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Brian Cohen·
Financial
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4 Reasons Why Mandatory Resort Fees May Finally Be Disappearing

Mandatory resort fees — and their brethren, which include mandatory destination fees and mandatory facilities fees — have been the scourge of the lodging industry in the United States and several other countries…

4 Reasons Why Mandatory Resort Fees May Finally Be Disappearing

Pool Hilton Fujairah
Photograph ©2015 by Brian Cohen.

…but although now is not exactly the time to celebrate — just yet, anyway — evidence exists that the heyday of these nefarious fees may actually be starting to wane; and at least four reasons have been cited.

1. Charging Hotel and Resort Properties Commission on Resort Fees

In addition to artificially lowering the room rate for comparison purposes with the competition by potential customers and therefore intentionally obfuscating the true total cost of a stay, mandatory resort fees were also vehicles for hotel and resort properties to avoid paying commissions to travel agencies.

“Hotels raise the concern that including the cost of bundled services in the room rate, rather than charging a separate resort fee, would increase the commissions they pay to OTAs. Hotels pay commissions to OTAs for booking their rooms to consumers. These commissions are typically a percentage of a hotel’s room rate.”

That statement which you just read was extracted from page 34 of a report — which was released in January 2017 — titled Economic Issues: Economic Analysis of Hotel Resort Fees by Mary W. Sullivan of the Bureau of Economics of the Federal Trade Commission of the United States. OTA refers to what is known as an online travel agency — such as Orbitz, Expedia or Travelocity.

This is expected to change sometime this month in June of 2019 — if it is not already in effect — when Booking.com will reportedly charge a commission to any hotel and resort property in the United States which imposes a mandatory resort fee on its guests, according to this article written by Simon Calder, who is a travel correspondent for The Independent: “As an extension of our overarching aim to provide our customers with transparent information about the total price they will need to pay at a property when they make a booking and to create a level playing field for all of our accommodation partners, we are updating our process when it comes to charging commission on mandatory extra fees that customers are asked to pay at the property.”

Whether or not other travel agencies will follow suit is unknown at this time — except for Expedia, which multiple sources have reported is considering following the lead of Booking.com — but if they do, will hotel and resort properties which impose resort fees as a mandatory addition to advertised room rates pass on the increased cost of commissions to their customers?

2. Full-Fare Advertising Act by Department of Transportation

Once Booking.com collects resort fees, they reportedly fall under the full-fare advertising act of the Department of Transportation of the United States.

As I first wrote in this article on Thursday, January 26, 2012, a new rule became effective in which airlines were required by the Department of Transportation to include all mandatory taxes and fees in advertised airfares — and I proclaimed that “I not only say that it is about time, but that this policy was long overdue.” That rule also requires disclosure of all mandatory fees collected by tour operators and airlines — and, apparently, online travel agencies.

“The issue was debated before the Advisory Committee for Aviation Consumer Protection several years ago”, according to this article written by Charlie Leocha, who is the chairman and founder of Travelers United, which is an advocacy membership organization that represents all travelers. “There the operative word in the full-fare rule was ‘collected.’ Since the tour operators and airlines were not collecting mandatory hotel fees, they never had to include the mandatory fees in the ‘full-fare.’ However, should Booking.com and other online travel agents begin to collect resort fees (rather than leaving hapless, surprised consumers to deal with them at checkout), these mandatory fees will be subject to inclusion in the published tour rates.”

3. Slump in Tourism Forces Some Hotel and Resort Properties to Lower — or Temporarily Eliminate — Resort Fees

Las Vegas memorial
Only days after the shooting which killed 58 people, a woman signs a book at a makeshift memorial at the base of the iconic Welcome to Las Vegas sign. Photograph ©2017 by Brian Cohen.

Las Vegas has suffered from its worst slump in tourism in four years, which has forced some hotel and resort properties to reduce the amount of the mandatory resort fees which they charge — or offer promotions of stays with no mandatory resort fee — during slow periods; while other hotel and resort properties have hinted that mandatory resort fees will not increase in the foreseeable future.

The Las Vegas Convention and Visitors Authority “blamed the rotation of the triennial CONEXPO-CON/AGG convention in part for last year’s decline in visitation”, according to this article written by Todd Prince of Las Vegas Review-Journal. “The construction and agriculture industry gathering is one of the largest U.S. trade shows, attracting roughly 130,000 participants. It was last held in Las Vegas in 2017 and will return in 2020.”

