A Plea for Stopping Ancillary Fees

In previous columns, I’ve written about what I call “ancillary fees” that hotels tack on the final invoices of both the individual attendees at meetings and to the master account paid by groups holding large meetings. These ancillary fees include charges for things like daily Internet access, daily resort fees, mandatory daily maid gratuities, A/V “patch fees” if an outside vendor is used, and a host of other fees that are often not mentioned in the hotel contract and not revealed to guests until after they arrive. 

These fees are, arguably, a breach of the meeting contract because the hotel is charging something other than the room price stated in the contract. But what many people do not realize is that when ancillary fees are tacked on to the bill of individual conference attendees and conference sponsors, these fees may very well constitute a deceptive trade practice that is in violation of both federal and state law. That’s essentially what the Federal Trade Commission (FTC) concluded when it issued warning letters to 22 hotels late last year.

In the warning letters, the FTC described the practice of tacking on hidden fees at a form of “drip pricing” where consumers do not realize they will be hit with the fees until they have already entered into the buying process and, sometimes, long after their arrival at the hotel property. The FTC noted that these extra hotel fees can amount to $30 or more per night, which is significant enough to affect consumer purchasing decisions. 

The FTC did not release the names of any of those 22 hotels, which is unfortunate since naming those properties would have had a big deterrent effect by publicly shaming the hotels into mending their ways and by warning the public about which hotel properties have incomplete pricing information. Also, the FTC imposed no sanctions of any kind and merely issued a relatively polite letter in which hotels were “strongly encouraged” to look at their websites and online reservation systems to see if all prices are reasonably disclosed. The letter was the government’s version of acting as a schoolteacher who waves his finger at the schoolyard bully and then walks away. Hotel chains that reaped millions of dollars of extra profits from years of drip pricing were likely laughing all the way to the bank in the face of such a mild scolding by the FTC. But at least it shined a light, however dim, on a hotel billing practice that was getting out of hand. 

Believe it or not, the FTC also used your tax dollars to conduct a one-day seminar on this matter in 2012, flying in very prominent economists and marketing academics to explore what the FTC called the “theoretical motivation” for drip pricing. In advertising the seminar, the FTC also noted that the seminar would address the following questions which, apparently, were too difficult for FTC regulators to fathom on their own: “Why do firms engage in drip pricing? When is drip pricing harmful? Are there efficiency justifications for the practice in some situations?”  

This is not rocket science. Everyone knows that hidden fees are produced by greed and that making people pay more than they expected to for a hotel room is always harmful to consumers. The FTC would have been better off skipping the fancy seminar and spending that time and money doing its job by taking meaningful enforcement action.

Groups holding conferences should refuse to pay these hidden fees, and meeting attendees should do the same. If enough customers stand their ground, the practice will stop, or at least all of the fees will be disclosed to groups and their attendees upfront.