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How to implement extra hotel charges without alienating guests

18 June 2010
How to implement extra hotel charges without alienating guests

Following the airline industry and springing unexpected fees on guests without explanation is not conducive to repeat business. But, says Carl Schneider, there are ways to implement fees without alienating guests or sacrificing services.

Borrowing an initiative from the airline industry, hotels in the UK have begun to follow their US counterparts and implement separate fees for services previously included in the room rate. In the airline business, this process has become know as unbundling the airfare. While there isn't yet a clever descriptor for the practice in hotels, it is certainly becoming more prevalent.

Vague "resort" and "service" fees have been cropping up on check-out bills, and hotels have employed new motion-sensing technology to check on minibar consumption. Some of these fees are imposed to make up for systemic revenue shortfalls. For instance, a phone service was once a significant revenue generator for hotels, but the proliferation of mobile phones has strangled this stream, so some hotels have taken to imposing a telephone fee, unlinked to use.

Whatever the impetus for the imposition of new fees, they are on the rise, and don't show any sign of abating anytime soon. For hotel owners and operators, these are important revenue lifelines in a market that still aspires to 2008 conditions. But what is fiscally beneficial for ownership has the potential to alienate consumers, and this is a something operators need to keep a good eye on.

Where, in terms of fees, is the line between prudent business practice and chiselling the customer? Where is the balance between needed revenue and penny-pinching?

The truth is, hotels do need the new fees, just as the airlines needed to expose their core product to free up additional ancillary revenue streams. The key for hotels is to avoid some of the mistakes the airlines made, and make those fees straightforward and included upfront in the booking path, clearly linked to tangible services.

Springing an unexpected fee on a guest only at the end of their stay - as is the practice at some properties - is not conducive to repeat bookings and customer satisfaction, the two major drivers of hotel profitability. But there are ways to implement fees without sacrificing these.

First, let's look at some of the kinds of fees that are being implemented or considered. The most straightforward sort of fee accompanies a clearly delineated auxiliary service. What makes this kind of fee a fee and not an additional product or service for sale is its compulsory nature; a guest will not have a choice to decline this product or service. Housekeeper gratuities are a good example of this sort of fee.

The second kind of fee is derived from something that used to be included in the room rate as a matter of course. Energy surcharges fall into this category, as do in-room safe fees. This sort of fee is also largely unavoidable, and allows hotels to charge the indirect cost of lodging a given guest.

A third kind of fee spreads the cost of property upkeep to the individual guest; examples of these fees include groundskeeping fees, facilities or maintenance fees, resort fees and pool fees. Whether or not a guest actually uses an amenity, they pay a blanket charge for them.

The final sort of fee isn't really a fee at all, but a charge for various services that a guest may or may not engage in. Local phone fees, minibar charges, airport transfer fees and internet connectivity are all examples of fees that were (or are, at a different property) offered free to guests, with their cost covered by the room rate. But since guests are not compelled to partake in these services, they will not automatically pay the fees.

Clearly, the first and last kinds of fees are the most palatable for guests. Vague-sounding, badly-defined charges such as resort fees upset consumers, and rightly so; it is a transparent attempt to artificially lower the base room rate by separating a portion of it out. Fees that are closely associated with a given guest's impact on the property, such as energy surcharges, are a bit more palatable, though these fees are often instituted in response to changes in supply cost, which is also transparent to consumers.

If a hotel sticks with those fees that fall into the first and fourth categories, they can effectively keep the fee revenue stream open without running the risk of alienating their customers. These fees are both reasonable, as they are tied specifically to auxiliary services or products. In the case of the fourth category of fees, there is an opportunity for guests to avoid them if they care to. These are the sorts of fees that hotels can reasonably impose, and continue to reap the benefits of repeat business and high guest satisfaction levels.

Whatever kinds of fees a hotel decides to implement, it is absolutely imperative that the hotel be up front about them. Guests should be alerted well in advance that there is a fee associated with a particular service or product - or if a fee will be imposed regardless - as soon as possible in the booking path. This has a dual effect: first, if a fee is avoidable, this notification gives guests the opportunity to opt out. Second, if a fee is compulsory, it prevents a guest from feeling hard done by in the end. Of the two evils - being informed of a small charge and being outright deceived - the former is always preferable.

Hotel fees don't have to be a Faustian bargain. By imposing reasonable, incremental fees, and by disclosing their existence clearly and early on in the booking process, consumers can be made to accept what is becoming an ever-more common practice. By following these simple principles, hotels can have their fees, ad their repeat customers and high satisfaction rates, too.

Carl Schneider is founder of http://www.guestrights.org/" target="_blank" rel="noreferrer">GuestRights


How to implement charges without creating confusioN

Don't be vague Make the charges clear from the outset so that the guest doesn't feel hoodwinked

Make the fee straightforward Express exactly what the charge is for and don't be unclear

Don't charge for everyday expectations Guest do not expect to be charged for a service that everyone uses. Only make an additional charge for services that can be avoided.

Be up front What ever fee you implement, make sure the guest knows well in advance they are paying for a particular product or service

Make the fee affordable Guests are much more likely to accept and make use of a service if it is at a reasonable price

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