A new FTC rule is intended to create transparency in pricing and eliminate “junk fees” including resort fees for hotel guests.
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New FTC Final Rule
In a bipartisan effort, the Federal Trade Commission issued a new final ruling regarding junk fees and calling out hotel resort fees specifically.
“The Federal Trade Commission today announced a final Junk Fees Rule to prohibit bait-and-switch pricing and other tactics used to hide total prices and bury junk fees in the live-event ticketing and short-term lodging industries. These unfair and deceptive pricing practices harm consumers and undercut honest businesses.
“People deserve to know up-front what they’re being asked to pay—without worrying that they’ll later be saddled with mysterious fees that they haven’t budgeted for and can’t avoid,” said FTC Chair Lina M. Khan. “The FTC’s rule will put an end to junk fees around live event tickets, hotels, and vacation rentals, saving Americans billions of dollars and millions of hours in wasted time.” – FTC
I’ll address that last piece in a moment.
President Biden’s administration has long touted a desire to eliminate junk fees costing Americans billions of dollars. Earlier this year, bank overdraft fees were capped at $5 down from an average of $35, saving some $5 bn annually for Americans. The overdraft fee cap is facing legal challenges and is set to go into effect Oct 1, 2025 if it remains unchanged.
Some Common Misconceptions/Inaccuracies
Ignoring for a moment the other junk fees included in the bill, there’s a notion that eliminating the fee will eliminate the cost. Many hotels will likely pass the added resort fees into their common rate without the distinction. But that’s not necessarily an elimination of the costs. Hotels may continue to charge resort fees so long as they disclose it at the time of purchase and include it in the overall rate. The FTC concedes that it may not save consumers any actual money, but has assigned a value to the projected cumulative time savings:
“The FTC estimates that the Junk Fees Rule will save consumers up to 53 million hours per year of wasted time spent searching for the total price for live-event tickets and short-term lodging. This time savings is equivalent to more than $11 billion over the next decade.” – FTC
Las Vegas hotels without resort fees have been in constant demand because Sin City is particularly notorious for adding resort fees that can consume a significant portion of a guest’s total bill. The real question is what hotels that charge resort fees will do to comply.
Will It “Eliminate Junk Fees?”
There are two possible scenarios that will play out in the coming months with implementation of the new rule: hotels will either adjust prices down to the market they were competing against and hiding an element of their cost, or nothing changes other than disclosure. Here are those two outcomes in further detail.
Hotels Forced To Adjust Pricing Down
Hotels abusing resort fees to mask the total cost of staying at their property aim to compete against properties that are cheaper by the cost of their fees. It’s possible that hotels charging resort fees will price down to match those cheaper competitors that don’t charge resort fees. This would lead to savings for consumers.
Nothing Changes
Hotels that currently charge resort fees will all have to comply with the new rule meaning that all of their total prices will increase (they really won’t increase, just the display of their rates will rise to actual charged levels.) In essence, the rule does nothing to materially change the experience or cost for guests, just the expectations of their total cost of stay. However, it will look initially like familiar hotels are now charging $35-50/night more even though there’s no actual difference in cost.
Some Elite Guests Could Save More
In the event that hotels choose to sunset resort fees rather than carve them out as separate components of the nightly rate, some guests will save money. Elite loyalty guests with some chains like Marriott are charged resort fees on award redemptions and so if the fees die completely, they will save those guests money. Hyatt and Hilton, for example, waive resort fees on award stays for elites so whether the fees exist or not, they won’t benefit.
Conclusion
A CBS news article (and many more) claimed this week that the federal government banned junk fees including resort fees. However, that’s inaccurate as the fees aren’t banned, brands are just required to disclose those fares in a total rate. The FTC can’t foresee businesses abandoning this revenue stream so instead it projects consumer benefit in time saved hunting for the true price, and values that time savings at $11 bn over the next decade which seems generous and unqualified. It’s possible some elite guests could save money if a hotel (or an entire chain) decides to remove the fee and add them to the nightly rate but it’s difficult to forecast how likely either outcome is at this time.
What do you think?
Adding a “fee” to the cost of something is a swindle , pure and simple .
They also need to eliminate junk fees & additional charges on cruise line quotes; daily service fees really
add up on a cruise.
Just show me the room rate inclusive of all so-called “fees” and taxes. It’s not difficult.
Charging a separate fee for wifi, “pool and gym access”, etc, is blatant gouging. Cut the BS, and roll it into your room rates.
Plain and simple, adding a “fee” just makes people feel they are being gypped or cheated but by increasing the price of the room, people will just pay it; not a complicated business tactic.
A healthy free market relies on clear signaling and signposting. This is in small part why healthcare is broken.
I think this could end up costing Hyatt Globalists money: if hotels sunset resort fees and roll them back into the regular room rate, suddenly the waived resort fee benefit is useless and all our Hyatt stays are $30-$50 per night more expensive.
I’m in favor of it overall, of course, but this aspect is a bummer.
People should be able to go to a search engine, enter the details, and be given prices for stays. This whole “Here’s the price, oops we meant this…..” is a game and needs to be called out.