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Consumer and business travel advocates urge FTC action on hotel price advertising

@denschaal

Aug 27, 2012 6:58 am

Skift Take

There is no reason for a hotel to leave out a mandatory fee when advertising the price of a room. It’s time for the FTC to crack down.

— Dennis Schaal

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Hotels have been playing fast and loose with gotcha fees for too long and now consumer and business travel advocates are urging the Federal Trade Commission to end the practice.

The fees in question include mandatory resort, housekeeping, and Internet access fees, among others, which aren’t included in the initial, advertised base price of the room, but appear at booking or even at hotel checkout.

Columnist Ed Perkins, Consumer Travel Alliance executive director Charlie Leocha, and Business Travel Coalition chairman Kevin Mitchell penned a letter to FTC chairman Jon Leibowitz demanding an end to these “unfair and deceptive pricing practices.”

“Unfortunately, the hotel industry has embraced these anti-consumer practices,” the letter states. “As advocates for individual travelers as well as large corporate buyers of travel services, petitioners request that the FTC consider taking appropriate enforcement action.”

Up to $30 per night tacked on

The trio note that these hidden fees can sometimes boost hotel rates by $30 per night.

Among these hidden fees, referred to as “drip pricing,” the consumer and business traveler advocates cite the practice whereby some European hotels hide mandatory VAT charges when advertising prices through U.S. points of sale.

“An obvious remedy would be a requirement to prohibit drip pricing by hotels and resorts,” the letter to the FTC states. “Specifically, such firms should be required to include any mandatory fees and charges in the base prices they post anywhere – in print, on their own websites, and in GDS and OTA postings. This requirement should apply to all hotels and resorts based in the U.S. and to foreign-based hotels that distribute in the US.”

Lots of precedent for enforcement

The letter states that there is precedent for the FTC, the DOT and state governments to take enforcement action against drip pricing, where suppliers deduct manadatory fees from advertised prices to make it appear that the advertised price is lower than it actually is.

For example, the DOT prohibited airlines from omitting “fuel surcharges” from price promotions, and the FTC “took action” in the 1980s against International Weekends, a Boston tour operator, “that was using drip pricing promotions,” the letter states.

These gotcha fees by hoteliers have been around for decades, but as airlines tack on a la carte fees for everything from checked bags to meals and seats with extra legroom, lodging companies are increasingly getting into the act.

Fees going up, although they are not on the up and up

A study by a New York University professor forecasts that hoteliers in the U.S. will take in nearly $2 billion in such fees in 2012, up 5% from 2011, the Los Angeles Times reports.

And, it isn’t just consumers who are harmed.

The letter points out that these hidden hotel fees make it very difficult for corporations and travel management companies to compare hotel rates and track costs, and the fees often escape the attention of state and local taxing authorities.

See the full text of the letter below:

Download (PDF, 84KB)

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