Fee to hold your airline reservation for a few days: $20. Peak air-travel surcharge: $47. Rental car GPS: $13 a day. Beach chaise lounge: $20 a day. Resort fee: $25 a day.
Your carefully planned vacation budget? Out the window. We have all learned by now that the travel industry loves a surcharge, and most of us have adapted accordingly. On planes we bring our own headphones, snacks, pillow, blanket. At hotels we know not to drink the pricey bottled water in the room. Fine. For anyone taking a trip in 2012, certain perks might seem like legitimate extras.
But as I peruse some of my latest bills, the a la carte add-ons do not feel like small pleasures; they feel like things that ought to be included in the basic price. More to the point: they feel like sneaky ways to pluck a few more dollars from my pocket.
In the last few months I’ve unwittingly paid for newspapers plopped outside my Starwood hotel-room door (review your bill before you check out) and rental-car fees with vague, perplexing names like “airport concession recovery" and “facility charge."
And I have been taken aback by fees for hotel beach chairs, umbrellas and parking.
These were on top of fees I knowingly paid for preferred seating on planes, in-flight Internet, changing tickets and simply printing boarding passes.
The growing list of add-on fees would be comical were they not at our expense. There are now charges for reservations, cancellations, boarding early, departing early, holding bags, checking bags, and using the gym, the business center and the safe in your room. And thanks to the latest high-tech minibars, you cannot even touch an Almond Joy to read the calorie count without a charge on your bill (along with a “restocking" fee).
Some fees are mandatory; you must learn to factor them into your vacation budget. Others are optional. And then there are the charges that you’re welcome to opt out of — if you can figure out that you’ve been billed for them in the first place.
A record $1.85 billion in fees and surcharges was collected last year for hotels alone (up from $1.2 billion in 2000), according to Bjorn Hanson, divisional dean of the Tisch Center for Hospitality, Tourism and Sports Management at New York University. He expects that figure to climb to $1.95 billion in 2012.
‘Feeling of a shakedown’
Airlines, meanwhile, collected more than $3.3 billion in baggage fees and more than $2.3 billion in reservation cancellation and change fees last year, according to the Bureau of Transportation Statistics. Rental car companies and cruise ships also take a share, with extra charges for child seats and navigation systems, as well as certain onboard snacks, activities and excursions.
“There is this increasing feeling of a shakedown," said Jonathan Turley, who, as a leading expert on constitutional and tort law, frequently travels for work. Turley said he actually laughed during a recent visit to the Waldorf-Astoria when he was told that it would cost him $15 a day for Wi-Fi on one device, say an iPad, plus $15 for each additional device. “Then you go across town to the Days Inn and they have Wi-Fi for free," he said. “As someone who teaches law and economics you expect to have some predictable market response to this need, and it’s actually flipped. You get a higher level of these services at lower-end hotels."
And don’t get him started about plane tickets, which he likens to tickets at Disney World. “You pay this upfront cost, but then you find out that everything in the park is designed to eke out a little bit more of your money," said Turley, 51, who thinks the travel industry is actively trying to lower consumer expectations by charging separately for even the most basic services. “I get the feeling that the airline industry is really waiting for my generation to die," he said. “We’re the cranky, loud ones because we have a higher expectation. Every day, fewer people remember what it used to be like."
Added fees and surcharges emerged as an industry practice in the late 1990s with resort fees that claimed to be for things like beach towels and housekeeping, then spread to airlines, cruise lines and car rental companies. Hotel fees, for one, are highly profitable and, according to Hanson, have increased every year except for the periods following the economic downturns in 2001 and 2008 when lodging demand declined. Despite the fees, hotel rates “are still not back to 2007 levels," Hanson said, adding that going forward, the industry will most likely focus on raising room prices because ultimately it’s more profitable than fees.
Even cruise lines are adding fees, among them Carnival Cruises, which is in the midst of a pilot program that, for $49.95, will allow everyone in your stateroom to board the ship early.
Yet many obligatory charges are easy to miss and hard to understand. In January, Transportation Department regulations took effect requiring airlines and ticket agents to “include all mandatory taxes and fees in published airfares." Baggage fees must also be disclosed.
In July, the department fined Travelocity $180,000 for violating the rule on full-fare advertising “by failing to include fuel surcharges and other fees in advertised airfares." That same month the department fined TripAdvisor $80,000 for violating the rules on full-fare advertising (and for failing to disclose that flights were being operated under code-sharing agreements).
And last month, a class-action lawsuit was filed in federal court, claiming that up until late last year, Spirit Airlines actively misrepresented fares booked by its customers by unbundling certain fees, including something it calls a “passenger usage fee" that can be avoided only by purchasing tickets at Spirit’s airport counters.
