Justin M. Bowen / File photo
Saturday, May 8, 2010 | 2:01 a.m.
Cost of business
Hotels are adding and raising room surcharges to boost profit. It’s a risky strategy, as room rates are the No. 1 or No. 2 determining factor for leisure travelers who book rooms. Most Strip hotels now charge resort fees. Some started charging them a few months ago; others have had them for a few years.
Chicago resident Tim Murtaugh keeps close tabs on his trip expenses, so when the Excalibur tacked a $4.50 “resort fee” on top of his $39 room rate for each night of his stay, the retired librarian sent a complaint letter to the resort’s management.
“I just didn’t think it was right,” Murtaugh says.
Neither do many others who have been surprised by resort fees charged for their stays in Las Vegas. The tide of complaints about the fees is rising in online forums, travel blogs and just about everywhere else that frequent travelers swap stories and post reviews.
Murtaugh had previously stayed at Las Vegas hotels that didn’t charge resort fees, so the added charge caught him off-guard. Resorts say the fees cover amenities such as high-speed Internet, gym and pool access and newspaper delivery.
They are relatively new in Las Vegas, but the fees are part of a growing trend in the hotel industry that’s expected to spread as tourism rebounds.
A 10 percent increase in hotel add-on fees this year is the prediction of New York University’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management.
Hotels are adding and raising room surcharges to boost profit, says the study’s author Bjorn Hanson, an associate professor of hospitality and tourism management at NYU.
It’s a risky strategy, as room rates are the No. 1 or No. 2 determining factor for leisure travelers who book rooms, rivaling the hotel’s brand name and what that represents, Hanson says.
“This is a period of grand experimentation to see what fees and surcharges guests will tolerate,” Hanson says.
The fees can vary by hotel, even hotels owned by the same company in the same city. That’s especially true in Las Vegas, where resort fees vary by property, though many are owned by a handful of companies. Most Strip hotels now charge resort fees. Some started charging them a few months ago; others have had them for a few years.
What’s more, Las Vegas hotels that formerly charged taxes only on the room cost are increasingly taxing the added fees as well, which can inflate the total bill.
Many consumers have complained that the fees are sometimes buried in fine print, so hotels and travel booking sites have improved disclosure in recent years.
Hotels in Las Vegas and elsewhere have trained employees to discuss such fees with customers if they are booking rooms by phone or as they are checking in.
They also have trained employees how to handle customer complaints from angry guests who don’t notice the fees until they check out and see their final bills, Hanson says.
These hotels graciously refuse to refund such charges, saying they were adequately disclosed beforehand.
Customers such as Cindy Weldon of San Francisco say they are fighting back by boycotting hotels that charge mandatory fees not included in the advertised rate. Weldon says some resort fees in Las Vegas can double the cost of a room. Weldon said some hotels still charge the fees even if they “comp” gamblers the room.
“It’s a sneaky, mandatory charge,” she says. “We used to only have to worry about taxes. Now we have to hunt to find out what these resort fees are.”
Station Casinos, which began charging resort fees ranging from about $15 to $25 per night in 2004, calls such customers a “vocal minority” because the fees are disclosed upfront, before customers book their rooms online or over the phone. On the company’s website, the amount of the “hotel amenity fee” is included as the fifth line item in a terms and conditions section that appears after customers select a date and room type at a particular hotel.
A small number of complaints about the fees crop up in guest surveys, but the vast majority accept the fees as a fair deal, says Michael Grisar, vice president of hotel operations for Station Casinos.
Previous to bundled fees, he says, customers were paying several times those amounts for services and amenities such spa access and shuttles to and from the Strip.
“Every time we added a new item it started costing more for the guest ... you might be talking about an extra $60 to $70. We offer one low clean price for a package of amenities that guests have always wanted. We didn’t want to see them nickel and dimed for various things.”
Gordon Absher, a spokesman for MGM Mirage, which began introducing bundled resort fees two years ago, says the fees have spread at MGM hotels because “our guests see it as a convenience to have a single charge added to their overall bill” rather than a series of charges for things customers might not have expected needing, such as Internet access.
Likewise, guests like the convenience of sipping in-room bottled water and would end up paying more for water had they purchased it separately, he added.
Hospitality industry consultant James Sinclair of OnSite Consulting in Los Angeles advises his clients against charging mandatory fees in favor of a la carte fees or optional, bundled charges. Hotels that insist on charging mandatory fees shouldn’t make customers pay extra for basics like housekeeping, but rather, should include more tangible offerings such as access to the spa, he says.
“It’s not worth risking the angry customer who wasn’t looking for these fees or the customer who begins looking for resorts that don’t charge them.”
Sinclair calls mandatory fees “a deceitful way of making money,” given that hotels are reluctant to include them in advertised online rates so as not to get knocked out of a search for the lowest-priced hotels.
And yet, hotels feel pressured to implement them given that some competitors are tacking them on the back end of discounted rates, Sinclair adds. Many hotels — knowing that most people won’t dispute charges even if they don’t like them — are no longer removing charges for disgruntled customers now that business is picking up, he says.
Harrah’s Entertainment in Las Vegas is among a few companies resisting the resort fee trend. At a meeting this year, Harrah’s executives decided to charge for things the old fashioned way so as not to risk turning off customers.
At Harrah’s-owned properties in Las Vegas, customers can go down to the lobby to buy a bottle of water or a newspaper. They also pay for long distance calls and amenities such as the spa.
“If you want these extra things, we’re happy to sell them. But customers don’t necessarily want all these things,” says Marilyn Winn, regional president of three Harrah’s Strip resorts — Bally’s, Paris and Planet Hollywood.
The spread of resort fees is inevitable, much like the higher prices Las Vegas tourists now pay for improved amenities, says Mehmet Erdem, an assistant professor in hotel management at UNLV. People will grow accustomed to paying the fees, especially if they get a good deal on a room, he says.
“There’s a learning curve. When I first came to Las Vegas, there was no $20 buffet. Now that’s the norm. And you don’t see people getting sticker shock over it.”
Resistance to hotel fees isn’t so different from cruise ship customers who dispute mandatory tips and other previously disclosed add-ons when they receive their final bills, Erdem adds.
“On the day of debarkation, you will see this huge line of people at the front desk.”
And yet, such fees have become standard for the cruise industry, which attracts many repeat customers.
And resorts in Hawaii have long charged bundled resort fees, which have become a necessary and largely accepted cost of a Hawaii vacation, he said.
In fact, Murtaugh will be back at the Excalibur next month.
Based on his gambling activity, he’s getting three of his four nights for free, paying a resort fee for one night. Including taxes, the fee will cost him about $16.
“That was hard to turn down,” he says.