Meeting Mentor Magazine

December 2018

'Drip Pricing'

Hotels Act to Comply After
FTC Warning on Resort Fee Disclosure

When the Federal Trade Commission sent a warning letter on “drip pricing” — the deceptive practice of not clearly showing mandatory fees (specifically resort fees) in the booking process — to 22 hotel operators this past November, the hotel community took notice. That’s exactly the response the FTC sought.

The warning letters were sent out not only to correct practices by individual hotel properties, but “as a broad message to the travel industry,” said Annette Soberats, attorney in the FTC division of advertising practices. The monitoring will continue.

The warning about fees did indeed capture the attention of the hotel community. “It was heard loud and clear,” said American Hotel & Lodging Association CEO Joseph McInerney, “even by third-parties, where the real problem comes in.” Despite everyone talking about it, however, no hotelier approached AH&LA for guidance. “We don’t know who they were, and no one admitted to getting the letters,” he indicated.

While the letters have created some industry “buzz,” noted Robert Gilbert, CHME, CHBA, president and CEO of Hospitality Sales and Marketing Association International (HSMAI), he put them within the context of a “much broader action across numerous industries, not just hospitality.” HSMAI encourages hotels to “clearly define and disclose resort fees at the get-go, on page 1 of the booking process,” but “they don’t control the display in third-party booking engines (OTAs), which have created much of this problem.”

McInerney identified drip pricing as a communication issue. “The important thing is for hotels to make sure to tell their customers there is a mandatory fee before they make the reservation,” he said. If not then, “the front desk clerk has to make sure customers know about it.” And it should never happen at check-out, added Gilbert.

The FTC initiated its investigation into “different hotels in different states,” Soberats explained, after it held a conference on drip pricing last May. She confirmed that mandatory resort fees themselves do not violate the law. To date, most of the notified hotels have either modified their online reservation systems to comply or are cooperating with the FTC in making the changes, reported Soberats.

Because this was the first time the FTC publicly announced its position on resort fees, she added, it felt the best way to communicate was through warning letters. “Given the positive response from those who received letters, we think that the warning letter is sufficient,” she said. The FTC is following up with a presentation on drip pricing at the spring meeting of the Academy of Hospitality Industry Attorneys. — Maxine Golding


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