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The Ugly Truth: Hidden Fees Hurt Rates at Four-Star Hotels

You can still find four-star hotel accommodations for less than $100 per night in many big U.S. cities. Opaque buying helps cut costs; fees add to costs. That’s the overall takeaway from a recent report from Hotwire, the big online travel agency (OTA) and Expedia’s player in the opaque-buying marketplace.

The report’s focus was on cities where you could find the most four-star hotels for less than $100 per night when buying through Hotwire’s opaque system—in which you know the price, rating, and general location, but you don’t find out the specific hotel until you make a nonrefundable purchase.

  • Cities with the most four-star deals, from most hotels to least, are: Las Vegas, Atlanta, Dallas, Orlando, Minneapolis, St. Louis, Chicago, Detroit, Salt Lake City, and Reno-Tahoe.
  • Cities with the greatest spread between the best published list price and the opaque price are Detroit, with a $58 spread, Dallas ($52), Chicago ($47), Atlanta ($45), Minneapolis ($39), Orlando ($37), Las Vegas ($35), St. Louis and Salt Lake City ($32), and Reno-Tahoe ($27).

In some ways, I was surprised that the spreads were as low as they were. My experience has been that opaque buying cuts the price of a four-star hotel by a lot more than $58, let alone $27. I can’t argue, however; the results were based on Hotwire’s actual bookings and published rates posted on other big websites during the first seven months of 2013.

But the numbers of four-star hotels with sub-$100 rates is seriously distorted by the fact that most hotels in Las Vegas, Orlando, and Reno-Tahoe add hidden “resort” and other mandatory fees, up to $40 a day, to what they post as their rates. The fees don’t distort the price differentials: You pay the same fees whether you buy at a posted or opaque rate. But the fees can easily put what looks like a $75 room over the $100 mark.

Digging into these numbers revealed an ugly truth about current hotel markets: The cancer of mandatory fees is spreading, and the FTC’s feeble efforts to police the marketplace are ineffectual. Although the worst offenders originally concentrated in Las Vegas and Hawaii, they’ve invaded other popular visitor centers as well. I checked the 10 cities on Hotwire’s list as well as a few other important destinations for mandatory fees.

  • I found that many or even most hotels add mandatory fees in Anaheim/Disneyland, Aspen, Atlantic City, Las Vegas, Myrtle Beach, Orlando/Disney World, Reno-Tahoe, and Scottsdale. also shows fees in Biloxi, Mississippi, plus scattered results in California and Texas.
  • On the other hand, I found no added mandatory fees in Branson, Burlington, Gatlinburg, Jackson Hole, Mendocino, New Orleans, or Newport Beach.

One of the most galling aspects of this problem is that almost everybody who looks at the scam buys into the hotels’ phony excuses for the fees. The hotels generally put forth a laundry list of services the fees supposedly cover—Wi-Fi, a daily newspaper, a bottle of water in the room, access to gym facilities, and such. Because the lists are plausible, people fall into the trap of accepting the correspondence between fees and individual services; they analyze the problem in terms of whether or not those services are worth the fees. In fact, those claims are totally phony: As long as the fees are mandatory, what hotels say they cover is meaningless: If they’re mandatory, they’re an integral part of the base rate.

Early this year, the Federal Trade Commission sent a letter to the largest hotel chains advising them to inform customers of their mandatory fees. In response, most hotel chains and online agencies now post their fees somewhere on the first screen but don’t include them in the featured price used for comparisons. FTC apparently thinks that’s enough disclosure, but it isn’t. Websites can still base rate comparisons on the phony pre-fee prices, so those comparisons do not reflect real prices. The only true solution is to require that all mandatory fees be included in the initial base-rate posting. How we’ll get there, however, is anyone’s guess.

Ed Perkins on Travel is copyright (c) 2012 Tribune Media Services, Inc.

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