The State of the Union address last week directly referred to resort fees as surprise fees that are tacked on to hotel bills. It was also noted that these fees can cost guests up to $90 a night at hotels that aren’t even resorts.
Changes can be expected — either in the ability of hotels to charge these fees altogether or in how these fees are implemented to ensure that consumers’ interests are protected. The Federal Trade Commission has already published an “advanced notice of proposed rulemaking” to outlaw “deceptive or unfair acts or practices relating to fees.” What is being referred to as The Junk Fee Prevention Act will also ban airlines from adding fees for families to sit with young children, along with other extra fees and surcharges.
Resort fees at hotels first emerged in the late 1990s and have grown rapidly over the years. By 2015, they accounted for a sixth of total hotel revenues. In 2018, they represented $2.93 billion in revenue, according to the U.S. Lodging Fees and Surcharges study conducted by New York University’s School of Professional Studies.
Resort fees, also known as urban destination fees or amenity fees, typically have high profit margins attached to them. Profitability of these fees ranges from 80% to 90%, depending on what is included in the fee. With continued pressure on operating margins, resort fees are a highly preferred revenue source by operators, due to the strong flow-through to the bottom line.
While the future of resort fees is uncertain, hotel owners and operators can implement simple and effective strategies to ensure that consumers do not feel like they are being taken for a ride.
1. No Surprises
Transparency is paramount when charging a resort fee. Ensure that the fee is clearly communicated early in the booking process and at the same time as when the price of the room is first displayed if the reservation is made online, or when the room rate is first stated by the reservation agent, if the booking is being made via phone. List all items and services that are included in the resort fee so that consumers know what to expect.
It is critical that the customer has a clear understanding of the cost of the resort fee and what is included prior to making the buying decision.
Further, details of the resort fee should be included in the reservation confirmation and shown as a separate charge from the room rate. Upon check-in, the front desk agent should take a few minutes to explain the fee and its inclusions. Avoid surprising the consumer with these fees. Communicate details early in the booking process.
2. Provide Value
Provide real value against the resort or urban destination fee and avoid including items or services that a consumer would have access to anyway as a guest of the hotel.
A good rule of thumb is that the retail value of items and services included should be five times the fee. So, if you are charging a $20 fee, the retail value of items included should be $100 or more.
Several brand guidelines on resort and urban destination fees refer to target retail value two-and-a-half times or four times the fee. But if you want to minimize guest complaints and incidents of refunds on the guest folio, target a retail value that is five times the fee. Provide real value for money.
3. Make It Special
Avoid including items in the resort fee that are standard expectations of a quality hotel experience — for example: in-room coffee, access to the fitness center, bottled water, and the worst one ever, local phone calls.
Instead include experiences that are unique to your property, community or city. For example: an outdoor yoga class at dawn, a regional wine flight, a mezcal tasting, a guided hike, surfing lessons, a complimentary chef’s signature appetizer, a chocolate tasting led by the pastry chef, a sommelier-led tasting of hand-selected wines. If curated thoughtfully, inclusions in the resort fee can help drive meaningful additional revenue, as many guests are likely to buy the entire experience based on what they sampled via the resort fee inclusions.
The President’s comment on resort fees at the State of the Union address has put a big question mark on the future of these fees. Meanwhile, it is only responsible for our industry to implement these fees in a manner that is transparent, provides real value for the cost and includes unique experiences that enable guests to create lasting memories.
Romy Bhojwani is director of hospitality market analytics, Northeast and Midwest, at CoStar Group.
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