The Fourth of July fireworks came a little early this year for participants in the Advisory Committee for Aviation Consumer Protection meeting at the Department of Transportation headquarters.
For several tension-filled minutes, two Federal Trade Commission lawyers stood before the committee last month, insisting their agency had done all it could to stop hotels from deceiving the traveling public about resort fees.
Not so, replied several consumer advocates and one member of the committee. In fact, the FTC has failed to protect consumers from what is perhaps the most dishonest fee in the travel industry. (You can watch the entire heated exchange at the 1:48 mark of the morning-meeting video on the committee’s Web site.)
A peek behind the curtains in the resort-fee drama suggests neither side is entirely correct. The government is, indeed, concerned about resort fees, which are mandatory surcharges added to your hotel bill for everything from use of the hotel gym to pool towels. These extras are usually disclosed after an initial price quote but before you pay for your room. Critics say the sleight-of-hand makes it difficult for travelers to effectively comparison shop and pressures hotels to pile on even more hidden fees, in an effort to appear to be the best deal online.
Federal watchdogs have taken small steps to deal with these controversial charges. But have they done enough?
No one knows exactly how much money hotels extract from resort guests in fees. A recent study by New York University found that hotels and resorts collected $2.25 billion in surcharges last year, but the number includes other add-ons. We do know that virtually no hotels disclose the fees in their initial online rate quotes. At best, you have to click to another screen to get the “all-in” price, including the mandatory resort fee; at worst, you don’t find out about it until you check out. Customers also complain that hotels don’t tell them about the fees when they make hotel reservations.
Resort fees appear to be proliferating — and increasing. Only a few years ago, it was uncommon to find a hotel with a resort fee higher than $20 a night, and they were limited to resort areas like Las Vegas and Orlando. Today, they’re everywhere. Several resorts have cracked the $50-a-night mark, and at least two hotels charge more than $100 a night.
When it comes to stopping misleading — and illegal — advertising, the FTC has a lot of flexibility, says Mark Jacobson, a partner at the Minneapolis law firm Lindquist & Vennum and an FTC expert. The FTC Act, which outlines the agency’s ability to regulate advertising, says “unfair methods of competition” and “unfair or deceptive acts or practices” are illegal. But federal law also limits the FTC from declaring an act or practice unlawful unless it’s likely to cause substantial injury that is “not reasonably avoidable by consumers.”
Back in 2012, the FTC sent warning letters to 22 hotel operators, cautioning that resort fees must be disclosed. Jacobson and other FTC-watchers say the key question is whether the mandatory resort fees are spelled out early enough in the booking process for customers to avoid them.
“If they are disclosed early in the process, the mandatory resort fees are reasonably avoidable by consumers and probably do not violate the FTC Act,” he says. “If they are disclosed after the reservation is made, they are probably not reasonably avoidable and probably violate the FTC Act.”
An FTC representative confirmed that’s how the agency currently views resort fees. As long as they are revealed early in the booking process and included in the final price, giving a hotel guest the opportunity to abandon the reservation, they’re acceptable. But another agency spokesman noted that this may or may not be the agency’s final position on the fees, adding that advertising and marketing practices are “constantly evolving.”
For consumer advocates, that creates an enormous loophole that would technically allow a hotel to advertise $1 room rates and then charge a mandatory $100 resort fee, disclosed only after the booking process started. By that time, a traveler may already be vested in the purchase and reluctant to discontinue the transaction.
Opponents of resort fees have launched a new site, hotelfees.travelersunited.org , aimed at drawing public attention to the problem of resort fees. The initiative, backed by Travelers United, a Washington advocacy group, also released a white paper urging the government to take enforcement actions against hotels that collect mandatory resort fees from guests but do not include them in advertised nightly rates.
“The charging of mandatory resort fees by hotels results in a misrepresentation of the true price of the hotel room,” says Charlie Leocha, the president of Travelers United. He called the practice of quoting a low price and then adding a mandatory fee later in the booking “drip pricing,” which is “harmful to consumers and undermines fair competition.”
Travelers United says that the FTC is incorrectly interpreting the FTC Act and that it should take action to end resort fees immediately by issuing formal guidance that not including required fees in the nightly rate is deceptive and a violation of Section 5 of the FTC Act. (Disclosure: I co-founded Travelers United, but I am no longer involved in the organization.)
The FTC would not comment on the assertions made by Travelers United.
But this spectacle might be coming to an end soon. The Department of Transportation (DOT) has a “full fare” advertising rule that requires online travel agents and airlines to advertise the complete price paid to the airline or travel agent by the customer. The rule doesn’t currently apply to most resort fees, because airlines don’t collect the fees. But advocates are also pressuring DOT to tighten its disclosure rules, and if they succeed, it would put the agencies at odds with one another. The FTC says it is coordinating with DOT to ensure that resort fees are clearly disclosed.
In the meantime, be mindful of mandatory resort fees that are revealed only after you start the booking process. They’re legal, for now. But you can always exit the screen or hang up the phone and book a different hotel. And nothing sends a message about resort fees quite like an abandoned reservation.
Elliott is a consumer advocate, journalist and co-founder of the advocacy group Travelers United.
E-mail him at email@example.com.
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