Hilton Hit With Lawsuit Over Resort Fees

Filed Under: Hilton, Hotels

One of the most annoying trends in the hotel industry is resort fees, destination fees, facility fees… whatever you’d like to call them. Essentially these are added mandatory charges that hotels tack on to the room rate.

Why hotels charge resort fees

Hotels charge these fees for a variety of reasons:

  • They’re a way for hotels to try and get more revenue without increasing the “transparent” room rate
  • It works out better for the hotel than an increase in the room rate, since historically they don’t have to pay travel agents a commission on these fees
  • In some areas it also allows hotels to skirt the typical occupancy tax that otherwise applies on the room rate

Hotels are largely delusional about these fees, and the Hotel Association of New York has stated that guest “appreciate the value offered” by these fees.

While I’m not generally for the government getting involved in everything, I’ve long said that I think it would benefit consumers for the government to at least require hotels to be forced to advertise all-in pricing, just as they require of airlines. I’m not saying hotels shouldn’t be allowed to charge these fees, but rather that they have to be clearly disclosed.

The good news is that we’re seeing more and more progress on this front…

DC Attorney General suing Marriott over resort fees

As I noted a couple of weeks ago, the District of Columbia Attorney General is suing Marriott over their practice of hiding resort fees.

He argues that this practice has harmed consumers, and he wants to force Marriott to advertise the true price for their hotels up-front, and also to provide monetary relief to DC consumers who have been harmed by this policy.

It was interesting that the lawsuit was specific to Marriott, and I was curious if we’d see more of this from other attorney generals and/or for other hotel groups. We now have our answer.

Nebraska Attorney General suing Hilton over resort fees

Nebraska Attorney General Doug Petersen has filed a lawsuit against Hilton, for hiding the true price of hotel rooms from consumers and for charging hidden resort fees.

He argues that Hilton’s deceptive and misleading pricing practices and failure to disclose fees has harmed consumers and violated Nebraska’s protection laws.

The suit seeks to force them to change the way they display prices, as well as provide monetary relief to Nebraska consumers, and pay civil penalties.

As he explains:

“For years, Hilton has misled consumers in Nebraska regarding the true cost of certain Hilton hotel rooms. They failed to heed warnings from the Federal Trade Commission and the mounting complaints from their own customers.”

Bottom line

It looks like things might finally be changing for major hotel groups, as we now have two attorneys general suing two different hotel groups. If this spreads I think hotels will have no choice but to change their practices.

(Tip of the hat to View from the Wing)

Comments
  1. Are there any Hiltons in Nebraska charging resort fees?

    I really do hope that these lawsuits get the hotels to change their act.

  2. As I’ve mentioned before I work for one of the major hotel companies, not one being sued….yet. As far as line employees go, we HATE these fees. It really doesn’t come from the hotel companies themselves, but from owners. They see this as a way to generate additional revenue much like baggage fees. For the properties I represent I fought against them, but it came down to ownership groups wanting to generate additional profit. I would like nothing else than to see them just disappear.

  3. Nebraska from the clouds! I feel like the state just wanted to be in the headlines for once. Good for you, NE. Great way to get your name out there.

  4. I’d like to point out that there’s one other reason why they charge these: Government GSA per diem rates typically don’t include resort fees. So as long as their “rate” meets the GSA rules, government (and all gov’t contractors) can stay there, then the fees and taxes are added on top and the gov’t will reimburse the full cost.

    If GSA (general services administration I believe) changed their per diem rules to counter resort/destination fees, I bet that would remove an incentive as well.

  5. Seriously, resort fee for hotel in Nebraska? You’ve got to be kidding me, good move on Nebraska AG, hopefully other AG from other states will start sueing these hotels. I’m a Hilton royalist but screw them for practicing this deceptive pricing bs.

  6. This is good and bad at the same time for hyatt globalist. There are hotels where the room rate is $100 and the resort fee is $55, thanks to the globalist perk I only pay $100. Now without the fee they are gonna increase the price to $155 and that sucks

  7. You know that an issue requires government intervention when Republicans and Democrats both call for stopping it. Glad to see momentum picking up against resort fees. Businesses are able to get away with way too much deception and overcharging. Hopefully we can end resort fees and “send them back” to where they came from – the consumers who got ripped off by the big hotel chains!

  8. @Tom sez: “Someone needs to sue Hyatt as well for resort fees.”

