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Internet Travel Monitor - Marketing, Research & Tech

September 27, 2017

U.S. Lodging Industry Fees and Surcharges Forecast to Increase to a New Record Level in 2017 Ð $2.7 Billion

Following the 2016 record of $2.6 billion, total fees and surcharges collected by US hotels are forecast to increase to another record level of $2.7 billion in 2017. Fees and surcharges were higher than forecast for 2016; although occupied room nights were lower than anticipated, fees and surcharges were higher, with the largest increase in cancellation fees.
The increase for 2017 reflects a combination of approximately 2.0 percent more occupied hotel rooms than in 2016, slightly more categories of fees and surcharges charged-with about the same amounts charged, but lower fees and surcharges for high speed Internet access-and more fees collected for cancellations, for a total increase of approximately 5.0 percent.

Fees and surcharges emerged as an industry practice around 1997 and accelerated when energy surcharges were introduced for a large number of hotels in 2000. There have been numerous categories of fees and surcharges introduced in the past 17 years.

Examples of fees and surcharges include: resort or amenity fees; early departure fees; reservation cancellation fees related to timing of cancellation; early check in fees (for checking in before Òcheck-in time, typically 3:00 pm); Internet access fees; telephone call surcharges; business center fees (including charges for receiving faxes and sending/receiving overnight packages); room service delivery surcharges; mini-bar restocking fees; charges for in-room safes; automatic gratuities and surcharges for other than all-inclusive resorts; baggage holding fees for guests leaving luggage with bell staff after checking out but before departure; charges for a non-binding guarantee for a specific room type; and charges for unattended parking. For groups there have been new or increased charges for bartenders and other staff at events, special charges for set-up and breakdown of meeting rooms, and administrative fees for master folio billing.

An increasingly common and relatively new fee or surcharge is for early check-in, primarily for resorts, more common in Las Vegas (typically check-in time might be 3:00 pm, but if a guest arrives earlier and a guest room is available, traditionally there was not a charge for early check-in). Other of the more recently introduced fees and surcharges include charging for unattended surface parking in suburban locations and holding checked luggage.

The industry also has become stricter about cancellation of reservations with fees for cancelling within two days of arrival as most common, but three days for an increasing number of hotels.

US lodging industry fees and surcharges have increased every year except for brief periods following 2001 and 2008 when lodging demand declined.

Fees and surcharges are highly profitable; many have incremental profitability of 80 to 90 percent or more of the amounts collected.

Some fees and surcharges are sometimes unfairly called ÒhiddenÓ or Òsurprise,Ó but disclosure on websites, confirmation emails, ÒtentÓ cards in guest rooms, room service menus, and guest service directories continues to increase in the nature of the disclosure. In interviews for this update, the issue is more about unpopularity of fees and surcharges rather than fees and surcharges being ÒhiddenÓ. One of the reasons for the sense that some of these fees and surcharges are ÒhiddenÓ or ÒsurpriseÓ is because the categories are often established and the amounts are set hotel-by-hotel rather than by brand, and both can change frequently.

An increasing number of state attorneys general are evaluating or investigating the industry practice of fees and surcharges in response to consumer complaints and visible reporting.

Other initiatives have included:

  • In 2012, the Federal Trade Commission (FTC) Division of Advertising Practices issued 22 warning letters to the hotel industry about disclosure of resort fees. Despite recent statements by industry executives to the contrary, the FTC currently is focused on resort fees.
  • Senator Claire McCaskill announced in February 2016 that she is introducing legislation targeting what she refers to as Òdeceptive hotel feesÓ that are Òbait and switchÓ practices that resort guests are Òslapped with,Ó based on hearing from Òhundreds of Missourians.Ó
There are occasional statements that it would be better to include resort and other fees and surcharges in room rates, but there are several reasons this is not the general practice, including that the higher room rate would subject the fee amount to municipal occupancy taxes; room rates change frequently and are closely monitored by many travelers but resort and other fees and surcharges change less frequently; and the focus of many travelers on room rate. Other occasional comments relate to whether or not it is the role of government to mandate how businesses such as hotels and resorts price their goods and services if fees and surcharges are disclosed.

The estimated amounts of fees and surcharges collected are summarized below:

Year Amount (in billions)
2017 $2.7 billion (forecast)
2016 2.6
2015 2.45
2014 2.35
2013 2.1
2012 2.0
2011 1.85
2010 1.7
2009 1.55
2008 1.75
2007 1.75
2006 1.6
2005 1.4
2004 1.2
2003 1.0
2002 0.55
2001 1.0
2000 1.2

These amounts are estimated based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases, and information available on hotel and brand websites.

Copyright 2017 New York University School of Professional Studies. All rights reserved. From http://www.nyu.edu.
By Bjorn Hanson, PhD, Clinical Professor, NYU School of Professional Studies,
Jonathan M. Tisch Center for Hospitality and Tourism.

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