Hilton Hotels & Resorts is the latest hotel group to be under fire for allegedly deceptive pricing in its advertisements of hotel room rates.
Nebraska Attorney General Doug Peterson filed a lawsuit against the company July 24, 2019. Peterson is accusing the hotel group of drip pricing and "charging hidden resort fees to increase profits."
The lawsuit seeks to force Hilton to be more transparent in its fees. It also wants the company to provide monetary relief to affected Nebraskans as well as pay civil penalties.
"For years, Hilton has misled consumers in Nebraska regarding the true cost of certain Hilton hotel rooms," said Peterson in a statement. "They failed to heed warnings from the Federal Trade Commission and the mounting complaints from their own customers."
Marriott International is also being accused of charging hidden fees. On July 9, 2019, Washington, D.C., Attorney General Karl Racine filed a lawsuit against the hospitality giant for “hiding the true price of hotel rooms.”
Racine claims that Marriott’s pricing practices are against the District’s consumer protection laws. The complaint said, “For at least the last decade, Marriott has used an unlawful trade practice called ‘drip pricing’ in advertising its hotel rooms whereby Marriott initially hides a portion of a hotel room’s daily rate from consumers.”
These practices can affect how meeting attendees booking outside a room block choose and reserve accommodations.
[Related Content: Destination Boycotts—A Contract Clause to Protect Your Meeting]
The lawsuit requests Marriott recompensate Washington, D.C., residents who Racine says were misled in the price of hotel rooms at the company’s properties.
Racine claims that “Marriott’s unlawful trade practice has affected District consumers, as Marriott has charged resort fees to tens of thousands of District consumers over the years, charging those consumers well in excess of a million dollars.”
The lawsuit also asks that Marriott be prohibited from advertising daily hotel room rates that do not include mandatory resort fees in the price advertised for accommodations at its hotels.
It states that “Marriott owns, manages or franchises at least 189 properties worldwide that charge consumers resort fees ranging from $9 to as much as $95 per day.
“By charging consumers resort fees in addition to the daily amount consumers must pay for their rooms, Marriott makes hundreds of millions of additional dollars in revenue without appearing to increase the price for which it initially offers its rooms,” the lawsuit said.
The lawsuit filed against Marriott in Washington, D.C., is not declaring that the practice of charging resort fees is wrong, or that they should not be permitted, but rather that those fees are “fully and fairly disclosed to consumers in a transparent way.”
[Read More: Check Out All of Meetings Today's Contracts and Legal Coverage]
According to Bjorn Hanson, Ph.D., an industry researcher and consultant, there is a difference between a hidden fee and an unpopular fee. Consumers can claim they found out about the resort fee at some point in booking but didn’t like it.
“I have found that when booking accommodations at a resort, the resort fee is difficult to miss,” Hanson said. “However, when looking at urban hotel’s booking process and sites in 2017, added fees were sometimes less prominent and not as easy to understand.
“They sometimes appeared late in the reservation process or were only disclosed in a list in with other taxes and fees,” he added. “I believe part of the issue may be that there is not a generally accepted and well understood name for these fees.
“It seems odd to charge a ‘resort’ fee at an urban property.”
Drip Pricing and What it Means to Consumers
These mandatory fees that companies like Marriott include in the rooms rates and the practicing of charging them is called drip pricing. Drip pricing allows companies to bring in the same amount of profit without changing the advertised room prices.
“I actually had to look up what ‘drip pricing’ was, which is described by the FTC as deceptive or misleading,” said MaryAnne P. Bobrow, CAE, CMP, CMM, Bobrow Associates, Inc. “Since 2013, the FTC has been warning hotels to eliminate this practice.
“I guess six years of ‘fix it or else’ was enough,” she added.
[Related Content: Planners (and Suppliers) Say the Darndest Things]
In 2016, Attorneys Generals across the U.S. as well as the District of Columbia assembled a task force to address concerns surrounding undisclosed or poorly disclosed resort fees in hotel pricing models. This multi-state investigation targeted hotel brands that intentionally hide these fees and therefore practice drip pricing.
The FTC Report was issued in January 2017, but there has been no high-profile enforcement or litigation until this lawsuit filed by Washington, D.C. Attorney General Racine.
Meetings industry attorney Tyra Hillard, Esq, PhD, CMP pointed out to Meetings Today that “The Competition Initiative and Hidden Fees from the National Economic Council under Obama's administration specifically addressed this issue and named resorts as one of the biggest offenders (along with airlines, event ticketing agencies, etc.).
“I've been waiting for some lawsuits like this to be filed since I saw this Obama era report,” Hillard said. “Just like I'm waiting for some food allergy ADA lawsuits.
“They are coming,” Hilliard added. “Mark my words.”
What Do Separate Resort Fees Mean for Meeting Planners?
“I imagine there are some mixed opinions from meeting planners on resort fees and if the added fee should be separate from the room rate,” Hanson said.
“Others may believe these charges could be less easily negotiated,” he added.
On the other hand, having the added fee separate from the room rate can be beneficial when it comes to negotiating a contract.
“The meeting planner has the ability to negotiate both the room rate and fees and lumping them together could change that,” Hanson continued. “For example, if the resort fee includes breakfast, the planner could negotiate a better deal for the program’s breakfast.”
[Read This Next: An Essential Contract Checklist for Meeting Planners]
This article was originally published on July 10, 2019. It was updated on July 26, 2019.