's the cheaper brands that provide the most free services.
Unlike airlines, which are few, hotels are many, and the hotel industry is finding that brand loyalty is eroding, particularly among business travelers. Stays at the Hilton, which offers a whole array of fees, turn into bookings at the Courtyard, which is less plush but charges a rate that includes most of the things a traveler needs.
Hotels, the Times notes, are quickly learning what Southwest Airlines noticed when it refused to charge customers to check baggage: Customers now prefer brands that don't bleed them. Southwest, in fact, claims its market share rose by $1 billion after its rivals put bag fees in place.
Some new hotel brands are defined by their lack of fees. Hyatt's newish Andaz and Hyatt Place chains intentionally include a lot of free amenities for the price, which the chains rightly equate with true hospitality. Kimpton Hotels recently announced a new strategy to allow guests free late check-out up until 2pm. A few brands, such as Fairmont, waive fees for loyal customers. It charges the common customer for Web access but grants free usage to those with frequent-guest "Gold" status.
Testing the limits
While hotels are trying to figure out at which point customers will push back and flee to more economical properties, they're also trying to remain competitive in a market with depressed room rates by exploring creative ways to make us pay more.
Just as the airline industry, a decade ago, fractured into "low-cost" airlines and legacy carriers, the hotel industry is dividing into two camps: those that are generally all-inclusive, and those that lure customers with a low lead-in price and make their money in the back end.
Customers are quickly realizing that when you search rates on Orbitz or Priceline, the quote from Hampton Inn is more likely to be a final rate, while the one from Westin isn't. As smart consumers avoid the brands with higher star ratings and more fees, is a "luxury-hotel ghetto" being created?
For now, as hotels feel their way through this new income wilderness, most hotel fees remain more negotiable than you think. I recently wrote about what you can do to get out of unwanted hotel fees.
