The New York Times – The airlines have been doing it. Expect the hotels to follow suit.
Over the last few years, the airlines have been adding and increasing fees on checked bags, exit row seats and more, much to the benefit of their bottom lines. And for similar reasons, hotels are likely to add more fees and more stringently enforce or even raise existing charges for cutting a stay short, for example, or for storing luggage.
A new study by Bjorn Hanson, clinical professor at the Preston Robert Tisch Center for Hospitality Tourism and Sports Management at New York University, found that while total fees and surcharges collected by hotels in the United States declined to $1.55 billion in last year’s faltering economy, they will rise this year. Mr. Hanson said he expected hotel surcharges to climb back up to $1.7 billion this year as a result of an expected rise of 3 to 4 percent in occupied hotel rooms, broader adoption of fees and more aggressive enforcement of and increases in existing fees.
The fees and surcharges were initially charged by high-end hotel brands in the late 1990s for access to resort amenities like the swimming pool, putting greens and tennis courts.
Imposed generally today on a selective, property-by-property — rather than chainwide — basis, fees of $9.95 to $19.95 a day are now charged on Internet access, Mr. Hanson said. He said fees for room service and tray charges range from $2.50 to $5.95 (added to an automatic gratuity), and he estimated minibar restocking fees at $2.95 to $5.95 a day, once the first item is removed. In addition, he said, the fee for cutting short a stay or canceling a reservation without adequate notice is typically the cost of one night’s accommodations. For storing your luggage, a hotel might charge $1 a bag or more, he said.
Fees have “become more accepted as part of the travel experience,” Mr. Hanson said. With travel demand starting to rise, he added, “this gives hotels greater confidence to apply and enforce fees.”
Henry H. Harteveldt, travel analyst for Forrester Research, was not as optimistic as Mr. Hanson about the ability of hotels to collect fees in the near future.
“While business travel is better than it has been, it’s still being managed very carefully,” Mr. Harteveldt said. “And business travelers’ brand loyalty has declined. They’re open to changing hotels if they don’t feel they’re getting good value.”
He noted the assertion by Gary C. Kelly, the chairman and chief executive of Southwest Airlines, that the carrier had increased its annual market share by $1 billion, mostly by not imposing baggage-checking fees. “Business travelers don’t like fees,” Mr. Harteveldt said. “Southwest has gained market share in part because it’s perceived as not ripping customers off.”
But Michael W. McCormick, executive director of the National Business Travel Association, a trade group for corporate travel managers and suppliers, said that he expected hotel surcharges would climb and proliferate over the next year or so.
“Hotels have a modest ability now to increase their average daily rate, but they can increase their bottom line by trying to institute more add-on, ancillary fees,” he said. “That seems to be where the travel industry is going.”
Mr. Hanson noted that the fees and surcharges were highly profitable for hotels, as they were for airlines. He estimated the additional revenue from hotel fees and surcharges at typically 80 to 90 percent profit.
Although all hotel chains contacted about Mr. Hanson’s research either had no comment or declined to answer specific questions, executives of travel management companies — including American Express, Carlson Wagonlit Travel, Hogg Robinson Group, Egencia and Ovation Travel Management — generally agreed with his forecast of surcharge increases in 2010. All also said some fees, especially those for Internet access and early checkout, could be negotiated by corporate travel buyers with hotel companies.
Margaret Bowler, the Britain-based director of global hotel relations for Hogg Robinson Group, said she expected this year to be better than last, as more people travel and spend more money. “Because occupancies will go up, fees will naturally go up — to what level, I couldn’t tell you,” she said.
But she argued that “there’s a big difference between hotels and airlines” imposing surcharges. “There’s a hotel on every corner, but a limited number of airlines flying a limited number of routes,” she said. “If one of the big hotel guys does something, others may follow, but an independent hotel may not. And a corporation might choose the independent hotel because it wants the best price and savings.”
Joseph A. McInerney, chief executive of the American Hotel and Lodging Association, a hotel industry trade group, said Mr. Hanson’s forecast was “right on, but he’s about six months ahead of himself.” Mr. McInerney said he “can see an increase in fees in 2011, when there’s less new product coming on.”
Jan-Philip Velders, an information technology specialist at the University of Amsterdam, said that as a business traveler he was turned off by hotel surcharges. An elite-level participant in the Hilton, Marriott and Starwood loyalty programs, he said he planned to attend a conference in June in Miami. Although the conference will be held at the Intercontinental Miami, he will stay at a Courtyard by Marriott a few blocks away, where the room rate is $50 cheaper a night and Internet access is free.
“The value for the dollar is higher at the Courtyard than at the Intercontinental,” he said.
One way to avoid Internet access fees is to participate in a loyalty program: Choice, Wyndham and Fairmont hotels offer free access to all participants in their programs, as does Hyatt to all elite participants in its program. Starwood and Hilton offer free access to select elite program members, as will Marriott as of Friday.
“There is some value to being a member of a loyalty program,” said Tim Winship, publisher of FrequentFlier.com. “But who thought airlines would charge for a seat in the exit row? Maybe there will be surcharges now for rooms according to how far they are from the ice machine or elevators. Creativity will be brought to bear.”