U.S. Lodging Industry Fees and Surcharges Forecast to Increase to a New Record Level in 2016 – $2.55 Billion
 
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U.S. Lodging Industry Fees and Surcharges Forecast to Increase to a New Record Level in 2016 – $2.55 Billion

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TREND ANALYSIS REPORT
August 29, 2016

By Bjorn Hanson, PhD, Clinical Professor
NYU School of Professional Studies Jonathan M. Tisch Center for Hospitality and Tourism

Following the 2015 record of $2.45 billion, total fees and surcharges collected by U.S. hotels are forecast to increase to another record level of $2.55 billion in 2016. Although the amount will establish a record level of fees and surcharges, the percent increase will be the lowest since 2009.

The increase for 2016 reflects a combination of approximately 2.0 percent more occupied hotel rooms than in 2015, more categories of fees and surcharges, and higher amounts charged, but lower fees and surcharges for high speed Internet access, for a total increase of approximately 4.0 percent.

Fees and surcharges emerged as a common industry practice around 1997, and a notable event in the history of fees and surcharges was when energy surcharges were introduced for a large number of hotels in 2000. Since then there have been numerous categories of fees and surcharges introduced.

Examples of fees and surcharges include: resort or amenity fees, early departure fees, reservation cancellation fees related to timing of cancellation, Internet fees, telephone call surcharges, some business center fees (including charges for receiving faxes and sending/receiving overnight packages), room service delivery surcharges, mini-bar restocking fees, charges for in-room safes, automatic gratuities and surcharges for other than all-inclusive resorts, baggage holding fees for guests leaving luggage with bell staff after checking out of a hotel but before departure, and charges for unattended parking. For groups there have been increased charges for bartenders and other staff at events, special charges for set-up and breakdown of meeting rooms, and administrative fees for master folio billing.

Among the newest of fees and surcharges relate to a “guarantee” of a specific room type such as a room with a King bed or two Queen beds, or a room on a high floor, typically subject to availability.

An increasingly common relatively new fee or surcharge is for early check-in, primarily for resorts, more common in Las Vegas (typically check-in time might be 3:00 pm, but if a guest arrives earlier and a guest room is available, traditionally there was not a charge for early check-in). Other of the more recently introduced fees and surcharges include charging for unattended surface parking in suburban locations and holding checked luggage.

U.S. lodging industry fees and surcharges have increased every year except for brief periods following 2001 and 2008 when lodging demand declined.

Fees and surcharges are highly profitable; many have incremental profitability of 80 to 90 percent or more of the amounts collected.

Some fees and surcharges are sometimes unfairly called “hidden” or “surprise,” but disclosure on websites, confirmation emails, “tent” cards in guest rooms, room service menus, and guest service binders continues to increase in the nature of the disclosure. One of the reasons for the sense that some of these fees and surcharges are “hidden” or “surprise” is because the categories are often established and the amounts are set hotel-by-hotel rather than by brand, and both can change frequently.

In 2012, the Federal Trade Commission (FTC) Division of Advertising Practices issued 22 warning letters to the hotel industry about disclosure of resort fees. The FTC is currently focused on resort fees.

Senator Claire McCaskill announced in February 2016 that she is introducing legislation targeting what she refers to as “deceptive hotel fees” that are “bait and switch” practices that resort guests are “slapped with”, based on hearing from “hundreds of Missourians”.

There are occasional statements that it would be better to include resort and other fees and surcharges in room rates, but there are several reasons this is not the general practice, including that the higher room rate would subject the fee amount to municipal occupancy taxes; room rates change frequently and are closely monitored by many travelers but resort and other fees and surcharges change less frequently; and the focus of many travelers is on the room rate.

The estimated amounts of fees and surcharges collected are summarized below:

Year       Amount (in billions)

2016       $2.55 billion (forecast)

2015         2.45

2014         2.35

2013         2.1

2012         2.0

2011         1.85

2010         1.7

2009         1.55

2008         1.75

2007         1.75

2006         1.6

2005         1.4

2004         1.2

2003         1.0

2002         0.55

2001         1.0

2000         1.2

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.

EDITORS: To interview Dr. Bjorn Hanson about this research or for more information, please contact Cheryl Feliciano at Cheryl.Feliciano@nyu.edu or 212-992-9103.

About the Author
Bjorn Hanson, PhD, is a clinical professor with the NYU School of Professional Studies (NYUSPS) Jonathan M. Tisch Center for Hospitality and Tourism. He 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.  He has served as divisional dean of the School’s Preston Robert Tisch Center for Hospitality, Tourism, and Sport Management and as co-interim dean of the NYU School of Continuing and Professional Studies (now the School of Professional Studies). Prior to joining NYU, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.

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