    It is not necessary. The proverbial Pandora’s box was opened when the DC AG sued Marriott over this ridiculous practice. The lawsuit against Hilton is just the exclamation mark. The days of resort fees not being part of the total room rates quoted are numbered because both Hilton and Marriott will lose their respective lawsuit and, in a domino effect, standalone resort fees will be outlawed throughout the US, and not too soon because the practice has been illegal in other western democracies, like, forever. Here is what wiki says:

    Australia
    In Australia, under the Australian Consumer Law, it is illegal to charge, or even advertise it is a requirement to pay, mandatory fees (including resort fees), if they were not reflected in a total cost as a single figure at the time of booking. Under Australian law, any fees that are mandatory and are able to be calculated, including resort fees, must be included as a part of the total price in a single figure at the time of booking, deliberately doing otherwise are grounds for prosecution for misleading and unconscionable conduct.

    Europe
    In the European Economic Area, which comprises the European Union plus three more countries, Articles 5(1)(c) and 6(1)(e) of Directive 2011/83/EU (Consumer Rights Directive) require businesses to quote “the total price of the goods or services inclusive of taxes”. Therefore, it is unlawful to charge or advertise unavoidable fees and taxes that are not included within the total room rate, such as resort fees and city taxes. The legislation also applies when booking non-EEA accommodation via EEA-based travel agents and web sites, which are bound by the same requirement to quote the “total price”.
    ________________________

    This part of the EU legislation is interesting: “The legislation also applies when booking non-EEA accommodation via EEA-based travel agents and web sites, which are bound by the same requirement to quote the “total price”.”

    Does that mean that if I book stays at resorts in the US using an EEA-based Hilton wed site, I would get rates that are inclusive of resort fees even now?

  9. I’m sure the fees won’t go away. Instead they will start displaying them more clearly and have to charge taxes on the fees. So we get screwed in the end. Hotels aren’t going to let these fees go away.

  10. @Marsh — Hotels can set whatever room rates they wish. That is not why they are being sued. In other words, the lawsuits are not intended to force hotels to stop charging resort fees. Rather, the lawsuits are meant to force hotels to be honest and reveal the true costs of stays, instead of costs with hidden but mandatory ‘resort fees’ that try to make room rates seem cheaper…

  11. Its interesting, we live in a world when a giant like Booking.com (the Amazon of the travel industry) charges hotels such high fees that the only way these hotel can do so is to tag on an additional fee. The industry is one of the lowest margin industries in the market, completely based on the cost of labor, its labor intensive to take care of someone. Think Hotels make big profits? Think again. Consumer expectations generated by these sites are such that Mom and Pop operations are held to the same standards that a Four Season are. You want to get rid of Resort Fees? Stop booking through Booking.com and Expedia. Did you know that some independent hotels ( that we all love) pay upwards of 35% to Booking.com or Expedia just to be visible? This article champions the Sheriff of Nottingham for stealing from the poor…do you think Booking.com and Expedia are providing you value for your 35% that you just paid to them? Do they change your sheets, park your car, carry your luggage? No, they just take your money (yes this is the big reason why your hotel rates continue to grow and why now these fees exist). Of course their money into campaigning against the hotels on forums like this doesn’t hurt. How was the free stay anyway? If you’re reading this, stop supporting those monopolizing entities (yes…there are really only two of these…and yes even trivago and trip advisor are owned) and you may see these fees eventually removed. Hotels really just want to please the guest, its in the DNA, but doing so as a pauper when you have 100’s of staff whose jobs are always in jeopardy because the electrical bill might not get paid makes it hard to not to apply a fee as hotels still have to provide those services you want (ie) internet (which they don’t get the same rates s you do at home, let me assure you). It is right that these agencies are taking further profit off of the cost of providing these services? There is a cost to that gym, there is a cost. Hotels are literally removing this from the rate so that they don’t pay commission to Booking.com to have a gym or internet. Hotels are not the airlines, and to be quite blunt usually not the bad guys in this whole situation. Throwing it out there as usually consumers don’t understand, Hotels cant really talk about it because they’re at the mercy of these two giants and the repercussions of open dialogue are tremendous. However the more knowledgeable should be calling all of this out.

  12. In the theme of resort fees and the higher end hotel fees that charge them, I want to ask why it is that when you go up the chain from cheep hotel to expensive, you get less included. Since we’re talking about Hilton let’s use them as an example. You go to a Hampton inn and get breakfast. You get a pool and fitness center without a resort fee, etc.. You go to a Garden Inn, and you’re paying for breakfast. You keep going up to a Waldorf Astoria and you get nothing included and you get a resort fee. Shouldn’t you get more with the higher cost? Since they like comparing themselves to airlines, the equivalent would be an airline giving you free baggage, meals, and alcohol in economy, but starting to charge you piecemeal in comfort, business, and first class.

