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CHLA Spring 2014

Full Disclosure Required for All Hotel Fees and Charges By Jim Abrams SPRinG 2014 California Hotel & Lodging Association 23 The Federal Trade Commission (FTC) recently served notice on the lodging industry that it would not tolerate undisclosed fees, surcharges, and similar charges that some hotels add onto the advertised price of their rooms. The FTC characterizes this practice as “drip pricing.” FTC warns hotel operators that price quotes that exclude ‘resort fees’ and other mandatory surcharges may be deceptive The Federal Trade Commission has warned 22 hotel operators that their online reservation sites may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms. The warning letters cited consumer complaints that surfaced at a recent conference the FTC held on “drip pricing,” a pricing technique in which firms advertise only part of a product’s price and reveal other charges as the customer goes through the buying process. According to the FTC letters, “One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or internet access, sometimes referred to as ‘resort fees.’ These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions.” The warning letters also state that consumers often did not know they would be required to pay resort fees in addition to the quoted hotel rate. United States of America FEDERAL TRADE COMMISSION Washington, D.C. 20580 Division of Advertising Practices November, 2012 Company Name Attn: President or CEO Address WARNING LETTER Dear _______________: The Federal Trade Commission (“FTC”) has investigated whether certain hotel operators are violating Section 5 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45(a), by misrepresenting the hotel room reservation price quoted to consumers. On May 21, 2012, the FTC held a conference on “drip pricing,” defined broadly as a pricing technique in which firms advertise only part of a product’s price and reveal other charges later as the customer goes through the buying process. At the conference, FTC Chairman Jon Leibowitz, asked consumers to share their drip pricing stories with the FTC. One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or internet access, sometimes referred to as “resort fees.” These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions. Specifically, consumers complained that they did not know that they would be required to pay resort fees in addition to the quoted hotel room rate. Several stated that they only learned of the fees after they arrived at the hotel, long after making a reservation at what they believed to be the total room price. Others paid for the reservation in advance, and only found out after they arrived at the hotel that they would have to pay additional mandatory fees. FTC staff has reviewed a number of online hotel reservation sites, and has confirmed that some hotels exclude resort fees from the quoted reservation price. Instead, the “total price” or “estimated price” quoted to consumers includes only the room rate and applicable taxes. At some of these sites, the applicable resort fee is listed nearby, but separate from, the quoted price. In others, the quoted price is accompanied by an asterisk that leads consumers to another location at the site–sometimes on the same page, sometimes not–where the applicable resort fee is disclosed, typically in fine print. A few sites fail to identify applicable resort fees anywhere, and instead inform consumers that other undefined fees may apply. These practices may violate the law by misrepresenting the price consumers can expect to pay for their hotel rooms. We believe that online hotel reservation sites should include in the quoted total price any unavoidable and mandatory fees, such as resort fees, that consumers will be charged to stay at the hotel. While a hotel reservation site may breakdown the components of the reservation estimate (e.g., room rate, estimated taxes, and any mandatory, unavoidable fees), the most prominent figure for consumers should be the total inclusive estimate. We reviewed your website at __________ and found that in at least some instances mandatory resort fees are not included in the reservation rate quoted to consumers. We strongly encourage you to review your company’s web site to ensure you are not misrepresenting the total price consumers can expect to pay when making a reservation to stay in your hotel. Please be advised that the FTC may take action to enforce and seek redress for any violations of the FTC Act as the public interest may require. Thank you for your attention to this matter. Please direct any inquiries concerning this letter to Annette Soberats at asoberats@ftc.gov or at 202-326-2921. Very truly yours, Mary K. Engle Associate Director for Advertising Practices  Warning Letter 


CHLA Spring 2014
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