FTC Cracks Down on Hidden Fees in Travel Industry

The Federal Trade Commission (FTC) has unveiled a new rule designed to shield travelers from the frustration of unexpected and often exorbitant add-on fees. This regulation specifically targets what the FTC terms "unfair or deceptive fees" that have become increasingly prevalent in the short-term lodging sector, encompassing hotels, motels, vacation rentals, and platforms like Airbnb. These fees often masquerade as "resort fees" or "destination fees" and are tacked onto the bill for access to amenities such as pools or gyms, even when usage is minimal or non-existent.

The primary aim of this rule is to eradicate bait-and-switch pricing tactics and other deceptive strategies employed to conceal the true cost of travel. This includes the live-event ticketing industry alongside short-term lodging, as stated in the FTC’s official press release. The core principle is to ensure transparency and prevent consumers from being misled about the final price they will be paying.

It is important to note that taxes or other legitimate government fees are excluded from this new rule. The focus is strictly on those fees that businesses impose independently.

The FTC’s directive is clear: short-term lodging and live-event businesses must prominently display all pricing information in their advertisements and provide a total price upfront. This total price must encompass all mandatory charges or fees that the business is aware of and can accurately calculate at the time of booking. This includes any charges or fees for goods or services that customers are obligated to purchase as part of the same transaction.

The impact of this rule is expected to be significant, potentially altering the landscape of pricing transparency in the travel industry. By requiring businesses to disclose all mandatory fees upfront, the FTC aims to empower consumers to make informed decisions and avoid unpleasant surprises at the time of checkout.

Marriott, a major player in the hospitality industry, has already taken steps toward greater pricing transparency. According to a Marriott spokesperson, the company began providing customers with clear and transparent pricing in May 2023. Marriott claims to be the first hospitality company to ensure that non-government fees charged by hotels are displayed upfront and included in the total price presented to customers. Marriott also stated that this enhanced display has been in place for two years, suggesting that guests are unlikely to notice a significant difference from what they currently see.

The American Hotel & Lodging Association (AHLA), a prominent industry group based in Washington, D.C., has also weighed in on the issue. Earlier this year, the AHLA’s president and CEO, Rosanna Maietta, stated that the organization had spearheaded efforts to establish a federal standard for consistent, upfront pricing. She emphasized that this standard would bring much-needed clarity to the marketplace and that all consumers deserve transparency in the booking process, regardless of where they choose to book their stays.

Despite the impending rule change and the proactive measures taken by some companies like Marriott, the prevalence of resort fees remains a concern for many travelers. According to the American Hotel and Lodging Association, approximately 6% of hotels currently charge resort fees. While this may seem like a relatively small percentage, the impact on individual travelers can be substantial, particularly when these fees are unexpected or not clearly disclosed.

Nerdwallet, a personal finance website, offers several tips for travelers seeking to avoid paying resort fees. One suggestion is to utilize hotel points for bookings, as some resorts still impose resort fees on award stays, requiring payment in cash in addition to the points redemption. Another strategy is to leverage hotel elite status, which often comes with exemptions from resort fees.

The broader implications of this FTC rule extend beyond individual travelers. By promoting transparency and preventing deceptive pricing practices, the rule aims to foster a more competitive and fair marketplace for all industry participants. Businesses that have historically relied on hidden fees to boost their profits may need to reassess their pricing strategies and adopt more transparent approaches.

The rule could also potentially impact consumer behavior. With greater clarity on total pricing, travelers may be more likely to compare prices across different lodging options and choose those that offer the best value. This increased price sensitivity could further incentivize businesses to adopt more transparent and competitive pricing models.

The FTC’s new rule represents a significant step toward protecting travelers from hidden fees and promoting greater transparency in the travel industry. While the full impact of the rule remains to be seen, it has the potential to create a more level playing field for businesses and empower consumers to make more informed decisions. As the rule is implemented and enforced, it will be crucial for travelers to remain vigilant and continue to advocate for transparent pricing practices. The fight against hidden fees is an ongoing effort, and consumer awareness and engagement are essential to ensuring a fair and transparent travel experience.