Do not think that this lawsuit only matters to Marriott. Competitors are keeping a close eye on the case, knowing they could be next. The industry has a big decision to make about how it charges amenity fees, if at all.
A lawsuit pending against Marriott in the Superior Court of the District of Columbia may very well result in the company and its franchisees paying millions of dollars in restitution for resort fees that it is accused of deceptively charging guests. But it is unlikely to eliminate the practice from the hotel industry altogether, experts say.
And for those hospitality groups who do drop resort fees under this new pressure, they may opt instead to tack on amenity costs onto offered room rates to compensate for the loss of revenue from resort fees. This has dangerous implications for customers and hoteliers alike, according to Bjorn Hanson, hospitality consultant and former clinical professor at the NYU Jonathan M. Tisch Center for Hospitality and Tourism.
Guests for one will have to pay higher occupancy taxes at checkout. Hotel owners also have to contend with listing lower on third-party booking sites, such as Priceline or Expedia. Larger unit hotels will especially be at a competitive disadvantage in this scenario, as they require more in resort fees than smaller hotels with fewer perks to offer.
Examples of common amenities hotels charge customers for include access to gyms, rooftop bars, swimming pools, casino credits, transportation, newspapers, and water bottles in rooms. The problem is these sometimes are not clearly laid out to customers upon booking stays online or on guest folios, according to case documents.
“The government may use public relations as a way to get rid of amenity fees, but it’s unlikely,” said Hanson. “It’s not the government’s place to tell businesses how to price. It is their job to act in favor of the consumer, making this suit a disclosure issue.”
Road to Transparency
Regardless of the lawsuit’s result, transparency will be the real winner of the litigation, Hanson added. The case also rings the loudest alarm yet at the industry for widely deploying a strategy previously reserved for vacation destinations as recently as 2015.
“The real takeaway from this lawsuit is to have an important jurisdiction file against a big company,” said Hanson. “Other hotels will have to wait and see what happens, but other states and jurisdictions will feel that now is the time to go after them.”
Marriott is not the only hotel group benefiting from resort fees. But lawmakers are going after the chain first for the same reason one would target McDonald’s or Walmart — it is the biggest fish in the pond, according to Howard Adler, professor of hotel management and director of the Center for the Study of Lodging Operations at Purdue University.
Marriott currently has more than 7,000 properties available worldwide, of which it owns less than 30 hotels. Meaning the brand has to tread softly when approaching its hundreds of franchisees about how to handle resort fee language and practices after its pending litigation is settled, Adler said.
This is especially true if Marriott is forced to pay up. While the company does charge its franchisees management and incentive fees, property owners pocket the bulk of profits from resort fees.
“Define it and customers will likely be alright with it,” said Adler, adding that one potential solution could be for the hotel industry to allow guests to opt in to different amenity packages, similar to cruise lines offerings.
“Hotels look at each other the way airlines do,” he said. “Hilton, IHG, and Marriott account for a huge amount of available rooms around the world, but know what’s going on with one another. If one creates uniform policies [with franchisees], the industry will follow suit.”
Marriott did not immediately respond to requests for comment. However, CEO Arne Sorenson in an interview with LinkedIn on Friday, said, “We’ve been talking to the attorney generals of many states for a number of years. D.C. withdrew, sort of at the last minute, and decided to make a bigger test case out of it. We’ll obviously fight it, we think it’s wrong, it [resort fees] are well disclosed, and we’ll go through it.”
Resort Fees Spread to Urban Hotels
Resort fees have always been a bone of contention for government agencies and consumer groups.
In 2012, the Federal Trade Commission sent notices to hotel companies, including Marriott, discouraging the use of “drip pricing,” as it violated federal consumer protection laws by misrepresenting prices consumers should expect to pay.
A report by the FTC’s Bureau of Economics five years later reiterated its earlier findings. But by then resort fees had begun trickling into urban markets. Marriott currently stands accused of unfairly charging guests amounts ranging from nine to $95 per night in 189 of its properties worldwide, including Washington D.C.
“Notwithstanding these warnings from the FTC, Marriott continues to advertise room prices that do not include its resort fees both on its own website and websites operated by OTAs,” the lawsuit says.
Hotels charging resort fees in large metropolitan areas was a rarity until last year, when amenity costs rose as much as 400 percent, according to Hanson. A key factor was the increasing cost of insurance, real estate taxes, and labor for brands, amidst slow room rate growth. So too was the historical success of fees charged at destination resorts. These costs were not only only expected, but also clearly advertised to the consumer.
“Go on almost any resort website, you could not claim you were not informed that there was a resort fee,” said Hanson. “Now in urban markets, it was inconsistent in 2018 because websites were not designed to disclose the fee, and companies were trying to figure out how to put it on reservation systems.”
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Photo credit: Marriott’s pending case in the Superior Court of the District of Columbia may result in the hotel industry tacking on resort fees to room rates. Bloomberg