Hospitality Industry Amateur Hour: Hotel & Resort Fees
By Mark Lewis-Brown, CEO & President of Vertical Booking USA
After you've been in the hospitality industry for as many years as I have (more than 30 years… how time flies when you're having fun!), you get used to seeing human error manifest in so many truly unfortunate instances: from putting the decimal point in the wrong spot (hello, $10 rooms!) or using overbooking as a revenue management strategy, I've seen it all.
One of the biggest mistakes - one that separates the winners, from the losers and the amateurs, from the experts - that a hotel could make today is:
DRUM ROLL PLEASE… Hotel and resort fees!
Fees are the thorn-in-the-back of every, single guest that walks through your doors. There has never been a guest who responded positively to a bill with double-, or even triple-digit, surcharges unexpectedly added at check-out!
(An aside… can you even imagine how that interaction would go?
- Front Desk: "Hello Ms. Smith, how did you enjoy your stay?"
- MS: "It was lovely. Never slept so well in my life!"
- FD: "Glad to hear it! Btw, here is your final bill; please note the extra $100 that we tacked onto your agreed upon booking rate. Cool?"
- MS: BEST. VALUE. EVER!!
Head slap emoji!)
Since we, as an industry, decided that we wanted to follow the 'yellow brick road' to ancillary revenues, there have been many consumer articles and TV travel segments warning guests about hotel fees, all of which make hotels sound like evil monsters, out to steal every last dollar from travelers' well-worn wallet(s). Even though these fees are a legal business practice, consumers don't see it that way; they see it as a "trick" to get guests to booking, which could be supported by the fact that, most properties that do charge fees, go out of their way to hide the fact that the fee exists. Talk about fine print!
While I fully acknowledge that it's not a fair portrayal industrywide - we are businesses, just like any others, and we need to maintain profitability - some properties have been taking the fee frenzy to a whole new level of sketch:
- Ever heard of a hotel that, all of a sudden, became a resort overnight - just so that they can charge a resort fee? I have… talk about sketchy, right?!
- And excuse me for harping on about semantics but, if you're charging a fee, don't call all the items paid for by that fee "complimentary." Every single person knows that charging $32 per night is the EXACT opposite of free - and reasonable, to be honest.
These bogus tactics are what make consumers think of the rest of us are a bunch of crooks. And it's not right. In the end, it comes down to this: our profitability shouldn't come at the cost of our guests' satisfaction.
Hotel and resort fees do help us to cover the ever-increasing cost of doing business, without decreasing bookings (hello, low price!) but they will not work in your favor in the long-run; in fact, they will ruin your property's reputation and decrease your occupancy - and profits - over time.
So, how can we, the hotel industry, ensure that we are covering our costs, without making our customers think that we are scheming, lying, money grubbers?
There are two ways:
1: Disclose your fee upfront (MAKE IT VISIBLE!!) and show the full amount that the customer will owe upon check-out (including fees) before the customer clicks "Book."
This should only be the option that you choose to implement if one or both of the following statements are true:
- You are legally required to charge a special fee because of the area in which your property is located (valid).
- If you want to continue p*ssing off your customers - but not quite as much as before.
At least with Option #1, guests are getting visible, full disclosure on the actual rates that they will be charged; however, it won't help hotels who need a get-rich-scheme to keep their property in business, since consumers won't book a stay at a sky-high daily rate or if they see that your fee is more expensive than your actual room rate (what happens in Vegas, stays in Vegas… am I right?!).
Which brings me to the only real, viable way to deal with hotel and resort fees:
2: JUST DO(N'T) DO IT!
We're in the business of pleasing our guests; it's called the hospitality industry for a reason. Because of the availability of online reviews, today's customers make decisions, more often than not, on the reviews of your property's past guests; obviously, unhappy guests can impact a property's financial performance, even years later.
And the fact remains: sneaky business practices - even if they are fully and visibly disclosed (see #1) - are never going to produce happy guests.
When you opened your doors for the first time, you knew that there would be costs of doing business - and that, like all other industries, those costs were very likely to increase over time. Just because commission rates are surpassing next-level status, it shouldn't be something that we turn into a pass-along charge, throwing all the rules of true hospitality out the window.
Yes, the airlines are doing it. (There's an important BUT to this argument: airlines are required to show the total cost of the ticket, including all fees that need to be paid to board the flight, before the passenger books. Airline's fees are for optional services, like baggage fees or picking your own seat. That's a big difference from mandatory hotel and resort fees applied daily, like in the hotel industry!)
Yes, people are paying their fees… VERY begrudgingly.
But, are airlines as profitable as possible, even when using these tactics? Are airlines' passengers happy and excited to fly with them again?
NOPE. Even with the ancillary revenue earned from fees, airlines continue to show lower profitability than they would if they focused on offering passengers' a better in-flight experience:
According to a 2017 Fortune article, which examined the correlation between airlines' service levels and profits: "Running an airline on time and with customers properly served means performing hundreds of tasks on thousands of flights a day—millions of tasks in total. Yet airlines typically perform at only a 90% success level on these tasks, which leads to a 60% overall total success rate…
If carriers could complete these smaller tasks with over 99% accuracy, their overall success rate would approach 90%. This, in turn, would reduce defects and complaints by 75%. Airlines would operate much more reliably and on time... They could have higher-quality flights, lower costs, greater customer satisfaction, and improved airline profits."
You can see that, even in the airline industry, where fees are old news, improving operations and focusing on customer satisfaction will yield increased profits.
The same can - and should - be said for the hotel industry.
FACT: The latest annual J.D. Power and Associates North American Hotel Guest Satisfaction Survey showed that, while overall guest satisfaction went up (from last year), guests' satisfaction with "service or staff touch-points, such as check-in and check-out, or food and beverage options" improved the least.
To become more profitable, the entire hospitality industry need to move away from taking advantage of customers (NO MORE FEES!) and realize that keeping them happy, keeps our bank accounts happy.
Don't believe me? Here's what Jennifer Corwin, J.D. Power associate practice lead for global travel and hospitality, had to say on the subject: "(They) need to shore up the services area and make sure that's still a focus… (They) can't forget about what makes the industry what it is."
As Corwin said, we need to re-evaluate our customer service principles and implement out-of-the-box ancillary revenue options that won't make our customers head for the hills (or the nearest Airbnb). We should use technology that supports and boosts the earning potential of the booking cycle. Think beyond the booking cycle; look for value-added service options instead, which customers can choose when needed and which will truly improve their experience.
Future guests, get ready for the best hotel stay of your life - no bogus fees added!
Mark Lewis-BrownMore from Mark Lewis-Brown
About Vertical Booking
Vertical Booking is a leading, global reservation technology provider with hotel clients in more than 118 countries worldwide, offering solutions translated into 29 different languages and usable in all currencies. No matter the size of the property or group, Vertical Booking can provide a customizable reservation solution that supports the entire guest booking cycle, including a booking engine, GDS distribution, channel manager, OTA rate comparison tool and a reservation call center application, all through one unique dashboard. Because the solutions are module-based, hotels can customize the platform to only pay for the tools needed, keeping the suite of products affordable for everything from small boutique hotels to large groups and independent chains. Vertical Bookings solutions eliminate manual reservation input, inventory tracking and are fully integrated using 2-way XML connection, to ensure access to real-time reservation data.