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To Fee or Not To Fee

Does charging guests additional fees really make a difference? Here’s a consensus.

Friday, April 30, 2010
David Wilkening
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Homewood Suites by Hilton tried to take a facetious approach to airline fees for “travelers down on their ‘spirits’ with the news of airline fees going as high as $45 for carry-on baggage.” In a press release, the chain said:

“Meals, extra space and Internet access should not have a price tag, and staying at a Homewood Suites is guaranteed to save travelers the money they would have to spend on the new baggage fees (plus all the other airline fees) in just a one-night stay.” The hotel company created a chart comparing its array of free services with the various charges for the airlines.

The fee issue is hardly a laughing matter, however, as Spirit Airlines CEO Ben Baldanza found out recently with the proposed carry-on fee that has prompted seven U.S. Senators to introduce legislation to ban the move and five airlines to deny they will match it.

So where does that leave hotels…which some say inevitably will have to add fees? What do you need to know about hotel fees? And if you do want to introduce them, what’s the best advice to minimize any public relations damage?

When it comes to hotel fees, they have perhaps been around even longer than airline charges.

“Hotels have always offered their share of unreasonable fees - such as exorbitant taxes and dollar-a-minute telephone charges - but in recent years the industry has begun upping the ante,” said Independent Traveler.

“Ever been socked with a $26-a-night ‘resort fee’ or had the pleasure of paying $3 simply for having a safe in your room, even if you never used it? These are just a few of the pesky fees that hotels are tacking onto travelers’ bills,” the site says.

So when it comes to fees, you can count the ways, as the site did. They found 17 of the most common, ranging from airport shuttles to bellhop gratuities, cancellation fees to energy surcharges.

Sites such as Elliott.org, run by Christopher Elliott, have long found ready readership on advice for avoiding such fees.

“Hotel fees that must die - and how to kill them,” was one typical Elliott column from “The Travel Troubleshooter.”

Elliott pointed out that, as 2010 shapes up to be another “down” year for the hotel industry, and sliding room rates, fees may be inevitable. But he adds that some fees are acceptable while others are not. An example of the latter is a surcharge for a safe, particularly when a hotel does not vouch for safe storage. His advice for wary consumers is to be aware of fees before booking.

One of the problems with fees is that they often don’t add that much to the bottom line.

In 2007, revenue from sources other than room rates and food and beverage sales in restaurants was less than six percent of a typical hotel’s revenue, according to PKF Hospitality Research.

USA Today selected 20 U.S. hotels and asked for their charges for handling packages, toll-free calls and laundering clothes or other common services often needed by frequent business travelers.

Many hotels were in line with the Marriott chain, which typically allows individual properties to determine their charges. When it comes to controversial fees such as toll-free calls, Marriott spokesman John Wolf says the chain takes no stand, but “we strongly encourage them (individual hotels) to use discretion.”

As for whether or not hotels are moving towards fees, they are. “They’re doing it right now. They’re doing it on parking, on resort fees -- all kinds of fees, exactly as the airlines are doing,” says Jean Francois Mourier, CEO, REVPAR GURU.

Fees have become big business and profit generators for airlines, he says, though they have typically bundled fees into their core product, while hotels traditionally have kept them separate.

“Until now, that is. Hotels around the world are beginning to emulate their airline brethren and charge guest fees for previously installed services,” he says.

Mourier says the move will continue in large part because of various taxes that hotels have to pay. In his own area of Miami, for example, the local hotel tax is above 13 percent.

“If you go through Expedia, typically there’s another 25 percent charge. So before the hotel gets any money at all, they’re already paying 38 percent. That’s why it’s very difficult for a hotel to get away from charging fees,” he says.

The immediate impact on customers is that fees are “detrimental” to their service perceptions.

“No one likes to be nickel-and-dimed, and consumers will push back at tactics that make them feel that way,” he says.

So what do hoteliers do?

Fees properly done can be a positive, he says. “The stripping out of extraneous services and offering them for a fee can have dramatic positive effects on the basic rate,” he says. Fees can help give hotel operators the chance to differentiate their product from competitors.

The biggest mistake hoteliers make in implementing fees is “not disclosing it ahead of time to guests,” says Carl Schneider, founder of GuestRights, a membership program to “maximize the hotel guest experience and increase hotel bookings and revenues.”

“If a hotel has something like a resort fee, it should be right there on their website. Fees are not necessarily unfair, as long as the guest is not caught off guard or surprised by them,” he says.

A key for hotels is to avoid the mistakes airlines made with “sneaky” and poorly explained fees. Instead, they should be presented “straightforward and upfront” in the booking path, he says.

The best fees he recommends are those that accompany a clearly stated service.

“What makes this kind of fee a fee and not an additional product or service is its compulsory nature: a guest will not have a choice to decline this product or service,” he says. A good example is housekeeping.

A second kind of fee is the one that is included in the room rate as a matter of course. An example is an energy surcharge. “This sort of fee is also largely unavoidable, and allows hotels to defray the indirect cost of lodging a given guest,” he says.

A third fee is not really a fee, but a charge for various services that a guest may or may not use - such as local phone or mini-bar charges. “Since guests are not compelled to partake in these services, they are not automatically on the hook for their associated fees,” he says.

In the end, whether there are fees or not, hotels still must provide their fundamental elements of clean rooms and sound service.

“No one is considering charging a fee for cleanliness or for courtesy,” Mourier says.
Credit
David Wilkening    David Wilkening
Associate Editor
Hotel Interactive® Editorial Division

Bio: David Wilkening is a writer specializing in travel and business-real estate writing. His work has appeared in dozens of publications and dot coms. He never met a trip he didn't like. He is a former newspaperman who worked in Chicago, Detroit, Orlando and Washington, DC, where he was a writer and editor covering a wide variety of subjects ranging from politics to feature stories.
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RE: To Fee or Not To Fee article link
Hopefully the day will come when we are mature enough to do away with the words "Fee" and "Free" and charge our customers a fair price which allows us to provide the services they require and make a reasonable return on our investment. For to long we have let the public rule how we market our services. The more we say "Discount" "Free: and "Fee' the less loyalty our customers will have. Charge for unusual services, include expected services and make a profit. That is the old fashioned and smart way to do business. And not doing that has proven disatrous for the airline industry. In all of my years I have never seen restaurants, hotels or any other business fail by doing that-they fail not because they do things correctly, but rather by not running a good shop.
Posted by: Bernard Otis
Email: botis75@sbcglobal.net
5/4/2010

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