Resorting to fees to boost profits

Hotel fees for "use" of a resort's facilities as well as other "amenities"  have unfortunately come under the scanner in a variety of forums and even invited comment from a Federal Advisory Committee focused on airlines surcharges. USA Today recently ran a story pointing out that "U.S. hotels are projected to reap a record $2.47 billion this year from fees and surcharges that require guests to pay extra for everything from getting into their room early to leaving bags with the bell staff" per a recent report from New York University.

While there is a lack of transparency on the part of a few operators the industry is unfairly being tarred by the brush used on the airlines, particularly US airlines.  With the exception of Southwest most of the others continue to find innovative ways to pick passengers' pockets while steadily constricting their offerings. United Airlines, for instance, is notorious for its steep baggage fees and outrageously high costs for sitting in any of the rows in the front of their economy cabin allegedly for an extra inch or two of leg room and insult to injury by "upselling" while passengers board the plane!

Left out in the clamor over undisclosed fees is that hotel room rates across the United States are actually below what they were for the peak year (2008) when rates were $107. Adjusted for inflation that amounts to  $117 in 2014 as compared to the actual average room rate of $113 for last year. While consumers are obviously unbothered by the escalating costs (real estate taxes for example in New York City have gone up between 35 – 70% for the same period) what is pertinent is the range of amenities that hotels have added since the advent of the Great Recession. These range from the by now ubiquitous free WiFi and continental breakfast to the more esoteric electric car charging.

Perhaps hotels need to do a better job of price perception by consumers and steer away from the airline or what's worse Uber's (surge) pricing models and take their cues from giant suburban retailers who give the impression of being cheaper than their specialty counterparts even if, on many occasions, that is not the case.  "Unbundling" amenities that indeed are optional (and desirable)  is also another way to overcome consumers' ire at "mandatory" fees.  In any event, a better job of conveying the fact that a highly fragmented industry like hotels can never act in the rapacious manner of a quasi-oligopolistic grouping like airlines is what is urgently needed.

 

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.

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