Resort fee

A resort fee, also called a facility fee,[1] a destination fee,[2] an amenity fee,[3] an urban fee, or a resort charge, is a separate mandatory fee that a guest is charged by an accommodation provided in addition to a base room rate.

Resort fees are illegal in many countries. In other countries, including the United States, there is no specific legislation that either allows or outlaws resort fees.

Definition

A resort fee is a daily mandatory additional charge that the hotel separates out from the advertised price. Consumer advocates equate this to paying a second room rate.[4] The average resort fee is $24.93 per day.[5][6] It can be more than the advertised cost of the room.[7] There is no limit to what the resort fee can be. Two hotels in Florida have resort fees of over $100 per day.[8]Many hotels in Las Vegas advertise room rates that are lower than the resort fee.[9][10]

This concept is widely known as drip pricing, particularly in consumer rights contexts.[11] One price is advertised out front to lure in a customer but when the customer goes to book there are then mandatory unavoidable fees, taxes and other add-ons that incrementally drip and increase the original advertised price.[12]

Location

The concept of resort fees originated in North America.[13] Though mostly found in tourist destinations in the United States, some resorts in Mexico and the Caribbean also charge resort fees.[14] A handful of hotels in Canada have also recently taken up the practice.[15]

Resort fees are most prevalent in tourist locations and are usually seen as a nuisance by travelers.[16][17] They also affect international tourists who are unfamiliar with the breakdown of a US hotel bill and may not speak English.[4]

Resort fees are also commonly located in tourist areas, where there is collusion, and every hotel decides to charge resort fees. Currently, resort fees apply to all 62,000 rooms on the Las Vegas Strip.[18] Resort fees, along with the recent introduction parking charges (neither of which are typically charged at the numerous alternative gaming locations in the United States), are believed to be a major cause of a reduction in tourism to Las Vegas.[19]

Resort fees are not found just at resorts. Many budget hotels also charge resort fees. The Days Inn in Miami Beach, the Super 8 in Las Vegas and the Hotel Pennsylvania in New York City are all two star hotels that charge resort fees.[20]

New York City has seen a surge in hotel resort fees.[21] In New York City the fees are often called destination fees, facility fees or amenity fees.[22][23] There were 15 hotels in New York City with resort fees in 2016. In 2018 there are 84.[24]

Background

Hotels have long charged guests for specific amenities at a hotel, such as for snacks, drinks and use of facilities.[25] In 1997 some resort hotels began to charge mandatory fees, regardless of which facilities were actually used by the guest.[26] This enables the hotel to advertise a cheaper room rate, making up the balance from the mandatory fee.

Benefit to hotels

The major benefit to the hotels is the profit, while still being able to show 'reasonable' room prices to the public. Resort fees brought in $2.47 billion to the hotel industry in 2015.[25] MGM Resorts International stated that, for Las Vegas hotel rooms in 2011, "Our RevPAR (revenue per available room) in the first quarter was up 16%, including resort fees. Excluding resort fees, REVPAR was up 11% in the quarter year-over-year."[27]

Online hotel search and booking tools like Expedia, Travelocity and Hotel Tonight take a percentage of a reservation and then pass the reservation on to the hotel.[28] A hotel loses a certain percentage from every reservation made on one of the sites. Hotels that charge resort fees but are listed on these hotel search and booking sites list only their advertised rate and not their resort fee. That is because the hotel booking site takes a percentage of that advertised rate. When the hotel collects the resort fee at check in, separately from the rate purchased for online, the hotel collects 100% of that charge. Resort fees also affect travel agents.[29] Travel agents can earn commission on the advertised rate of the hotel and do not collect a percentage of taxes or fees. Furthermore, travel agencies must legally know what the resort fee for each hotel is so that they can properly pass it on to their clients.[30] Failure to do so could result in a lawsuit to their agency. Individual travel agents have found it difficult to keep up with changing hotel resort fees.[31]

