The U.S. Federal Trade Commission has the power to immediately eliminate hidden fees at hotels and resorts (and indeed, across the economy). It is time for it to act to protect consumers. Transparency should not be a partisan issue. So-called “drip pricing” undermines free markets and cannot be defended.
It’s Time For The FTC To Ban Resort Fees And Other Hidden Charges
The Federal Trade Commission (FTC) is tasked with protecting consumers from anticompetitive, unfair, and deceptive trade practices. Like advertising a hotel room for $39 in Las Vegas only to have that total more than double once mandatory “resort fees” and government taxes are added…
With one stroke of the pen, the FTC can compel hotels to disclose all-in pricing from the moment in which a consumer searches for rates and eliminate “drip pricing.” Drip pricing is where sellers offer deceptively low pricing to lure in customers and only reveal the full cost, including mandatory surcharges and fees, once the consumer is close to completing the transaction.
In a well-argued column in the New York Times, Max Sarinsky argues why this matters to consumers:
Drip pricing has no legitimate business purpose and harms consumers in at least two key ways. First, the practice leads people to spend more money than they would if the full price were communicated upfront. While consumers can in theory walk away once the true price is revealed, studies show that many complete such transactions, given the time and effort that they have already invested. Second, even for consumers who abandon a transaction, drip pricing wastes time and severely complicates efforts to compare the actual prices of competing offers.
It matters to businesses as well:
Drip pricing can also be damaging to businesses, and it is not a problem that the market will correct on its own. Unless all sellers are required to disclose their full prices upfront, companies that opt for transparency risk losing market share to those that practice deception. After finding in 2015 that customers spent over 20 percent more on tickets on its website when mandatory fees were hidden versus when the full price was disclosed at the start, StubHub resumed its practice of concealing mandatory fees in order to keep up with the competition.
For years, in both the Obama and Trump administrations, the FTC has warned and threatened it would take action. But it never did.
Some businesses, like Marriott, now offer consumers the ability to opt-in for all-in pricing, but this is not enough. Such information should be provided by default.
CONCLUSION
Hidden pricing is deceptive and unfair. It undermines capitalism and should be addressed for hotels and other sectors of the economy, just as it has been for airlines. Consumers should see the actual price they must pay when they invest the time to check on hotels, tickets, and other services.
I have yet to hear a cogent argument for why all-in pricing should not be mandatory, so I’m not sure what the hold-up is beyond the efforts of powerful interest groups which are trying to hoodwink consumers.
(H/T: SINJim)
The hold up of course is that there is more money to be made through drip pricing as opposed to simply showing the all in mandatory care up front. The only people who benefit from going all in up front are consumers and as an interest group we have little to no influence.
Another great example of this is the disparity between what happens when you the consumer make a mistake vs when an airline makes one. If you mistakenly book a ticket to the wrong city for example unless it’s a refundable ticket your screwed. There is no 48 hour grace period during which you can go “hey my bad” and get your money back.
By contrast look at how mistake fares are handled. At virtually any point an airline could declare the fare you paid a mistake and void your ticket with little to no consequences to them. That’s just plane wrong.
There is a very easy way to end this practice: do not stay in hotels that charge hidden fees. If they get zero bookings, they will stop this practice. It amazes me that most of the things we complain that is wrong only exists because stupid people pay for it.
So you have never stayed at a hotel with a resort or destination fee?
I’m sure you have great tales from your storied travels at the Days Inn in Topeka.
As much as I despise the fees… “So-called “drip pricing” undermines free markets and cannot be defended” is just simply false. As long as the fees are listed up front when you book the reservation and people agree to it, it doesn’t undermine anything. The best way to stop these fees is for the OTAs to start charging the same commissions on them as they do the actual room rate.
But that’s the problem – how do you define upfront? At the final payment screen? I would say that is completely the opposite of upfront.
It’s displayed repeatedly throughout the booking process. Even the Expedia search results give you the total including taxes and all mandatory fees. It has become less about screwing over the consumer and more about cheating the OTAs out of commissions – that’s why I think this is their fight. They need to either stop listing hotels that charge any mandatory fees or collect them at the time of booking from the consumer.
Resort fees are bad because it’s harder to know who has them. On the other hand, sales tax is relatively uniform so omitting that in hotel prices is ok with me.
The basic idea to separating sales tax is so the consumer will know how much the state is taking instead of blaming the business for the cost. In Europe, the VAT can be roughly 25% but it is not separated out so people can forget how much they are paying the government.
Hope it includes (or at least displays) parking. I’ve thought I found a great rate only to discover parking is $30-$60/nt.
Parking has always been a huge ripoff when staying in hotels. However, you can find ways around it by parking yourself and walking couple blocks. Now, resort fees you have no choice but pay for it.
“I’m not sure what the hold-up is beyond the efforts of powerful interest groups which are trying to hoodwink consumers”
You used to work in Washington, there’s your cogent argument. The traveler lobby isn’t very powerful, and certainly doesn’t contribute enough to political campaigns of people who care enough to make a change. Though if hotels keep pushing the envelope with electricity charges and whatever else they can think up, I think a court might actually hear one of the pending lawsuits out there.
From your lips to God’s ears.
100% agree. It’s getting out of control. At a very minimum you should be able to opt out of the resort fee if you don’t want the “extras” it includes.
Don’t hold your breath.
Don’t get me started on the credit card fees you have in Australia.