by Jonathan T. Howe Esq. | March 01, 2013

In late November 2012, the Federal Trade Commission sent a letter to 22 undisclosed resort hotels regarding their pricing practices pertaining to resort fees and charges that might not have been disclosed prior to the time a booking was made. (For more information, read “FTC Warns Hotels About Hidden Fees.”)

The not-so-technical term for this practice is “drip pricing,” which the FTC defines as advertising only part of a product’s price (in this case, the room rate) and then revealing other charges (resort fees, fitness center fees) later as the customer goes through the buying process, sometimes not until the customer is already obligated for the purchase, such as at hotel checkout.

The FTC letters, in my opinion, were a warning shot across the bow. The agency, under Section 5 of the Federal Trade Commission Act, has the authority to police deceptive trade practices, including advertising and promotion. Hotels that don’t meet the agency’s criteria for protecting the consumer might end up being charged by the FTC under Section 5.

As I see it, the 22 hotels were just a sampling. All properties that have mandatory add-on fees for anything — energy fees, newspaper delivery and so on — should be on notice. This scrutiny, however, probably will not apply to Internet fees, because guests essentially are not required to pay that, whereas they usually are forced to pay the resort fee.

The FTC is most concerned about website disclosures, as was stated in the letter to the 22 resorts. Consumers had been complaining that they were never informed that there were additional fees beyond the quoted room rate. In analyzing this use of drip pricing, the

FTC concluded that the resorts were trying to hide part of the price from the consumer and therefore were intentionally being deceptive.

Protecting attendees
The concern for meeting professionals is how to display the pricing for potential participants. If you know there will be add-on fees, in my opinion you should let them know in advance. Often in hotel contracts we require that the total costs for all items being provided to the attendees are included within the room rate or in a comprehensive breakdown leading to the total gross cost, including taxes, fees, etc. If there will be add-on charges, they must be disclosed in the contract before it is signed, or participants must be able to opt out of the charges at check in.

In the contract, you should say that no one will be charged more than, say, $200 a night, not counting taxes, and that $200 should include all fees. Then there should be a clause stating that the property cannot add on any fees after the fact.

Of course, it is possible to negotiate out the resort fee, but you’ll probably pay the up-charge in the room rate. The hotel will get the money one way or the other.

A last note: If you’re working in pharmaceutical or government meetings, or for a corporation bound by Sarbanes-Oxley regulations, the current scrutiny would call for all these fees to be broken out and explained anyway, so it’s best to address them in the agreement and spell it all out up front.