Ask Skift: Why Are Junk Fees a Problem in the Travel Industry?

Junk fees — charges imposed by travel service providers that are seen as hidden, unnecessary, or excessive — are a constant source of frustration for travelers.

Why are junk fees a problem for the travel industry? 

We put the question to Ask Skift, our artificial intelligence chatbot. Ask Skift used information from our past news coverage and research, and we also did additional reporting on the subject.

What Ask Skift said:

Junk fees are problematic in travel for several reasons:

Lack of Transparency: These fees are often not clearly communicated to travelers upfront, making it difficult for them to understand the full cost of their travel plans. This lack of transparency can lead to unpleasant surprises when the final bill is presented.

Increased Costs: Junk fees can significantly increase the overall cost of travel. For example, a $270 flight to New York might end up costing $300 after additional fees, or a $450 hotel room could exceed $500 with added charges.

Erosion of Trust: The surprise and hidden nature of these fees erode customers’ trust in travel providers. This can damage the relationship between travelers and service providers, making customers less likely to return or recommend the services to others.

Regulatory Scrutiny: The U.S. government, under the Biden administration, has been actively looking to crack down on these fees, highlighting their negative impact on consumers. This regulatory pressure indicates that junk fees are not only a consumer issue but also a legal and compliance challenge for travel providers.

What else you need to know:

The U.S. government has ramped up its efforts to combat junk fees. The Department of Transportation released rules this April requiring airlines to disclose junk fees upfront, including informing customers of the prices for checked baggage, carry-ons, changing a reservation or canceling one. It’s scheduled to go into effect this October.

However, trade group Airlines for America — along with several prominent athletes — sued the DOT over the junk fee rule, arguing it was a regulatory overreach that would create confusion for customers.  And in July, a U.S. appeals court temporarily blocked the rule  pending a full review of the rule. 

Meanwhile, a U.S. Senate committee passed a bill last month that would create national standards for pricing for hotels, short-term rentals and other lodging companies. Under the Hotel Fees Transparency Act, hotels, short-term rentals, and online travel players would all have to display the total price, including all mandatory fees, upfront. The bill is currently awaiting a full Senate vote.

FTC’s Imminent Rule: The Federal Trade Commission is expected to issue the final version of a rule clamping down on junk fees, roughly two years after the agency’s first proposal.

U.S. States Tackle Junk Fees: As for individual U.S. states, Minnesota and California have enacted laws combatting junk fees.

California Governor Gavin Newsom signed into law a bill last October requiring the upfront disclosure of any mandatory fees by hotel companies, online travel agencies, car rental companies, and online concert ticket sellers. The law went into effect on July 1.

Airbnb Chief Financial Officer Ellie Mertz said California’s new law — which requires travel platforms to disclose the total price upfront, excluding taxes — is creating a bit of a headwind for the company’s business in the Golden State. “So that’s an area that we’re watching quite closely to see how quickly consumer behavior normalizes after these regulations have been put into place,” Mertz said.

Minnesota businesses will no longer be able to add service fees, health and wellness surcharges or other mandatory charges to customers’ bills at the end of a transaction starting on January 1.

Restaurants and hotels in Minnesota would still be permitted to charge a mandatory gratuity, which is different from service fees because the revenue goes directly to the workers, not to the employer — provided the percentage is clearly advertised alongside any pricing information.