Junk Fee Crackdown in California Would Hit Hotels and Short-Term Rentals

California legislators have passed two bills that could impact how the state's 6,000 hotels and thousands of short-term rentals inform consumers about so-called junk fees, such as resort fees and housekeeping fees.

The bills, which passed the state Senate late last week, are on the desk of Governor Gavin Newsom — who hasn’t yet taken a position on them.

Under Senate Bill 537, businesses that sell lodging for up to 30 days in California can no longer display a room rate that doesn't include all fees or charges (except government-imposed taxes) as of July 1, 2024.

The bill specifies that online sites must display all mandatory fees upfront on a consumer's first search. The law affects listings shown to the public in California or consumers outside the state for hotels operating in California.

Under Senate Bill 478, it would become unlawful by mid-2024 for California businesses of any kind to advertise prices that don't include all mandatory fees or charges, with some exceptions.

October Deadline

The bills are among the dozens sent in the past month to Governor Newsom. He has until October 14 to sign or veto. If he does neither, one or both of the bills could become law by default.

"As with all measures that reach the Governor's desk, these bills will be evaluated on their merits," said a spokesperson on Monday.

Hotel resort fees are contentious. For example, as of Monday, 1 Hotel West Hollywood was charging $35 a night in resort fees that were mandatory even if a customer didn't want the amenities supposedly covered by the fee, such as "nature-inspired programming and events," fitness classes, and "pet beds."

Housekeeping and other service fees at short-term rentals are also an issue. Companies such as Airbnb have in the past year been attempting to be more transparent in showing up-front a stay’s total price before taxes.

Hotel Resort Fee Debate

The proposed legislation drew mixed responses. A key hotel lobby supported the final version of the bills.

"The standard disclosure of all mandatory fees in these bills provides a transparent and competitively fair booking process for guests making lodging reservations in California," said Lynn Mohrfeld, president and CEO of the California Hotel & Lodging Association.

Yet a couple of online travel agencies opposed the legislation.

Expedia Group said: "A state-level approach risks creating an unworkable patchwork of differing standards across states.

Airbnb argues the bill should apply only to California listings that are viewed by California guests. For example, it argued that the bill raised questions about what would happen if an out-of-state visitor searched for travel listings while in California. What if that consumer's home state's legislature had different regulations about price display than California's?

Why Junk Fees Matter

Fee disclosure matters. When fees are disclosed is critical, too. Wait until the moment of purchasing, and the consumer may be caught off-guard by the full cost.

Poor disclosure hampers comparison shopping. That's partly why complaints about junk fees have become more prominent this year.

A few recent developments:

• Hyatt in July began displaying nightly rates plus resort fees upfront on a traveler’s first search of its site and app.
• Marriott adopted a similar enhanced disclosure of resort fees in May.
• States attorney general and class action lawsuits against other companies, such as Hilton and Sonesta, are pending.