Meeting Mentor Magazine

December 2023

No Escape

Hotel Fees Generate Big Profits,
But How Far Can They Go?

Meeting professionals, attendees, and business and leisure travelers have added “fees” to the “death and taxes” they can’t avoid. Individually benign, these fees, when taken together, can turn onerous.

The Federal Trade Commission doesn’t talk publicly about pending actions. But consumer advocates believe the FTC will change its 2012 policy, which allowed hotels to charge fees but disclose them before consumers booked their rooms. Recent reports confirm the issues around these fees and just how much money they generate for hoteliers.

Hotel satisfaction. Satisfaction with hotel costs and fees flattened out from 2015 to 2016, according to J.D. Power 2016 North America Guest Satisfaction Index Study. This follows years of steadily improving satisfaction, even though average daily rate rose 2% to 4% a year. “As long as people felt they were getting increased value, they didn’t mind paying higher rates,” said Rick Garlick, Ph.D., global practice lead, travel and hospitality. “For the most part, hotels have run out of new ‘perks’ to add,” with free Wi-Fi, complimentary breakfasts and parking becoming standard. He would not be surprised to see scores go down next year, “as guests will have become accustomed to the level of improved quality they have experienced over the past few years.”

Cancellation and attrition fees. CBRE Hotels’ Americas Research analyzed 304 U.S. full-service, resort and convention hotels from 2007 through 2014. In 2007, cancellation and attrition income equaled 0.7% of total property revenue, jumped to 1.3% in 2009 (no surprise, thanks to the Great Recession), and leveled off at 0.5% since then. It was highest at resort hotels (0.9%), followed by convention hotels (0.8%). This minor revenue source, however, can have “a significant impact on profitability,” cited Robert Mandelbaum, director of research information services for CBRE Hotels’ Americas Research. since “most of the penalty payments received by hotels drop right to the bottom line.”

As more hotels tighten their cancellation policies, these fees are impacting more meeting groups and their attendees. Attrition and cancellation income for hotels increased 11.6% from 2013 to 2014, the study found. According to STR, accommodated group room nights in the U.S. returned to pre-recession levels in November 2014. Strong group demand and high occupancy are empowering hotel sales managers to be more aggressive with attrition and cancellation policies, Mandelbaum cited. — Maxine Golding

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About MeetingMentor
MeetingMentor, is a business journal for senior meeting planners that is distributed in print and digital editions to the clients, prospects, and associates of ConferenceDirect, which handles over 13,000 worldwide meetings, conventions, and incentives annually.

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