Ancillary fees as revenue enhancers: turning chump into chunk change

Fees for "ancillary" services have been proliferating across industries for the past several years with airlines and hotels being at the forefront in coming up with creative ways to raise money without raising prices on the main product or service.

While fees for checked bagggage amongst airlines is by now ubiquitous and largely, if grudgingly, accepted a slew of new fees are either being contemplated or already levied by the airlines. These include in-flight wireless use, extra-legroom and/or recline, in-flight "meals", preferred seating and priority boarding with particularly annoying, if not egregious, levies like itinerary change fees. 

Baggage fees are evidently lucrative with the New York Times reporting that last year "domestic airlines raised $3.4 billion just from charges for checked bags. In 2007, the year before most airlines started charging extra for checking a bag, the comparable figure was $464.2 million."

The hospitality industry led the way in the imposition of ancillary fees with the imposition of, (oftentimes outrageously high) fees for internet usage. Recent revenue enhancers include fees for parking, use of the airport shuttle (formerly free in most hotels), late checkout/early check-in fees and resort fees. Particularly annoying and usually only in upscale hotels is a fee for using the fitness center. The good news for the traveling public is that some chains (Radisson and Sofitel for example) are moving away and offering internet services for free. Ditto (at least in the upper deck) for airlines with many opting for free internet.

A direct by-product of the proliferation in ancillary fees is the change in focus for corporate travel managers from why hotels and airlines are ramping up and adding these charges to managing the increasing complexity in accounting for the spending on travel, an obviously critical area in straitened times.

That this is not merely an American issue is evident from a recent move across the pond where Britain's Office of Fair Trading (OFT) announced that it has opened a formal investigation into a number of airlines including "low cost" carriers EasyJet and Ryanair are being investigated by the Office of Fair Trading over surcharges for using debit and credit cards. Nor is it limited to airlines and hotels. The OFT is also looking into the competitive issues raised by the sale of ancillary products sold by insurance companies in addition to standard automobile insurance coverage.

 

Published by

Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

Leave a Reply

Your email address will not be published. Required fields are marked *