Pesky hotel resort fees could soon be on their way out. At
least, that's what some hospitality analysts predict might happen following
news that the District of Columbia attorney general earlier this month filed a
lawsuit against Marriott International, accusing the hotel giant of deceptive
The suit, which was filed with the District of Columbia
Superior Court, accuses Marriott of employing "an unlawful trade practice
called 'drip pricing' in advertising its hotel rooms, whereby Marriott
initially hides a portion of a hotel room's daily rate from consumers."
That hidden portion, according to the AG's office, is
typically labeled a resort, amenity or destination fee.
Marriott declined to comment on the pending litigation but
said, "We look forward to continuing our discussions with other state AGs."
The problem of drip pricing and poorly disclosed fees isn't
unique to Marriott, however. In fact, the practice is rampant among Las Vegas
hotels and resorts.
The industry as a whole has long made use of the practice,
generally revealing any mandatory resort fees only at the conclusion of the
booking process, resulting in a final price that can differ substantially from
the original advertised amount, thus discouraging price-comparison shopping.
Robert Cole, Phocuswright's senior research analyst for
lodging and leisure travel, said one of the fundamental issues with drip
pricing is that hotels and resorts are often forced to engage in the practice
simply to remain competitive.
"The hotel groups that don't use drip pricing are
disadvantaged, because their properties look artificially more expensive than
the other hotels that are participating in this anti-consumer behavior and are
artificially making their pricing look low," Cole said. "If you are
doing the right thing for the consumer, you are at a structural disadvantage to
those who are being hostile to the consumer, and that's a problem."
While Cole said he expects that the D.C. lawsuit alone won't
be enough to end drip pricing, he said he believes a legislative solution,
similar to past crackdowns that have reined in problematic pricing practices in
the airline and car rental industries, could be in the offing.
"We have a president in the White House who seems to be
pro-business and whose family is in the hospitality industry, so there's not a
strong likelihood of the Federal Trade Commission (FTC) doing something
immediately, but it's been on their radar," Cole said.
Citing a series of warning letters the FTC sent to various hotels
in 2012 and an economic analysis of hotel fees released by the agency in 2017,
he added, "This is an issue that has no consumer benefits and few
proponents. Hotels have managed to skirt it for a while, but it certainly looks
like a change is inevitable at this point."
Not everyone is quite as bullish on legislative progress.
Industry consultant Bjorn Hanson, an adjunct professor at New York University's
Tisch Center, called D.C.'s lawsuit "imprecise" and asserted that any
substantial change in the hotel resort fee and drip pricing landscape is "very
Moreover, Hanson said that resort fees have become
increasingly important to hoteliers in an environment where revenue growth has
stagnated and expenses are rising.
"In 2019, average daily rates are probably going to
increase by less than 2%, and inflation is going to increase by slightly less
than 2%," Hanson said. "But hotels are being subjected to large
increases in labor costs as well as in insurance, real estate and financing
costs, which are all growing faster than inflation. Despite occupancy being the
highest it's been since 1981, the industry can't achieve pricing power, so
there's definitely pressure to increase revenues."
Late last year, Hanson released an analysis predicting that
fees and surcharges at U.S. hotels would grow 8.5%, to a record $2.93 billion,
for 2018. Hotel fees and surcharges in the U.S. have increased every year since
This rapid rise and proliferation in fees, however, may have
finally hit a tipping point among guests.
"I think consumers are getting angrier," said
Christopher Elliott, founder of the nonprofit consumer advocacy group Elliott
Advocacy. "More hotels have adopted fees, and the fees have been going up
without a corresponding upgrade in amenities.
"A hotel that may have had a $15 resort fee five years
ago may now be charging $25, and consumers are not stupid. They know they're
getting less and paying more, and they don't like being shown a lower price and
then having to pay more at the end of their booking process. But I don't think
that resort fees are going to change with a single lawsuit. It's going to take
a lot of little things adding up together to finally do away with it."
Meanwhile, Phocuswright's Cole asserted that creating a more
transparent booking process is very much in a hotel's best interests.
"Hospitality and drip pricing are two mutually
exclusive things," Cole said. "Drip pricing is the antithesis of
putting the guest first and what hospitality is supposed to mean. It's in
complete conflict with the industry's messaging."