Total resort and facility fees are expected to reach a record high in U.S. hotels for 2017, but some fees are decreasing and hoteliers are adjusting to the changes.
REPORT FROM THE U.S.—Hoteliers are adapting to the changing environment of generating revenue through resort and facility fees, sources said, and for some that might mean increasing fees in certain areas.
Sean Mullen, president of acquisitions at Noble House Hotels & Resorts, said he’s seeing resort fees become more common in true resort hotels and facility fees starting to trickle into urban hotels.
Over time, Mullen said owners have looked at the hospitality industry with much more scrutiny while looking for ways to turn around and have higher-yield assets.
Fees are at record high
In 2016, total lodging fees and surcharges reached $2.6 billion, according to a study by Bjorn Hanson, clinical professor at the Tisch Center for Hospitality and Tourism at the New York University School of Professional Studies, but for 2017, Hanson forecasts the total will reach a record $2.7 billion, with cancellation fees seeing the largest increase.
Hanson posed two reasons as to why the fees are increasing each year.
“One is more occupied roomnights, so the increase is approximately 5% … 40% of that increase came from there being more guests,” he said. “The second component is the combination of more categories being charged and the amounts being charged.”
An individual hotel or resort might have added several fee categories or taken away one, Hanson said.
“There just seems to be an aggregate of more categories charged at hotels and resorts,” he said.
Hanson noted in his report that internet-access fees have decreased, and hoteliers have responded to that.
Mullen said hotel and resort guests now view Wi-Fi access as essential, and thus they don’t want to see a separate charge for it on their bills.
“I think Wi-Fi is a must-have for consumers and it’s evolved to now being that there is a basic Wi-Fi service,” Mullen said. “As far as the fee, that is either included in your room rate or included in the resort fee, and consumers are fine with that if they then are presented the option of higher speed in Wi-Fi with an additional cost.”
This has caused hotel owners to realize that if they no longer can charge $9.95 for internet access, and the profitability isn’t there anymore, then it must turn into a package inclusion in a resort or facility fee, he said.
“Ultimately, I need to keep that income coming to ownership,” Mullen said.
Robert Mandelbaum, director of research information services for CBRE, said there are hotels that offer free internet and don’t charge a resort fee and then there are hotels that charge a resort fee and include free internet as part of the rationale for charging the resort fee.
To make up for those declining fees, Mullen said one of the biggest things he’s seen is an increase in service charges.
“I’ve seen service charges in banquets go from 15% 20 years ago to now I’ve seen service charges up 24% being very common,” he said. “I’ve even seen outdoor service charges up 28% at some hotels around the country.”
Hoteliers are looking for the best way to adapt and make up some of their lost revenue, he said, or make up for higher benefits. Owners still need to get certain returns to have a financially viable model, he added.
What resort fees include
Hanson noted there is no static definition when trying to define resort fees in today’s landscape, and that’s one of the issues that makes it more controversial.
In the traditional way the industry views it, he said, it includes the use of a resort’s swimming pool, fitness center, congregation areas and amenities that support those areas. However, in the past few years, there have been additions such as business center operations like sending and receiving faxes and packages.
Mullen said consumers have come to accept the fees, for the most part.
They say, “OK, great, you’re charging me for it, but I want to get a good quality (experience),” he said.
Because of that, Mullen said the industry will continue to see more robust inclusions in resort and facility fees, and guests will have higher expectations about the quality of those services.
For example, fitness centers are included in resort fees, but guests are demanding a better fitness center with the latest technology and special classes included, Mullen said. It’s also about going above the basics, such as giving guests fruit-infused water or a personal beach butler service.
“I think consumers nowadays, because the fees are becoming much more common, that they’re starting to understand it and they’re also looking at other industries like the airline industry, these fees and add-ons are very common,” he said.
It’s now about hoteliers educating the consumer that the hotel industry functions very similar to other industries with add-on fees, he added.
Transparency remains key
The main issue around resort fees is the disclosure prior to consumers making a reservation, said Candace Johnson, VP of performance optimization at Two Roads Hospitality.
When consumers directly book a reservation through Two Roads, resort fees are fully disclosed, she said. When room rates are shown, a disclaimer says “excludes resort fee” with a full explanation of what is included in the fee.
“There’s so many different places where guests can book, and I don’t think there’s a consistency of guidelines necessarily,” she added.
Mandelbaum agreed that third-party sites might not be as transparent as direct channels.
Mullen agreed transparency is the No. 1 issue. And it must be reflected on both a property’s direct site as well as any third-party Noble House partners with, he said.
Much like Hanson’s prediction, Mandelbaum said he thinks that fees will continue to rise even after this year.
“I think we’re at a part of this cycle now where we’re not—and other firms are not—forecasting any declines in revenue, but things are sort of plateauing and so hotels are going to be more aggressive in terms of gaining other sources,” Mandelbaum said.
Going forward, Johnson said the hotel industry needs to find a solution that meets consumer needs and the needs of each property, as well as being able to explain what the value proposition is.