Ancillary revenue like resort fees is a big business for the travel industry, and it is unlikely hotels are going to abandon the practice during the volatile pandemic recovery — unless they are forced to.
Marriott International made hundreds of millions of dollars off the much-maligned practice of charging resort fees, recently unsealed documents allege from the Washington, D.C., Attorney General’s ongoing lawsuit against the company.
D.C. Attorney General Karl Racine first sued Marriott in 2019 for hiding the real price of a hotel room through the practice of resort fees, an added price on daily rates that isn’t initially showed online for what is supposed to be services unique to that property. These fees, even charged on non-resort locations under other names like amenity or destination fees, are an industry practice owners love as a way to boost revenue and profits. Guests tend to loathe as a bait-and-switch tactic.
Marriott made at least $206 million off the practice just from its self-managed resorts since 2012, according to depositions from the ongoing lawsuit. The company itself made $17 million from the practice in 2019.
“As alleged in the complaint, Marriott is taking advantage of consumers by purposely misleading them about the price of rooms just to increase the company’s bottom line,” a spokesperson from Racine’s office said in a statement. “AG Racine filed this lawsuit because of these facts – and now we have them confirmed by executives at the company and from the details about the tens of millions of dollars Marriott made off resort fees.”
The lawsuit accuses Marriott of withholding these additional fees — which can range from $9 to $95 per day — from the displayed daily rate on its own website as well as online travel agency websites like Expedia. Instead, the added fee is noted later in the booking process in an “obscure blue box” or under the taxes and fees section of the rate breakdown. But the latest documents from the lawsuit also reveal how Marriott leaders knew how important it was to continue hiding these fees.
“It would put us at a competitive disadvantage against hotels, other hotels, our competitors by doing that,” Jeffrey Wolff, Marriott’s former vice president of guest experience and rooms operations, said in a deposition.
Wolff oversaw the company’s resort fee program from 2010 until his retirement in 2019, according to the lawsuit.
While Marriott leaders believed rankings in search results would suffer as a result of disclosing fees, Expedia announced plans in late 2019 to lower a hotel’s rankings if it charged a resort fee. It’s unclear whether Expedia followed through.
Marriott declined to comment for this story, but company leaders have long maintained publicly that they are very transparent about these fees when guests go to book a hotel stay. There is also a rigorous process that goes into determining what hotels can impose these kinds of fees, according to prior statements from the company.
“Resort fees tend to be a hot topic because I think you’ve probably seen there’s been some chatter out there from the (state) attorneys general about the way they are displayed,” Leeny Oberg, Marriott’s chief financial officer, said at Skift Global Forum in 2019. “And I’ll remind everybody that we always make sure they are very clearly displayed before you actually book a room.”
An audit of Marriott’s resort fee-imposing hotels during the last five months of 2015, four years before Oberg’s statement, showed only 67 percent of those properties were disclosing the fee at the time of reservation.
The unsealed documents show Marriott does have a vetting process for hotels looking to add on resort or destination fees, but the company rarely punishes hotels for failing to comply with rules like disclosing the fee at the time of booking.
Hotels were “permitted to continue charging resort and destination fees if … they have not been complying with the disclosures,” Wolff said in his deposition.
Only one hotel was ever flagged for a potential revoking of its ability to charge one of these fees, according to the deposition of Scott McCoy, Marriott’s current vice president of operations and guest experience and who oversees resort fees.
A Swelling Surcharge
Resort fee revenue ballooned from their namesake leisure properties and into non-resort locations, in part because Marriott has a murky definition of what does and doesn’t qualify under these fees, according to internal emails obtained in the lawsuit. This is when resort fees began to appear under other names like “destination amenity fee.”
The guidance, per a 2014 memo from Wolff, is that the fee must include a bundle of products and services that wouldn’t normally be included in the price of the room. A destination amenity fee at the Renaissance Las Vegas Hotel included things like free play at a local casino, and a whiskey and wine tasting, according to the lawsuit.
But other destination fees appeared to lump in services that would normally be considered part of that hotel’s regular brand standard like fitness center access and parking. One of the motivating factors to deploy destination fees appears to be finding a way to recoup lost revenue from internet access, a service guests once paid for but has since become free at various speed levels.
Marriott isn’t the only company to deploy this practice or come under fire for it, either.
A sample booking at some of Accor’s Fairmont hotels Wednesday show an “urban experience fee” for some of the company’s city hotels not included in the advertised rate. The Nebraska attorney general’s lawsuit filed a lawsuit against Hilton’s resort fee practices in 2019 similar to the D.C. case against Marriott’s.
Ruled by Search Engines
The Federal Trade Commission first warned 22 hotels and resorts in 2012 about resort fees and what the organization viewed as price misrepresentation against consumers. Marriott-owned hotels were part of that initial group, the lawsuit alleges. The FTC followed up again five years later with a study showing consumer harm induced by the resort fees.
The hotel industry’s decision to keep up with the practice rather than heed the government’s warning appears to boil down to Google and Expedia rankings weighing more than any potential crackdown on hotel surcharges.
The American Hotel & Lodging Association, the hotel industry’s largest trade group, in 2018 submitted comments to the FTC noting “search is vitally important to how consumers book hotel rooms.”
But the organization also appeared to recognize the importance of transparency, publicly at least, with another claim: “The order of search results is important to consumers, and consumers expect default search results to be objective.”
Photo credit: Marriott came under fire for its practice of resort fees and the millions the company makes off the so-called "bait-and-switch" tactic. VisitPlano / Flickr