Why you should never hide surcharges in your hotel’s room rate

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By Clare Riley, Content & Editorial Manager, SiteMinder

For holidaymakers, travellers, and hotel guests, they’re often considered an unnecessary nuisance. But for hotels and accommodation providers across the globe, fees and surcharges are becoming an increasingly vital revenue stream.

New research from Bjorn Hanson, a clinical professor at New York University’s School of Professional Studies Tisch Center for Hospitality and Tourism, has found that hotels in the US collected a record amount in fees during 2014, with the upward trend showing no signs of slowing down.

Last year saw a record amount of $2.35 billion collected, and hotels in the US look set to grow that figure further to $2.47 billion in 2015.

Hanson suggests the jump in numbers is a reflection of a 3% rise in occupancy rates, as well as a 5% increase in the amount charged for fees and surcharges.

The research found a vast array of fees being applied by hotels and these include:

  • resort and amenity fees
  • early departure fees
  • reservation cancellation fees
  • internet fees and telephone call surcharges
  • business centre fees – i.e. sending / receiving faxes
  • room service delivery surcharges
  • mini-bar restocking fees
  • charges for in-room safes
  • baggage holding fees for guests after check out
  • charges for unattended parking

And some new fees are becoming increasingly-common too – according to Hanson’s work they include:

  • special charges for set-up and breakdown of meeting rooms
  • early check-in fees
  • fees to guarantee a specific room
  • charges for unattended surface parking in suburban locations
  • fees for holding checked luggage

The figures show that the number of fees and surcharges have increased every year since 1997 – except for brief periods following 2001 and 2008 when hotel demand in the US declined. Professor Hanson explains that this is no great surprise given that fees and surcharges can result in up to 90% profitability for savvy hoteliers.

Importantly, Hanson says that his research uncovered a rise in the disclosure of fees and surcharges among hotels in the US.

“Some fees and surcharges are sometimes called ‘hidden’ or ‘surprise’, but disclosure on websites, confirmation emails, tent cards in guest rooms, room service menus, and guest service binders continues to increase,” says Hanson.

And he suggests that guests can often view them as a surprise, because hotels set the amounts themselves, rather than following a brand’s guidelines or applying an industry-benchmark, which in turn creates a lack of consistency.

“One of the reasons for the sense that some of these fees and surcharges are ‘hidden’ or ‘surprise’ is that they are often established and the amounts set hotel-by-hotel rather than by brand, and both can change frequently.”

Disclosure is key and being transparent with guests is necessary to avoid a backlash when it comes to fees and surcharges for extras.

Back in 2012, the Federal Trade Commission Division of Advertising Practices in the US, issued 22 warning letters to the hotel industry about disclosing resort fees. However, as recently as July 2015, the division made it clear that these surcharges are allowed to be implemented if disclosed appropriately.

Be up-front with guests

A great way to be up-front with guests about fees and surcharges is to disclose them during the booking process, and offer as many as optional extras and add-ons.

For example, using your internet booking engine, such as SiteMinder’s TheBookingButton, you can add several options upfront that range from breakfast through to secure WiFi – something OTA Agoda.com this week identified as important to guests when they’re choosing a hotel.

Using TheBookingButton set-up system as an example, you can enter extras and charges for many different scenarios. Here’s just a few of the ones we’ve seen our customers use:

  • Per Booking – Late Checkout
  • Per Person Per Night – Hot Breakfast
  • Per Room – Champagne on arrival
  • Per Room Per Night – Fresh Towels
  • Per Person – Day Spa Package

You can even attribute certain extras to particular rooms such as ‘King Suite 3-Night Special’. And TheBookingButton allows you to set descriptions of the extra, images to really sell its appeal, and applicable start and end dates to make seasonal offers throughout the year, such as Valentine’s Day and Easter.

It might seem like an easy option to simply package these extras into your rates but Hanson warns hoteliers against about burying fees and surcharges away into room rates. He says potential guests pay close attention to room rates, and focus less on extras, and fluctuations in the rates they’re keeping a close eye on can cause guests to look elsewhere.

“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 travellers, but resort and other fees and surcharges change less frequently; and the focus of many travellers is on the room rate,” explains Hanson.

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