Benefit to consumers

The American Hotel and Lodging Association has stated that the resort fee provides many benefits to consumers.[32] Hotels say that customers like many features and amenities of the hotel to be included in the resort fee to avoid nickel and diming,[33] but there is no proof that any services are included in the fees, which leads many consumers to deem it to be dishonest pricing.[34]

MGM Resorts International senior vice president Alan Feldman,has said “We have heard negative feedback from guests, but we’ve also heard positive feedback, from guests who are happy that they are no longer paying à la carte for different services. They don’t feel nickeled and dimed.”[35]

Exchange for service

Hotels have stated that tourists are paying a resort fee for a variety of amenities at the hotel. The American Hotel and Lodging Association said that resort fees pay for a range of hotel amenities, such as pool use, gym access, towel services, Wi-Fi, newspapers.[36] They state that the resort fee is a payment for a group of services.

Consumer advocates such as the National Consumers League[37] and Travelers United[38] have stated that since it is a mandatory fee, it is not an exchange of service. A guest could decline all of the services allegedly offered by the resort fee and still be forced to pay the resort fee. The advocates state that there is no exchange of service. It is simply an additional amount that the hotel collects, on top of the advertised room rate.

Most hotels tax the resort fee at the hotel occupancy tax rate. This is a tax rate reserved for hotel room rates. Services are taxed at the sales tax rate in the United States. The hotel occupancy tax is higher than the sales tax rate. Consumer advocates argue this shows that the hotel resort fee is considered part of the room rate for the hotel and for tax purposes, not an exchange of service.[39] A direct exchange of service, such as a hotel charge of bringing an extra bed to the room, would always be taxed at sales tax. A resort fee is normally not taxed as an exchange of service, but as a second room rate.[40][41]

Disclosure of fees

Resort fees have been criticized by consumers for not being fairly advertised prior to purchase.[25]

Katherine Lugar, president and Chief Executive Officer of the American Hotel and Lodging Association said that “throughout the booking process, hotels are transparent about costs, fees and taxes.”[35] That assertion has been debated by consumer advocates. They argue that though hotels may list a resort fee, they do so at the very end of the booking process in extremely small print. Charlie Leocha, President of Travelers United, said "The charging of mandatory resort fees by hotels results in a misrepresentation of the true price of the hotel room."[42] Sometimes hotels improperly list the fee as a tax.[1] The Arizona Grand Resort & Spa lists its resort fee under taxes.[43] The Life Hotel in New York City lists their fee as an "NYC mandatory City Hotel Fee."[44] A resort fee is not a tax nor is it a mandatory city hotel fee.

Consumer advocates have noted that if consumers choose to book their hotel based on price-based search tools on Expedia, Priceline, or Hotel Tonight, the resort fees are left off in the initial price comparison search. A hotel could be anywhere from $10 to $50 more expensive per night, but it is not listed with the advertised price.[45]

A Priceline spokeswoman, Flavie Lemarchand-Wood, said the practice of tacking added fees onto the advertised price after a hotel is selected is not deceptive: "We are compliant in disclosing the fees prior to purchase. It is very important [for the consumer] to read everything on the page"[1] Expedia, Priceline and Hotel Tonight do not take commission from the resort fee. These online booking companies have no incentive to publish the resort fee. The hotel takes the entire amount of the resort fee. These companies are further disincentivized since if one site begins to add the resort fee to the advertised rate, it will look like the price on that site is higher and consumers would go to a competing online booking site.[1]

Consumers groups such as Travelers United and Kill Resort Fees contend if a hotel charges a mandatory fee, it should be included the nightly room rate.[38] Hotel rating systems, such as AAA, have taken a policy of deducting points from a hotel being reviewed if they charge resort fees.[46] AAA has said resort fees are a major annoyance of travelers.[47] Frommer's travel guides have come out with numerous articles against hotel resort fees.[48][49]

