Extra, Extra

An eye-opening breakdown of the billions properties reap in fees and surcharges

IllustrationIt is no secret that many resorts charge a daily “resort fee” -- which can be anywhere from $10 to $25 per day -- in addition to the agreed-upon room rate. But it’s not the only dollar add-on guests can expect to find on their invoices at checkout. Over the past several years, hotels have initiated a slew of new fees, from parking and portage to minibar restocking, Internet access and luggage storage. As far as revenue streams go, these added surcharges, many for services that not long ago were complimentary, are hugely profitable and growing.

According to lodging analyst Bjorn Hanson, principal of New York City-based Pricewaterhouse-Coopers’ Hospitality and Leisure group, hotels reaped close to $2 billion from such surcharges in 2007, a substantial increase from the $550 million they collected in 2003. What’s more, for 2008 Hanson predicts an increase in the number of hotels charging these fees, as well as a hike in the amounts charged. And that is on top of the 6 percent increase in average daily room rates PWC is forecasting for 2008 as the industry extends its seller’s market momentum for yet another year.

Under-the-radar fees

Hoteliers love to use the term “transparency” when describing how the Internet has transformed room rate pricing. When it comes to resort fees and surcharges, however, the reality is more like a thick, black veil. Of the 25 randomly selected resorts in the accompanying chart (see page 42), M&C had to call the reservation center of each property and run down a list of potential services to find out if the property charged an additional fee for any of them.

The list of ancillary fees is endless. Just because there’s coffee and bottled water in your room doesn’t necessarily mean it’s complimentary. Plan on using the in-room safe? Chances are, you’ll pay. Hoping to hit the treadmill at the fitness center before a long day of meetings? Better check if it’s included in the room rate. Need to catch up on e-mail between events? There might be a connection charge, even if you brought your own wireless card. And while the hotel will gladly store your luggage for a few extra hours after checkout, there could be a portage fee for the service.

Finding these hidden fees takes perseverance and time. For example, M&C found that while the website for the Wigwam Golf Resort and Spa (www.wigwamresort.com) in Litchfield Park, Ariz., clearly listed a $15 fee to access the fitness facility, management company Starwood Hotels & Resorts Worldwide’s site for the resort, which is a member of the chain’s Luxury Collection, did not. It merely included a line within the resort’s “Features & Activities” section that read, “Fees on certain facilities/services may apply.”

“Each resort has the ability to decide whether to charge a resort fee or fees for any type of service,” explains David Scypinski, senior vice president, industry relations, for Starwood. “Those fees can also change at any time, which is why we don’t put it on the Starwood site. It’s too hard to keep up with them.”

A “travesty” is how Maureen Beck, a sales associate with Elmhurst, Ill.-based Select Meeting Sites, describes these hidden fees. “I don’t see why they can’t in-clude it in the rate they quote you,” she says. “You always have to ask them for the resort fee, and then you have to ask them what other fees they charge, because they don’t come right out and tell you. My clients have to have that information so they can divulge it to their attendees, who need to know what their potential spend is going to be, because it determines if they can go to the program.”

The probability of hotels bundling resort fees into their room rates is highly unlikely, says former longtime Marriott sales executive Mike Beardsley. “Rates are highly competitive, because most people shop by rate, which is why these fees are always listed as additional line items,” notes Beardsley, now CEO of Inn Fluent, an Ashburn, Va.-based third-party site-selection firm. “Still, all fees need to be disclosed in the group’s contract, and if they aren’t, you are not liable for them.”

Deals are possible

How firmly hotels insist on their fees depends on how badly they want your business. If they have groups waiting to get a foot in the door, it is doubtful they will budge on a revenue stream. Still, for the savvy planner, there are opportunities to be had and deals to be made.

* Get it in writing. Without full fee disclosure, it is impossible to get a complete picture of a potential site. Don’t wait until a contract hits your desk to find out that the resort has a laundry list of fees and surcharges (including, of course, laundry service). Ask, ask and then ask again. Stipulate in the request for proposal that any and all additional fees and surcharges must be disclosed up front prior to formal negotiations. Only when you know what fees you are up against can you begin to negotiate them.

* Know your group. If group demographics reveal a younger crowd, chances are they will be more likely to take advantage of a resort’s fitness facility. Rather than try to get the hotel to waive the fee, ask for a discount, and then convey the savings to the attendees. “In the registration materials, include a note that says access to the fitness facility is typically $20, but attendees will only be charged a negotiated rate of, say, $5,” says Patti Palacios, a Dallas-based regional vice president with third-party firm HelmsBriscoe. “It conveys the hotel’s policy while also letting attendees know what a great deal they got because of the event.”

Similarly, if the event includes a heavy trade show format, don’t try to negotiate out the portage fee -- it will save exhibitors a lot of individual tipping going in and out. However, do inform attendees that the charge is automatic, which will allow them to decide whether a further tip for the service is warranted.

* Think small. “Smaller, independent resorts are much more willing to negotiate fees than the big brands,” says Sandy DiMinno, a San Diego-based regional vice president with HelmsBriscoe. “They don’t have the huge sales forces that big resorts do, and they rely on us to bring business to them.”

Another bonus: Independents typically fold fees into their room rates, rather than break each out as a separate line item, which allows them the flexibility to negotiate down rates. “When a fee is broken out as a line item, hotels are usually much less willing to negotiate them, because it is reported as a line-item revenue on their profit and loss statements,” says DiMinno, a former hotel executive.

* Unbundle. Consider the Internet access fee, which, according to Consumer Reports (July 2007) can be as high as $20 per day. The charge “is a huge moneymaker for hotels, so they are not going to waive it entirely,” says Palacios. Better to negotiate it down. “If your group is staying three nights, tell them you will pay the first night, but want the second and third nights waived,” Palacios suggests. “If you have 200 rooms at a $15-a-day access fee, that’s a savings of $6,000.”

* Look for value. Hotels are well aware of the perception that resort fees and surcharges are another way to nickel-and-dime the guest, but sometimes there is real value to the charge, says Beardsley: “If it is a meeting where attendees will bring their families, planners may want to keep the resort fee in place, because of the overall value it brings.” In other words, family members won’t have to pay separately for services included in the fee.

Looking ahead

It’s anyone’s guess if resort fees will go the way of the woolly mammoth when a buyer’s market eventually returns. A slow market makes for a more competitive one. Either the rates will become more negotiable, says Beardsley, or hotels will seek more creative ways to make money, which could mean even more fees. “The bottom line is that hotels are always looking for ways to make more money, because they have to,” says Beardsley.

The way HelmsBriscoe’s Sandy DiMinno sees it, the services included in traditional fees -- daily newspaper, local calls and in-room coffee -- already are outdated. “We kick the newspaper as we walk out the door; we get our news and make calls from our personal handhelds,” she notes. “Those amenities are dinosaurs. Who needs them?”

The market, DiMinno adds, is getting to the point where it is going to allow guests to determine what amenities they really need, and hotels will deliver them for a fee they determine to be appropriate for the service. “A hotel might say, ‘Here are 25 potential fees. Choose five that pertain to your group, and we’ll bundle them for X amount of dollars,’ ” she posits. “It would certainly save a lot of time and cut through all the negotiating back and forth.”