Michael Key was surprised by a hefty add-on fee for electricity at a recent meeting. “These charges came out of the blue,” says Key, the Durham, N.C. — based director of meetings and incentives for Monumental Life. “I just can't pull $20,000 from the air.”
For Koleen Roach, director, recognition and conference planning for Securian Financial in St. Paul, Minn., the surprise came when her convention services manager for a 2006 meeting asked to discuss additional power charges for ballroom audiovisual, production, and lighting. Roach's reply: “If it's not in the contract, I'm not paying.”
Even when add-on fees appear in the fine print of a hotel contract, the list is long — and getting longer by the minute. Among them are resort and amenities fees, telephone surcharges, minibar restocking charges, and automatic gratuities. One planner was assessed a service charge of 19 percent to 20 percent on in-house AV — on top of rental and labor rates. Another was charged 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 they get the best possible rate is becoming more and more challenging for planners.
“In terms of budgeting, we know what price we can pay, so it is a matter of good negotiations with the property to come up with a win-win situation,” says Lynn Schwandt, CMP, senior event planner, Thrivent Financial for Lutherans, Appleton, Wis.
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 were not 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.
Add-on fees will supply the hotel industry with an estimated $1.4 billion in extra revenue in 2005, according to PricewaterhouseCoopers. “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 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 in New York.
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 companywide 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 that a planner cannot be charged an optional fee unless he or she opts in.
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.”
Fortunately, planners aren't powerless in the face of add-on fees. “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.”
Steve Collins, owner of Breckenridge, Colo., meeting-planning firm Resort Meeting Source LLC, 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 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 these tactics. “If your group is valuable, then the hotel might even tolerate out-of-pocket expenses beyond discounting room rates and negotiating add-on fees,” says Blackman, director of sales and marketing for Seascape Resort Monterey Bay in Aptos, Calif. Recently, he says, “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.
After you've negotiated your way to a hotel contract free of add-on fees, John Foster, Esq., CHME, a lawyer with the Atlanta firm of 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 contracts.
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 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 who has the authority to make those decisions,” Foster says. “If the hotel takes orders from a person who 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.”