Skift Travel News Blog

California Governor Gavin Newsom signed into law on October 7 a bill to ban mandatory hidden fees — also called junk fees — starting July 1, 2024.

“The price Californians see will be the price they pay,” said Rob Bonta, the state attorney general.

As Skift previewed, the law broadly requires upfront disclosure of any mandatory fees by hotel companies, online travel agencies, car rental companies, online concert ticket sellers, and others.

If a company doesn’t comply, a consumer could seek “at least $1,000” in damages via the state’s existing consumer protection claims processes. (See the law, embedded below.)

Junk Fee Reform

It’s unclear how California’s new law will impact companies in mid-2024.

California has the largest population of any state in the U.S., and so some big companies choose to apply its requirements nationally.

Yet there could be lawsuits from industry groups, and corporations could find workarounds to keep profitable fees. California has rules on fees for car rentals, but many online travel agencies choose to display those fees in ways that vary depending on jurisdiction.

Another wrinkle: Newsom hasn’t yet taken a position on another bill awaiting his signature, Senate Bill 537. He has until Saturday night to decide whether to let that bill pass into law. The bill would prohibit businesses that sell lodging for up to 30 days in California from displaying a room rate that doesn’t include all fees or charges (except government-imposed taxes) as of July 1, 2024.

It’s possible the Governor may feel the bill he’s signed already covers this, making a law specific to hotels unnecessary. Either way, the state’s 6,000 hotels and thousands of short-term rentals are currently facing new rules about the display of so-called junk fees, such as resort fees and housekeeping fees. 

Here’s the legislation that’s just passed:

Travelers United’s choice to sue Hyatt over its “junk fee” practices fits into a broader storyline about travel junk fees being in the limelight ever since President Joe Biden referred to travel fees in his 2023 State of the Union address.

Travelers United filed the case in Washington, D.C., whose laws require transparent upfront pricing.

The lawsuit notes that “in or around August 2023” Hyatt began advertising accurate pricing information to consumers looking to book a hotel room. On Hyatt.com today, in Skift’s tests, the site displays rates plus resort fees upfront on a traveler’s first search. Hyatt appears to have changed its site to more transparently present resort fees within the past month or so.

But the advocacy group wants Hyatt to pay for the time it didn’t disclose resort fees upfront.

“Since at least 2020, Hyatt has been systemically cheating consumers out of tens, if not hundreds, of millions of dollars each year by falsely advertising its hotel room rates,” the lawsuit claims (embedded below).

We asked Hyatt for a comment yesterday, but haven’t received a response.

Travel commentator Gary Leff blogged that “This is an industry-wide problem, not a Hyatt problem.”

Lauren Wolfe of Travelers United said yesterday the advocacy group plans to file similar lawsuits against other hotel groups.

Yet broadly, some consumers seem to take the the industry practice of drip pricing in stride. One study found that guests dropped their online ratings by only a small percentage after they faced “surprise” fees and booked anyway.

News this week that Marriott will make resort fees more fully transparent upfront in the search results of its website and mobile app drew focus once again to the topic of resort fees. Yet research analysts at Truist suggest U.S. hotel groups haven’t expanded the practice since 2019.

“We see no clear evidence that the actual resort fees/guest have grown materially since 2019,” wrote analysts Greg Miller and Patrick Scholes in a report. “Frankly, this was very surprising to us.”

The analysts estimate that resort fees remain “a modest” amount of total revenues, between 1 and 2 percent, based on data from HotStats, a benchmarking service.

One possible reason may be that resort fees may have become “less profitable than pre-pandemic given inflationary and labor cost pressures,” the analysts speculated.

Marriott is the first of the global hotel groups to boost pricing transparency. It alone made at least $206 million off the practice just from its self-managed resorts since 2012, according to depositions from the Washington, D.C., Attorney General’s ongoing lawsuit, which Skift reported on. But all of the major hotel groups engage in the practice.

So-called “drip pricing” continues to be a popular sales technique in travel, where a seller gets a consumer psychologically invested in an offering and then adds little additional costs without prompting the buyer to abandon the purchase.

Yet many consumers seem to take it in stride. One study found that guests dropped their online ratings by only a small percentage after they encountered fee surprises yet booked anyway.

U.S. President Joe Biden commented on Wednesday that his administration would look to crack down on “surprise fees” consumers face. Biden named two examples, including “resort fees” for hotel stays and administrative fees for live events and concert tickets.

The Federal Trade Commission had begun to work on a rule last week to crack down on “unfair and deceptive fees across all industries,” Reuters reported.

Biden’s remarks came as his administration faced pressure to clamp down on inflation that has hit four-decade peaks. A recent lawsuit by Washington, D.C.,’s attorney general against Marriott International alleged that the company generated hundreds of millions of dollars from resort fees. The American Society of Travel Advisors (ASTA) has called resort fees “out of control” and the leader of Booking Holdings, Glenn Fogel, has scolded the hotel industry about the practice.