Taxes

Since resort fees are a mandatory fee that is not included in the advertised room rate of the hotel, the fee can be taxed differently from the advertised room rate. Resort fees in Nevada are treated and taxed as a hotel room at hotel occupancy tax. Both hotel rooms and resort fees in Nevada are taxed at 13.38%.[50][51] Resort fees at many hotels in New York are taxed at 8.875% instead of the hotel occupancy tax of 14.75%.[52] There is a 5.875% tax loss for New York City per resort fee per room per night.[53] Consumer advocates estimate that hotel resort fees in New York City cause $10 million dollars of lost tax revenue annually.[54]

Legality

Australia

In Australia, under the Australian Consumer Law, it is illegal to charge, or even advertise it is a requirement to pay, mandatory fees (including resort fees), if they were not reflected in a total cost as a single figure at the time of booking. Under Australian law, any fees that are mandatory and are able to be calculated, including resort fees, must be included as a part of the total price in a single figure at the time of booking, deliberately doing otherwise are grounds for prosecution for misleading and unconscionable conduct.

When advertising the sale price of a consumer good or service (i.e. non business-to-business transactions) a price "must state the total price of the good or service as a single figure, which is the minimum total cost that is able to be calculated. This should include any tax, duty, fee, levy or other additional charges."[55] Due to this requirement under Australian law, unlike the U.S., consumer goods and services always have ticket prices which reflect the actual monetary cost which a consumer pays out of pocket, with no additional tax or fees calculated on top at point of sale.

Additionally, by virtue of Australian anti-price drip laws, it is also not sufficient, and it is illegal, to add a mandatory fee (including resort fees) in circumstances where it was only disclosed and added to the final single figure in the late stages of a booking process. This price-dripping practice constitutes a bait and switch tactic which is misleading and detrimental to both consumers and competitors. Any mandatory fee must be included in the single figure which is advertised, it must be disclosed, and the disclosure must be early on in the booking process.

In order to protect Australian consumers, heavy penalties are applied and enforced (up to hundreds of thousands of dollars) for each instance of a breach of the Australian Consumer Law provisions.

Europe

In the European Union, it is illegal to charge or advertise mandatory fees that are not included as part of the total room rate, such as resort fees, although there are now new 'city taxes' in many locals, however, these are required to be fully disclosed.[56][57]

United States

In the United States, the legality of charging resort fees has been a decades-long issue of contention. Currently there is no U.S. law that allows for hotels to charge mandatory fees in addition to their base room rate. However, there is also no law banning this practice.

Numerous bodies have authority on this issue in the United States, including the U.S. Congress, state legislatures, the Federal Trade Commission, and the National Association of Attorneys General. So far only 47 Attorneys General have opened an investigation into hotel resort fees. Marriott was issued a subpoena on June 6, 2017 by the Attorney General of Washington, DC regarding their non-cooperation in the investigation, as the hospitality industry continues to stall any legislative solution to the issue.

U.S. Federal Trade Commission

The Federal Trade Commission (FTC) is the US government organization with authority to regulate the hotel industry. On the subject of resort fees, FTC attorney Mamie Kresses said "The fees are not illegal as long as they're disclosed."[1] What constitutes a clear disclosure, however, has been a matter of debate between the hotel industry and consumers. In 2012, the Federal Trade Commission advised 22 hotel operators that their online rate quote totals, which did not include certain fees, may need to be updated to comply with FTC regulations.[58]

Since then the FTC has taken no legal action on resort fees. Consumer advocate Chris Elliott wrote "The FTC has failed to protect consumers from what is perhaps the most dishonest fee in the travel industry."[11] In 2016, FTC Chairperson Ramirez wrote a letter to Congress on the subject of resort fees and said “in my view……the most efficient and effective means to mandate the type of industry-wide requirement you propose would be through legislation.”[59] US Senator McCaskill introduced the “Truth in Hotel Advertising Act of 2016” in the US Senate on February 25, 2016.[60] The purpose of the bill is to "prohibit unfair and deceptive advertising of hotel room rates, and for other purposes."[61] The bill was not voted on during the 114th Congress.[62]

The Federal Trade Commission (FTC) published a report on the harm of resort fees on January 5, 2017.[63] The report concluded "that consumers are likely being harmed by the hotel industry practice of disclosing mandatory resort fees separate from posted room rates, without first disclosing the total price."[64]

