The public image of the U.S. hotel industry could be in for a shock in the coming months. A lawsuit over ugly allegations of price fixing by online travel agencies and several brand companies is beginning to take shape. In the meantime, the industry is waiting for word from the Federal Trade Commission on an investigation it launched last fall over whether 22 hotel companies are misrepresenting their room prices to consumers to hide resort fees and other mandatory surcharges.
While the facts of the two actions—as well as the outcomes of both—are important to those companies involved, it’s the potential blow to the industry’s generally positive image that we should all worry about. For years, and even today, hotel executives can feel good our industry doesn’t carry the stigma with consumers that most airlines do. And more recently, the cruise industry has taken some blows over the stranded Carnival Cruise Lines ship that bobbed helplessly in the Gulf of Mexico while millions of people watched the mess unfold on TV.
In November, the FTC sent letters to 22 unidentified hotel companies it claims don’t include mandatory resort fees in room rates quoted on their websites.
The FTC calls the practice “drip pricing,” implying that some hotel websites only include part of the price of a room and then reveal additional charges as the customer winds his or her way through the reservations process. To date, none of the hotel companies have identified themselves publicly or made any public response to the charges. But to make matters potentially worse from a PR standpoint, Caesars Entertainment said in late February for the first time it was instituting resort fees as high as $25 a night at its nine hotels in Las Vegas.
There’s no way to know how this action will be resolved. It could be done quietly with those companies involved agreeing to change their policies, or it could become a full-blown, media-driven controversy, something the hotel industry doesn’t need.
Nearly simultaneously, a class-action lawsuit in federal court in the northern district of Texas accused six OTAs, as well as six hotel chains of conspiring to suppress competition in hotel room prices. That suit was later consolidated with a similar action filed in California.
In particular, the suit says the hotel companies perpetuate the scheme by mandating minimum room prices for online agencies. The judge recently named a law firm to represent the plaintiffs in the action so a court date and judicial resolution of the case is a long way off. However, it too could flare up and create another black eye for the industry.
Salute to an industry stalwart
Tom Staed may not be remembered in the annals of hotel industry history in the same vein as giants such as Kemmons Wilson, Bill Marriott and John Q. Hammons. Yet, in his own quiet but confident and forceful way, Tom was an historic leader in our industry.
Tom, a long-time hotel owner, developer and operator based in Daytona Beach, Florida, died last week at age 81, according to Bob Davis of the Volusia County Hotel & Lodging Association.
While Staed made his mark in the business world at his hotels in Daytona Beach, he was more instrumental on a state and national stage. At different times in his career, Staed held the chairmanship of both Best Western International and the American Hotel & Lodging Association.
In Florida in the mid-1990s he was a key driver in the formation of Visit Florida, the state’s tourism marketing corporation. He also helped secure passage in the Florida legislature of a bed tax to fund the state’s tourism marketing efforts.
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