Robert Josefsberg and Katherine Ezell of the Podhurst Orseck firm in Miami, lawyers for the plaintiffs, said that since filing the suit, hundreds of passengers have contacted them to say that they thought they had bought the lowest fares available yet ended up paying more because the passenger usage fee adds $17.98 to $33.98 to a round-trip flight. “It’s fairly insulting," Josefsberg said. “You want to put your head out the window and scream ‘I’m not going to take it anymore.’" Alicia Jao, vice president of Travel Media at NerdWallet, a website that offers personal-finance and credit-card advice, said that from 2008 to 2011 the fee generated $142 million for Spirit.
A spokeswoman for Spirit said in a statement that the airline believes the suit’s claims “are without merit" and that it “intends to defend the case."
Hotels get you, too
Hotels are also coming under fire. When visiting the Hilton Garden Inn Sonoma County Airport last year, Rodney Harmon received a copy of USA Today that he claims not to have wanted or read, yet he was charged 75 cents. Last year, the Arnold Law Firm of Sacramento filed a class-action lawsuit against the “Hilton Family of Hotels" on behalf of Harmon and other Hilton guests who, according to the lawsuit, have “unwittingly purchased newspapers they reasonably believed and understood to be without charge" because the fee was printed inside the paper room-card holder in “extremely small font which is difficult to notice or read."
Despite lawsuits and customer complaints, fees continue to pop up on bills, and they are becoming increasingly harder to withdraw. “The hotels have become very good at responding to guest complaints," said Hanson, also the founder and former leader of the global hospitality and leisure industry practice for PricewaterhouseCoopers. “The idea is not to say ‘No,’ but the answer is ‘No.’"
He said hotels are training employees on how to handle guests who object to fees by first repeating their objection with something like “Oh, I understand you were surprised by the minibar restocking fee," and then adhering to a script that involves explaining to the guest why the charge is necessary.
“Guests should not expect to prevail in those negotiations the way they might have a few years ago," Hanson said.
Disappointing customers is a risky move, though. People who feel duped are more angry and less likely to return to the offending company, according to research by Vicki Morwitz, a marketing professor at New York University Stern School of Business who has studied consumer responses to what’s known as drip pricing by airlines and rental car agencies. “You can’t win over a consumer by misleading a consumer," she said. “You’re going to lose by negative word of mouth."
Even the name of a fee matters, which is why consumer psychologists think companies devise intentionally vague names like “service charge" and “resort fee."
“It makes it a little more palatable," said Ravi Dhar, director of the Center for Customer Insights at the Yale School of Management and a psychology professor at Yale, explaining that a resort fee suggests you are getting something above and beyond a mere hotel experience. “They must be doing something special," he said. Of course now that many people have figured out that a resort fee is often little more than a couple of bottles of water and a beach towel, they find it irritating. “If you start breaking it down," Dhar said, “people will be more upset."
The size of the fee is also significant. If it is a small percentage of the base price, psychologically it doesn’t matter, he said. He cited the $2.50 fee he recently incurred on top of a $90 Broadway show ticket. But the bigger the ratio, the bigger the annoyance.
Transparency is essential, too. Did the hotel or airline clearly state the charges upfront or did consumers perceive the charges as deceptive? “If they know what these charges are upfront and they walk into it with their eyes open, they feel a lot better," said Angela Y. Lee, a marketing professor at the Kellogg School of Management at Northwestern University. “This clarity in communication is really important."
That includes making sure that travelers understand when they are paying a fee and when they are paying a tax, and why. For instance, Morwitz said, many consumers think that the “concession recovery fee" seen on some airport rental car bills is, despite the name, a tax. But it’s really the rental company’s way of covering the additional cost of being in an airport, she said, “and they pass part of that cost along to consumers."
Wrong assumptions by travelers can also magnify frustrations. For example, Hanson said people often think that pricing is somewhat uniform across a hotel chain: if you stay at a Sheraton in one area of a city, the fees and surcharges should be similar to those at the Sheraton in different part of the same city, right?
Wrong. Charges can vary from hotel to hotel, depending on the guidelines set forth by each general manager.
While no one wants to pay more, some experts contend there is nonetheless an upside to all these fees. Consumers who choose not to pay a fee for a carry-on or to buy a bag of peanuts pay less, rather than having to subsidize those passengers who clog the overhead bins and don’t bring their own snacks. It’s analogous to being at a fancy dinner, Dhar said, and being told that you have to split the bill equally even though you didn’t drink any of the wine. Shouldn’t you pay less because you consumed less?
As someone who barely finishes a glass of wine while the rest of the table orders another bottle, I understand. But at the moment, passengers who travel light do not receive substantial discounts. When a standard airplane seat is so small and uncomfortable that anyone a little taller or heavier than average has to pay for a seat with more legroom just to get through the flight, that fee seems unfair.
Indeed, for many passengers, being nickeled-and-dimed diminishes the joy of the journey.
“I used to like to fly," Turley said. But he explained that doing so nowadays calls to mind certain extraterrestrial swindlers. “Now I feel like I’m in a ‘Star Trek’ episode," he said, “and I’m being hosted by the Ferengi."