Challenges to Resort Fees

Due to the increasing use of resort fees at hotels, many consumers have begun to challenge them being applied to their hotel bill.[65] This has been done by asking the hotel desk manager to remove the fee, by disputing the fee with the guest’s credit card company or by suing the hotel in small claims court.[66]

Consumer travel advocate Christopher Elliott advises anyone who was blindsided by an add-on fee to dispute the charge with their credit card company. While the booking sites may allow small-print disclosures, some credit card companies have taken the consumer's side in these disputes and reversed the charges. Moreover, merchants that have a high volume of disputed charges can run afoul of credit card providers, which in egregious cases have the ability to terminate a vendor's right to accept credit cards.[1]

Kill Resort Fees, an advocacy group working to eliminate resort fees, stated that all resort fees should be challenged. Lauren Wolfe, Founder of Kill Resort Fees, said that "Resort fees are the equivalent of being charged a second room rate. No law exists protecting hotels ability to charge two room rates for one night so all of these second rates also known as resort fees should be challenged by consumers."[67]

Forty-seven Attorneys General began an investigation into the practice of hotel resort fees in May 2016.[68] Marriott would not turn over documents on the investigation after many requests by the Attorneys General.[69] Marriott was subpoenaed on June 7, 2017 by the District of Columbia Attorney General Karl Racine.[70] The subpoena reads:

"D.C. Code 1-301.89c(a) provides that the Office of the Attorney General 'shall have the authority to issue subpoenas for the production of documents and materials or for the attendance and testimony of witnesses under oath, or both, related to an investigation into unfair, deceptive, unconscionable, or fraudulent trade practices by or between a merchant or consumer, as defined in 28-3901.' Consistent with that authority, on May 16, 2016, the District served its subpoena on Marriott"[68]

Wyndham is currently facing a class action lawsuit in Pennsylvania Federal Court regarding hotel resort fees. Luca v. Wyndham Worldwide Corp. et al., case number 2:16-cv-00746, in the U.S. District Court for the Western District of Pennsylvania deals with and Wyndham its subsidiaries are sneaking a resort fee on to its room prices without notifying consumers, causing its rooms to be advertised at deceptively low rates, according to a proposed class action filed Monday in Pennsylvania federal court.[71] The case reads:

“Defendants’ failure to adequately disclose the resort fee charge as part of the true cost of renting a hotel room is deceptive and causes consumers, including plaintiff and the class, to believe that they are paying substantially less than they actually are being charged for a room at defendants’ hotels,” according to the complaint."[71]

Most hotels that have resort fees say the fee provides internet access. In most locations, the hotel resort fee is taxed sales tax or hotel occupancy tax. Some have argued that internet access cannot be taxed at either of these tax rates due to the Internet Tax Freedom Act.[72] New York State is explicit in saying hotels and motels cannot tax internet access.[73] Numerous hotels are being sued over their claim that resort fees provide internet access.[74][75]

Organizations

Organizations Advocating For The Ability of Hotels to Charge Resort Fees

  • American Hotel and Lodging Association[60]
  • American Gaming Association[76]

Organizations Advocating Against Resort Fees

  • Kill Resort Fees[4]
  • Travelers United[38]
  • National Consumers League[37]
  • Consumers Union[77]
  • Consumer Federation of America[78]

See also

References

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  2. ↑ "New York hotels are now charging tourists an extra 'destination fee'". The Independent. 2017-11-29. Retrieved 2018-05-13.
  3. ↑ "Spa in Waikiki - Tennis Courts | Pacific Beach Hotel". www.pacificbeachhotel.com. Retrieved 2016-05-22.
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  12. ↑ "FTC Warns Hotel Operators that Price Quotes that Exclude 'Resort Fees' and Other Mandatory Surcharges May Be Deceptive". Federal Trade Commission. 2012-11-28. Retrieved 2018-05-13.
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  • "Las Vegas Resort Fees 2018 Guide". lasvegasjaunt.com.
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