  13. As an Australian I’m very much against the imposition of resort fees.

    In December I am traveling to Hawaii & staying at a fairly high-end hotel in Waikiki that wants to charge an additional $US40 per day resort fee.

    How can I argue the case to avoid this charge?

  14. @David Boyal – Man, do you not know the hotel business. Hotels may have a lot of employees but labor is a minor expense. Almost all hotel labor is low wage hourly workers with a few salaried managers. Depreciation is by far the biggest expense, generally followed by interest on your real estate and building because no one is dropping millions of dollars without leverage even on a small mom and pop type place. Even if you are just talking out of pocket expenses, loan payments dwarf payroll. I ran the back of the house for the Bellagio, and TI and the hotel ran about 75% fixed costs and 25% variable which included wages. The reason hotels are paying that kind of commission is the room itself costs hundreds of dollars full or empty but sending a maid through, cleaning sheets and towels, and checking someone in and out of one more room costs about $15, and that’s in a union shop in Vegas. A mom and pop paying $10/hour is going to cost even less.

  15. Somebody needs to sue IHG seems to me they start charging parking fees and so call additional charges for a holiday inn express REALLY?
    and looks like they start charging parking fees to staybrig hotels also

  16. @David Boyal – what are you talking about? A lot of times, the rates are much higher when booking directly with the hotels. I even called these mom and pop properties. They suggested to book thru expedia or booking.com for cheaper rates.

  17. There was a resort fee ($29)on our room in the Ghetto area of SFO we were told not to walk near the property !!It was totally nuts and i complained we were not in a RESORT!! give a $10 drink coupon for an$18 drink… Trump towers in Chicago did not charge a resort fee but parking is $70
    we need more lawyers on this…

  18. @Frank: Your first two sentences indicate that you are not familiar with the the overhead costs of hotel operation. I am not aware of any business whose payroll costs are minimal, except it is a family business where there is no hired help. Payroll costs involve both wages and worker compensation, which is quite steep due to abuse. Labor cuts are always the first on the chopping block when times are bad. Booking directly with the properties is generally cheaper than going thorough the travel websites. I generally use the dominant travel websites to locate the hotels and book with them directly, especially with mom and pop businesses. Chain hotels have deep pockets to withstand the economic slowdown. All hotels, franchise and independent, depend on Booking.com and Expedia, the only two dominant players in the industry, to fill their rooms.

  19. AirBnB and the fees they charge should be the next target. A lot of the growth in resort fees come directly from competition there. Folks think they are getting an AirBnB for a steal until they get cleaning fees/service fees tacked on. Hotels should at least get to compete on an even playing ground.

  20. @David H: “it came down to ownership groups wanting to generate additional profit”

    That is THE ONLY REASON that there are these fees – money changing pockets.

  21. I recently stayed at the Carib Royle in Orlando, FL. I was charged $30.00
    a night resort fee plus $14.95 a day parking fee. My son flew in and we
    picked him up and the hotel tried to charge him parking fee and he didn’t
    even have a car.We had a drink in the lobby,a glass of wine and a whiskey
    and the bill was $36.00 for two drinks. Some of the food areas in this hotel
    will add a 20% tip and not disclose it to you so you leave another 20%
    and now the server is getting a 40% Never again will I stay here.

  22. Another issue with resort fees is the fact that IHG for example,don’t allow them to be included towards points earned for a stay.In cases where resort fees can be over 30% Of the daily room rate,that is a hefty sum that IHG & Others are denying their elites.In addition Elites already qualify for some of the alleged benefits that Resort Fees are supposed to bring,by virtue of their Elite Status,so clearly the Resort Fee argument that is put forward by hotels ,is fundamentally flawed

  23. @globetrotter Operators tend to focus on labor costs because they are variable but variable is not the same as substantial. The land is already bought/leased, the hotel is already built, the rooms are already furnished, the rest of the equipment is installed, this is the real hotel overhead, not labor. While I was working there, MGM almost went bankrupt because they overbuilt with City Center despite the existing hotels making over 300 million dollars/month in EBITDA. Our labor costs including management weren’t even 10% of our debt service and debt service is always why a hotel goes bankrupt. Even if we cut labor 10% it was only going to contribute another 1% to cash flow. Hotels always try to cut service and blame labor costs but the problem is always taking on too much debt or overbuilding. The owners either spent too much building or paid too much in acquiring the property.

  24. Along the same lines, another absurd surcharge is “domestic security fee” which used to be known as “9/11 security fee” for rental cars in NJ. This is assessed at $5 per day. Revenue collected goes into a general state fund if you look at the statute. I’ve emailed state representative a few times but no response or change. It’s outright deceptive of that state government. I guess the NJ AG wouldn’t fight for that to go away .

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