Resort and amenities fees, telephone surcharges, mini-bar restocking charges, automatic gratuities — the list of add-on fees that can appear in the fine print of a hotelis long, and getting longer by the minute.
Barbara Mastroddi was recently surprised by a new add-on fee while planning a breakfast meeting. “On the hotel's menu for ‘Continental-Style Breakfasts,’ there was a line that read ‘Maximum service time of one hour; with seating add $2.50 per person,’” says the events and communications associate at the Center to Advance Palliative Care in New York. “I had never been assessed such a charge.”
Catherine Lyons, director of meetings and trade shows for the International Sleep Products Association in Alexandria, Va., has also seen new fees lately. “I am seeing a 19 percent to 20 percent service charge on in-house audiovisual — on top of rental and labor rates,” she says.
“I had a new one last week,” says Gerri Ayers, president of Ayers Meetings & Events Inc. in Houston. “It was a ‘passing’ fee to cover the cost of banquet staff passing the drinks on trays to guests. This was in addition to the standard bartender fees and the 20 percent gratuity added to the $5.50-per-drink cost.”
Keeping track of all the extra fees and ensuring that their customers get the best possible rate is becoming more and more challenging for planners. “It just seems like a lot of nickel and diming,” Mastroddi says. “It is like buying a car — you get a proposal with one price, and then only when you read the fine print do you see the additional service fees or resort fees you will have to pay. If we charged this way for registration or booth rental for our meetings, we would have some very unhappy customers.”
A New Revenue Stream
Hotels have seen some very unhappy customers. According to American City Business Journals Inc., some hotel chains have settled class-action lawsuits that allege fees weren't disclosed in advance, including Wyndham International Inc., Hilton Hotels Corp., Hyatt Corp., Marriott International Inc., and Starwood Hotels & Resorts Worldwide Inc. But that hasn't stopped hotels from adding fees.
Why would a hotel continue to engage in a practice that clearly irritates its customers? Three words: Cold hard cash.
According to Pricewaterhouse-Coopers, add-on fees will supply the hotel industry with an estimated $1.4 billion in extra revenue in 2005. “Planners should be alert to a master-folio billing charge, a bartender charge in addition to the traditional cost per bottle opened, meeting-room charges in rooms for food-and-beverage service, meeting-room yield management charges, and housekeeping and bell automatic gratuities and service charges,” says Bjorn Hanson, PhD, head of PricewaterhouseCoopers' Hospitality and Leisure Practice division. (See sidebar, page 24, for a complete list of potential add-on fees.)
Rather than do away with profitable add-on fees, hotels are now more careful to disclose them before striking a deal with a customer. For example, Hilton recently instituted a new company-wide pricing policy. “We classify charges in two ways: mandatory pricing or optional pricing,” says Dennis Koci, senior vice president of operations support for Hilton in Beverly Hills, Calif. “Room rates are considered mandatory pricing. Things like parking, room service, and telephone service are considered optional pricing. It's Hilton's official policy that all mandatory prices must be disclosed at time of purchase (when a reservation is made). That's how we train our managers.”
Hilton continues to use add-on fees, including resort fees, but these charges are now optional, and must be disclosed to customers before they are charged — which means a customer cannot be charged an optional fee unless he or she opts in. This is also the case with associations booking on behalf of a group.
Marriott also tries to maintain full disclosure with customers. “We believe in being open with our customers from the start so they are not surprised,” says Laurie Goldstein, manager of public relations for Marriott International. “Marriott does not charge resort fees. But for many of our customers, we are bundling phone and Internet charges. This saves the customer money and assures that they are not surprised by a lot of fees.”
“Our challenge these days is that as hotels have seen consumers become more accepting of these fees, they now see dollar signs and a new revenue stream,” says Steve Collins, owner of Breckenridge, Colo., meeting-planning firm Resort Meeting Source LLC. “They have seized upon this as a way to raise their rates without really raising their rates. They can still run advertisements with an eye-popping rate offer, and bury the fees in the fine print.”
How to Fight Fees
Fortunately, planners aren't powerless in the face of add-on fees. “We as consumers have the power to change this,” Collins says. How? Through careful.
“When talking to a resort property, I explain that we are meeting all day and ask why we should pay a resort fee when not one of our people will use its facility,” says Kathleen Fish, director of programs for the Association of Management Consulting Firms in New York. “If the resort wants the business, it will knock it off, and if it doesn't, we will go to another property.”
