Recent OTA rules could topple resort fees before new laws do

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Photo Credit: Sashkin/Shutterstock

Though a government crackdown on resort fees might be coming, hospitality experts say that recent efforts by OTAs to curb the practice could cause some hotels to rethink the fees in the nearer term.

"I would certainly like resort fees to end with the federal legislation that's now in the House, but obviously, moving things through Congress takes a lot of time and work," said Lauren Wolfe, a lawyer who in 2016 founded KillResortFees.com, a website that describes the fees as "the most deceptive and unfair pricing practice in the hotel industry."

Wolfe is a vocal supporter of the Hotel Advertising Transparency Act of 2019. Introduced in Congress in October, the proposed law would require hotels and other short-term lodging providers to display a full, pretax price to consumers as they search and compare options. A hearing on the bill, however, is not expected to take place until sometime next year.

Likewise, a pair of high-profile lawsuits are slowly winding their way through the courts: a complaint by the District of Columbia attorney general against Marriott International and a suit filed by Nebraska's attorney general against Hilton.

In the meantime, Wolfe and other consumer-rights advocates have welcomed more immediate moves made by OTAs. For example, Expedia has started displaying hotels that charge resort fees less prominently in its search results.

"Hearing that Expedia is now going to rank hotels with resort fees lower in their search is a great first step on the path [to eliminating fees]," Wolfe said. "And I've gotten lots of feedback from [consumers] saying that they're now going to be using Expedia because of this."

In a statement, Expedia said, "We remain focused on delivering value to our hotel partners and ensuring that all partners have a level playing field in our marketplace. With that in mind, we have started rolling out an algorithm that considers hotel-collected mandatory fees more directly. We know hotel-collected mandatory fees can be confusing to consumers, and we expect, among otherwise equivalent hotels, these changes will result in hotels not charging these fees having higher visibility on our sites than those that do."

According to Cornell School of Hotel Administration professor Chris Anderson, Expedia's move is an "interesting" contrast to the approach taken by Booking.com, which announced in May that it would start taking a commission on all extra, mandatory hotel fees.

"Expedia is setting an interesting precedent by not following suit with Booking," Anderson said. "Overall, I think it's a solid move by Expedia, designed to be consumer-friendly, pretty straightforward and minimize negative reaction [from suppliers]."

Whether or not Expedia faces backlash from its hotel partners remains to be seen. Booking.com, on the other hand, has already come under pressure from the Caribbean Hotel and Tourism Association (CHTA), with the group's CEO and director general, Frank Comito, stating in late July that the trade group would urge members to "reassess their use" of Booking.com. Comito took particular issue with the fact that in the Caribbean, resort fees are sometimes inclusive of tips and gratuities and sometimes include government-mandated charges.

Booking.com eventually opted to delay the rollout of its new policy until early next year, with the CHTA also reporting that the OTA had backed down on taking a commission on destination fees, defined by the CHTA as extra fees that generally support destination enhancement, promotion or beautification efforts.

But while somewhat less likely to ruffle feathers, Expedia's policy is still notable, said Steven Carvell, a professor at Cornell's School of Hotel Administration.

"A vast majority of people don't go past the first page of leads," Carvell said. "Therefore, even though Expedia isn't taking a cut of the fees or saying they won't list them at all, this is still significant."

In the wake of Expedia's changes, Anderson predicts that hotels with smaller resort fees could choose to abandon the practice altogether.

"I think we'll start to see this bifurcation of resort fees in the interim," Anderson said. "If a hotel is going to charge a resort fee, it will probably have to go all-in. It may no longer pay to have resort fees in the sub-$25-per-night range, so we could see those smaller fees disappear. But the ones that stick around will stay at least as large as they are now or possibly even increase."

David Corsun, an associate professor and director of the Daniels College of Business Fritz Knoebel School of Hospitality Management, agreed that hoteliers using the resort-fee model will be forced to do a cost-benefit analysis. 

If hotels are "looking to move inventory through OTAs and realize they’re going to get hurt by having the added fee, they're going to have to consider whether it's worth it," Corsun said. "I think it could nudge some hotels to embed it in rate, particularly in an environment like Vegas, where resort fees are [commonplace]. Being able to say, 'Our rate is our all-in price' could become a big point of differentiation, at least in the short term."

Still, Corsun remains skeptical that barring any legislative change, the hospitality industry will abandon fees on a broader scale.

"The problem with resort fees is that it's very high-margin revenue," he said. "And there's a concern that embedding some portion of the fee in rate is going to erode occupancy. Even if a hotel can get away with adding $10 to $15 of its original $25-per-night resort fee to its rate, it would mean letting go of another $10 to $15 per night, which is definitely significant across a resort's inventory over the span of a year."

However, with the threat of legislative enforcement looming, Wolfe argues, hotel resort fees are already on borrowed time. 

"These fees are completely against existing consumer-protection laws," Wolfe said. "And these hotels are opening themselves up to so many lawsuits that I don't know why they'd want to keep functioning this way. At this point, it's just nonsensical for the hotel industry to keep this up."

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