Mandatory resort fees themselves may be part of the blame for the decrease in tourism. According to this article written by Orko Manna for Channel 8 LasVegasNow, Anthony Curtis — who is the founder of the Las Vegas Advisor — said that “fewer people are coming to Las Vegas because of high resort fees and new parking costs.”

A plethora of possible reasons have been cited for the slump in tourism — including but not limited to:

  • The mass shooting which occurred on Sunday, October 1, 2017 — which left 58 people dead and hundreds more injured or wounded — reportedly contributed to the decrease in visitation to the city at the end of 2017 and in early 2018.
  • Several casino properties have been undergoing renovations within recent years.
  • The reduction in the number of visitors was also affected by fewer events — such as boxing matches during the summer — according to casino executives from Caesars Entertainment Corporation, MGM Resorts International and Wynn Resorts during earnings calls last year.
  • International visitation also might have been affected by the declining value of foreign currencies — which makes trips to the United States more expensive — as well as more restrictive visa requirements.
  • Competition from other states pertaining to gambling also has been growing.
  • Several resort properties have opened on the populous east coast of the United States — including in New York, New Jersey, Massachusetts and Maryland — in recent years.
  • Casinos which are owned and operated by Native American tribes in California — which is the largest visitor market for Las Vegas — have been expanding and upgrading their properties.
  • At least six states began offering legal and regulated sports betting late last year, which breaks the monopolistic stranglehold which the state of Nevada had — and this does not include the illegal sports betting which has been occurring in some states for years.
  • Jim Murren — who is the chief executive officer of MGM Resorts International — told Wall Street analysts during the earnings call of the company on Thursday, August 2, 2018 that “his company was forced to cut Las Vegas hotel room prices during the second and third quarters to draw leisure travelers because conventions didn’t fill enough rooms.”

4. The National Association of Attorneys General Have Issued Subpoenas

Did you know that attorneys general in many states in the United States — but not Nevada, in which the practices is widespread in cities such as Las Vegas — have reportedly said that the practice of implementing mandatory resort fees is unlawful; and that guests can reclaim resort fees?

On the legal front, the National Association of Attorneys General — which helps the 56 state and territory attorneys general fulfill the responsibilities of their offices and assists in the delivery of high quality legal services — “is slowly but surely coming up with the legal rationale for forcing hotels to include room rates with mandatory fees into one cost for an overnight stay”, according to the aforementioned article written by Charlie Leocha. “The ponderous legal actions are moving at what appears to be a glacial speed, but are important in the collection and research upon which legal decisions are made.

See also

Karl Racine and Doug Peterson — who are the attorneys general of the District of Columbia and the state of Nebraska, respectively — have been leading an investigation which questions the use of hidden mandatory hotel fees by Marriott International, Incorporated and the hotel and resort properties of other lodging companies. Launched on Thursday, June 7, 2017, 45 other state attorneys general have joined the investigation into the use of resort fees by hotel and resort properties to disguise the true room rate.

Subpoenas have been filed; and follow-up actions have been in process for almost three years. Leocha believes that anecdotal reports indicate that the research conducted by the National Association of Attorneys General is in the process of concluding — and that findings will finally be released soon.

Summary

Grand Hyatt Muscat
Photograph ©2015 by Brian Cohen.

An estimate from the Federal Trade Commission of the United States claims that one in 14 hotel and resort properties within the United States currently imposes a resort fee, making approximately $2.5 billion — with a b — in one year…

…yet according to this article written by Lauren Wolfe of Kill Resort Fees, “New York City loses $8,826,397.21 annually — over eight million dollars — due to hotel resort fees.” Those losses are in the form of taxes which are not paid by hotel and resort properties on resort fees.

Hotel and resort properties — and, apparently, hostels as well — need to stop with the games and the deception pertaining to perceived lower room rates; and just add those mandatory resort fees and include them in the room rate itself…

…but in order for that to happen, incentives must be removed or eliminated — such as not having to pay commissions on resort fees — and disciplinary action needs to answer what many perceive to be a scourge which is deceptive at best. The aforementioned Booking.com initiative may not be enough to discourage said practice — but I am hoping that the confluence of all of the factors which were discussed in this article will help to kill resort fees once and for all.

Other articles which I wrote over the years pertaining to mandatory resort fees include…

All photographs ©2015, ©2016 and ©2017 by Brian Cohen.

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