Collins has also successfully negotiated away the expense of add-on fees. “I had one hotel property implement a $5 resort fee between when it quoted rates to me and when we went to contract,” Collins says. “The resort fee was ‘non-negotiable,’ but it dropped the room rate by $5 so the end effect was the same. Had it not done that, we would have taken the business elsewhere.”
Tom Blackman, CMP, supports Fish's and Collins' tactics. “Know how much the hotel wants your group,” says the director of sales and marketing for Seascape Resort Monterey Bay in Aptos, Calif. “If your group is valuable, then the hotel might even tolerate out-of-pocket expenses beyond discounting room rates and negotiating add-on fees. Not five minutes ago a salesperson came to me and said ‘I think we can get this $40,000 conference if we are willing to provide the group transportation to a local attraction.’ We gave the group their requested transportation — a cost of $460 directly out of the resort's pocket. This group knew how much we wanted its conference.”
Keep in mind that the amount of leverage you have with a hotel is in direct proportion to the number of guest rooms your attendees will occupy in relation to the group's resource requirements and how much money the group will spend while at the property, Blackman says. “If your group is small, say 20 people and 20 rooms, please don't expect a large property to offer concessions, discounts, and free rooms,” he says. “But, there's a property for every group, even the one that needs 5,000 square feet of space and 20 overnight guest rooms.”
After you've negotiated your way to a hotel contract free of add-on fees, John Foster, Esq., CHME, an attorney with the Atlanta firm Foster, Jensen & Gully LLC, recommends adding further protection by including a clause that prohibits the addition of fees without your consent. The following example is the clause Foster uses in all his.
Miscellaneous Charges/ Authorized Signatures:
No additional charges not specified in this contract, or any addendum, will be incurred by XYZ Group for work performed or for services or items provided by HOTEL unless HOTEL has first obtained prior written permission from an authorized representative of XYZ Group to have the work completed or the service or item provided.
Neither XYZ Group nor attendees will be responsible for additional surcharges, gratuities, or service fees not included in this contract without XYZ Group's or an attendee's written consent, respectively.
This clause also protects planners from unexpected charges that can occur when someone without authority to consent orders something from the hotel, such as an extra projector or plate of hors d'oeuvres. With this clause in your contract, “a hotel is obligated to take requests for items only from someone representing the meeting sponsor that has the authority to make those decisions,” Foster says. “If the hotel takes orders from a person that is not authorized by the meeting sponsor to place such orders, then the hotel does so at its own risk.” Just be sure to designate one or more persons in the contract as being authorized to provide consent so the hotel will know to whom it should listen and respond.
“Planners still have recourse to fight add-on fees without this clause,” Foster says, “but the clause makes it easier to protest an unauthorized charge.”
Potential Add-On Fees
According to a 2003 study by PricewaterhouseCoopers, surcharges appearing in the U.S. lodging market include the following:
Cancellation fees of one-night's room rate plus tax (unless the hotel is notified two to five days in advance).
Early-departure fees averaging $50. Master-folio billing fees anywhere from $50 to more than $1,000 for maintaining an organization's master folio for direct billing, even though the hotel is not paying commissions on individual corporate credit cards.
Resort and amenities fees ranging from $15 to $20 for towels, fitness-center access, tennis- and basketball-court access, in-room coffee and tea, daily-newspaper delivery, etc.
Telephone surcharges on local calls longer than 20 minutes and connection fees for toll-free calls to capture revenues from guest use of local dial-up, Internet, and calling card calls.
High-speed Internet-access charges of approximately $9.95 for each 24-hour cycle, incurred during the first use, whether the Internet is used again or not.
Increased fax charges ranging from $1 to $5 per page.
Handling charges for overnight packages.
Room-service delivery fees of approximately $2.50 in addition to a 15 percent to 17.5 percent gratuity.
Mini-bar restocking charges up to 20 percent of prices.
Automatic gratuities or service charges for housekeepers, bellmen, and doormen.
Room charges for meeting rooms in which food and beverages are served during a meeting, in addition to meeting-room rental fees. (This had been a practice in many hotels in cities including New York and San Francisco, and now hotels in other cities are doing so.)
Open-bar reception charges have changed from an average single fee of $125 that included the bottle plus bartender fees to $125 plus bartender fees, gratuities, and tax.
Long-distance telephone charges.