FTC warns hotels about hidden fees

By Jerry Limone
In a letter to 22 hotel operators last week, the Federal Trade Commission warned that their booking websites may not have the pricing transparency that is required.

The hotel operators may be engaging in “drip pricing,” in which hotels advertise one rate early in the booking process, then reveal mandatory charges such as resort fees later in the process, the FTC said.

The FTC indicated that the extra charges can be as high as $30 per night, “a sum that could certainly affect consumer purchasing decisions.”

“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,’” the FTC stated.

“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 break down 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 FTC urged the companies to “review their websites and ensure that their ads do not misrepresent the total price consumers can expect to pay,” and that the FTC could “seek redress for any violations of the FTC Act.”

U.S. hoteliers have increasingly used resort charges and other fees to best take advantage of rebounding room demand without drastically boosting room rates.

U.S. hotel surcharges will increase 5.4% this year, to $1.95 billion, which is more than triple decade-earlier figures, the New York University School of Continuing and Professional Studies said in an August report.

Surcharges, which also include cancellation fees, early departure charges and room-service delivery fees, are profit centers because their margins are in the 80% to 90% range.

Danny King contributed to this report.
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