U.S. Lodging Industry Fees and Surcharges Likely to Decrease in 2009
 
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U.S. Lodging Industry Fees and Surcharges Likely to Decrease in 2009

Trend Analysis Report
January 23, 2009

By Dr. Bjorn Hanson, Clinical Associate Professor
NYU Tisch Center for Hospitality, Tourism, and Sports Management

The forecast for U.S. lodging industry fees and surcharges in 2009 is for the first decrease in the amounts collected since 2001. This decline follows a five-year period (2003–2007) of steady increases and/or record amounts collected. In 2008, fees and surcharges remained stable at approximately $1.75 billion, the same amount collected in 2007. 

Fees and surcharges started as a common industry practice in about 1997 and increased rapidly through 2000, reaching $1.2 billion that year. The amounts collected decreased to $1 billion in 2001 and approximately $550 million in 2002, reflecting the decrease in the number of U.S. occupied hotel rooms following September 11, 2001 and industry efforts to stimulate demand by selectively reducing hotel room rates and other charges. 

Fees and surcharges that have been introduced and/or increased in recent years include: resort or amenity fees, early departure fees, reservation cancellation fees, internet fees, telephone call surcharges, the costs of local calls, business center fees (i.e. cost of sending/receiving faxes and sending/receiving overnight packages), room service delivery surcharges, charges for in-room safes, and automatic gratuities and surcharges. For groups, there have been increased charges for bartenders, service, and other staff at events; charges for set up and breakdown of meeting rooms; charges for meeting rooms in which meals are served (the common practice has been that there is a charge for meeting rooms but not an additional room for food and beverage service); and fees for master folio billing. 

Some of the newest fees are mini-bar restocking fees and baggage holding fees for guests leaving luggage with bell staff after checking out of a hotel but before departure. 

These fees and surcharges have become an important source of revenue and profits for full service hotels and resorts because the new and increased charges reflect little or sometimes no new costs. Further, it is important to note that during the past five to six years the industry has spent record amounts on capital expenditures for enhanced guest amenities and services—including upgraded bedding, flat screen televisions, high speed internet access, and in-room amenities such as ironing boards and irons, coffee makers, and much more—and has sought ways to recover or generate returns on these investments. 

The decrease in fees and surcharges collected in 2009 will reflect a decrease in the number of occupied rooms of approximately one to three percent, which is the approximate range among various lodging forecasts, and a concern about introducing new fees or increasing fees in a period of less demand and greater price sensitivity. Also, decreases in demand will be greater in the hotel segments most associated with fees and surcharges and some guests will change their activities to reduce these costs. 

The amounts and trend of fees and surcharges collected is summarized below: 

Year                 Amount (in billions)

2000               $1.2

2001                1.0

2002                0.55

2003                1.0

2004                1.2

2005                1.4

2006                1.6

2007                1.75

2008                1.75

2009                1.65 forecast 

These amounts are estimated based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases, and information available on hotel and brand websites.

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EDITORS: To interview Dr. Hanson about this article or for more information, please contact him at bjorn.hanson@nyu.edu or 212 998-7256. 

About the Author
Bjorn Hanson, Ph.D., a clinical associate professor of hospitality and tourism management at the NYU Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, is a hospitality and travel researcher widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. Prior to joining NYU-SCPS this summer, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.

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