For holidaymakers, travellers, and hotel guests, they're often considered an unnecessary nuisance. But for hotels and other accommodation providers across the globe, fees and surcharges are becoming an increasingly-vital revenue stream.

Newfound research from Bjorn Hanson, a clinical professor at New York University's School of Professional Studies Tisch Center for Hospitality and Tourism, has found that hotels in the US collected a record amount in fees during 2014, with the upward trend showing no signs of slowing down. In fact, last year saw a record amount of $2.35 billion collected, and hotels in the US look set to grow that figure further to $2.47 billion in 2015.

Prof Hanson suggests the jump in numbers is a reflection of a 3% rise in occupancy rates, as well as a 5% increase in the amount charged for fees and surcharges – on such things as:

  • resorts and amenities
  • early departures
  • reservation cancellations
  • internet and telephone calls
  • business centre usage i.e. sending/receiving faxes
  • room service delivery
  • mini-bar restocking
  • in-room safes
  • baggage holding for guests after check out
  • unattended parking.

And some new fees are becoming increasingly-common, too. According to Prof Hanson's work, they include:

  • special charges for set-up and breakdown of meeting rooms
  • early check-in fees
  • fees to guarantee a specific room
  • charges for unattended surface parking in suburban locations
  • fees for holding checked luggage.

Fees and surcharges should come as no surprise

The above figures show that the number of fees and surcharges have increased every year since 1997 – except for brief periods following 2001 and 2008 when hotel demand in the US declined. Prof Hanson explains that this is no great surprise given that fees and surcharges can result in up to 90% profitability for savvy hoteliers.

Importantly, he says his research uncovered a rise in the disclosure of fees and surcharges among hotels in the US.

"Some fees and surcharges are sometimes called 'hidden' or 'surprise', but disclosure on websites, confirmation emails, tent cards in guest rooms, room service menus, and guest service binders continues to increase," says Prof Hanson.

And, he suggests that guests can often view them as a surprise, because hotels set the amounts themselves, rather than following a brand's guidelines or applying an industry benchmark, which, in turn, creates a lack of consistency:

"One of the reasons for the sense that some of these fees and surcharges are 'hidden' or 'surprise' is that they are often established and the amounts set hotel-by-hotel rather than by brand, and both can change frequently."

Be upfront with guests

Disclosure is key and being transparent with guests is necessary to avoid a backlash when it comes to fees and surcharges for extras.

Back in 2012, the Federal Trade Commission Division of Advertising Practices in the US issued 22 warning letters to the hotel industry about disclosing resort fees. However, as recently as July 2015, the division made it clear that these surcharges were permissible if disclosed appropriately.

A great way to be upfront with guests about fees and surcharges is to disclose them during the booking process, and offer as many as optional extras and add-ons.

For example, with Internet booking engines such as SiteMinder's TheBookingButton, you can add several options upfront that range from breakfast through to secure WiFi – something Agoda last week identified as important to guests when they're choosing a hotel.

Using TheBookingButton set-up system, you can enter extras and charges for many different scenarios. Here are just a few that SiteMinder's seen its customers use:

  • Per booking – late checkout
  • Per person – day spa package
  • Per person per night – hot breakfast
  • Per room – champagne on arrival
  • Per room per night – fresh towels.

You can even attribute certain extras to particular rooms – say, a 'King Suite 3-Night Special'. And, TheBookingButton allows you to set descriptions of the extras, using images to really sell their appeal, as well as applicable start and end dates to make seasonal offers throughout the year, such as Valentine's Day and Easter.

Remember, what many travellers focus on most is the room rate.

Prof Hanson explains: "There are occasional statements that it would be better to include resort and other fees and surcharges in room rates, but there are several reasons this is not the general practice, including that the higher room rate would subject the fee amount to municipal occupancy taxes; room rates change frequently and are closely monitored by many travellers, but resort and other fees and surcharges change less frequently; and the focus of many travellers is on the room rate."

So, while it might seem an easy option to simply package these extras into your rates, as Prof Hanson has warned against, there are real risks in hoteliers burying fees and surcharges away into room rates. Potential guests do pay close attention to room rates, and focus less on extras, and fluctuations in the rates they're keeping a close eye on can cause them to look elsewhere.

Does your Internet booking engine allow you to be upfront with your guests?

About SiteMinder

SiteMinder Limited (ASX:SDR) is the name behind SiteMinder, the only software platform that unlocks the full revenue potential of hotels, and Little Hotelier, an all-in-one hotel management software that makes the lives of small accommodation providers easier. The global company is headquartered in Sydney with offices in Bangalore, Bangkok, Barcelona, Berlin, Dallas, Galway, London and Manila. Through its technology and the largest partner ecosystem in the global hotel industry, SiteMinder generates more than 120 million reservations worth over US$50 billion in revenue for its hotel customers each year. For more information, visit siteminder.com.

Maria Cricchiola
Director of Brand Communications & PR
+61 2 9056 7415
SiteMinder

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