Value-add, transparency key to making amenity fees work
 
Value-add, transparency key to making amenity fees work
26 NOVEMBER 2019 3:47 PM

Independent and boutique hotels experimenting with charging amenity fees haven’t yet received pushback from guests. Sources said the key is to create transparency and tangible value-add offers such as F&B credits and spa discounts.

REPORT FROM THE U.S.—Unlike their branded counterparts, independent and boutique hotels haven’t yet seen pushback as they begin to experiment with amenity fees, but there are a few things to keep in mind to create value and not overcharge, sources said.

Wendy Norris, corporate director of revenue and e-commerce at Houston-based Valencia Hotel Group, which has nine boutique hotels in its portfolio, said her company started implementing destination amenity fees at some of its properties in January, and so far it’s been successful.

“It’s definitely a growing trend because your (average daily rate) isn’t growing as quickly, so you’re trying to find additional revenue sources,” she said.

How independents are charging fees
Norris said the fees at her participating properties are nominal, around $4 to $7, and it’s included in the room rate. She said there hasn’t been any pushback from guests. Her company’s boutique properties are the only ones in its markets that are charging these fees, she added.

The key to making guests happy is by being transparent and showing value-add, she said. Guests are made aware of the fees when booking online and via phone, so it’s not an added fee in fine print found on the final hotel bill.

“It’s in your face when you book your room,” she said.

Bill Nassikas, president and COO of Arizona-based Westroc Hospitality, was an early adopter and said his company began implementing amenity/resort fees about 10 years ago. He said in an email interview that his company will use the fees as a point of negotiation when booking group business.

He added that there’s been a focused effort on clearly disclosing fees at time of reservation both through voice and online.

“We’ve had our attorneys review our confirmation narrative and engaged our reservations staff in training exercises to ensure they are consistently comfortable with how the resort fees are portrayed,” he said. “When a guest pushes back or questions the fee—which is not often—we are open to offering concessions.”

Although most of Westroc’s properties charge a fee, Nassikas said he is experimenting with eliminating resort fees at one property. The outcome has been a year-over-year increase in revenue per available room. His company has a collection of three independent hotels.

Since most of Valencia Hotel Group’s properties are in mixed-use development spaces, Norris said the fees allow guests to have access to discounts at local spas or retail shops when they show their room key.

“It’s not just about the hotel itself, it’s about what’s in the area,” she added.

Norris said her team was nervous to implement these fees because they didn’t want to lose guests and room revenue.

“We said, ‘Let’s try it out and see how it goes.’ We started it in January of this year, and some of our group contracts and negotiating contracts didn’t have that (destination amenity fees) in there, so we played those on a case-by-case basis … and didn’t see any pushback,” she said.

Norris said there’s opportunity to increase rates, but when guests start asking about it, it’s too much. In 2020, she anticipates her company will raise the rates by a few dollars.

“It’s new avenues for us. It all floats to the bottom line,” she added.

Emily Wilson, VP at CHMWarnick, said instead of the standard free internet or bottle of water included with an amenity fee, she’s seeing independents including credits to food-and-beverage outlets, lounges or spas. That gives guests more of a tangible value-add opportunity and encourages them stay and spend more at the property.

The ability to implement fees should really depend on the market and hotel itself, Wilson said.

“If you’re an independent hotel in the market (and) no other properties are charging this fee, then it probably wouldn’t be wise to,” she said.

It’s in both the hotel’s and guests’ best interest that fees are disclosed upfront and throughout the entire booking process, Wilson said. Guests will consider those fees in their decision on whether to book.

“We don’t want any surprises when they show up on-property,” she said.

Indies have room for creativity with fees
Wilson said it’s probably a little easier for independent hotels to implement amenity fees versus a branded hotel, because they don’t have to comply with any brand standard. However, fees certainly need to be reviewed and evaluated based on the market dynamics, what guests will accept and if it makes sense financially.

Brands have a much broader sample and have been able to test fees with more properties, which has allowed them to build best practices, “and I think there are learnings to be had from those best practices,” she said.

Independents benefit from being able to tailor an experience for the destination and charge fees based on that, she added.

Brands and independents are so different from each other, Norris said. In her experience, guests in the upper-upscale and luxury independent segments don’t want to be nickel-and-dimed.

“There’s no reason to nickel-and-dime, you might as well just bring up your room rate,” she said.

Norris sees these fees most advantageous in the midscale segment, which is the segment where her company charges fees, because that’s where it’s not as easy to go in and raise room rates.

As far as advice for independent hoteliers who are looking to implement amenity fees, she said it’s best to look at a hotel as a whole within the market and make sure that if hoteliers are going to charge, there is true value-add and transparency.

Looking ahead, Wilson said while it’s becoming more of a challenge for hotels to grow ADR, more independent hotels might start to look for ways to increase revenue including charging amenity fees.

“They’re looking for every opportunity they can to meet their (revenue) goals,” she said.

1 Comment

  • Francis Purvey November 27, 2019 1:26 PM Reply

    So am I to understand this logic. Regardless of whether it is transparent or not, the amenity fees (which go directly to the bottom line and are not subject to occupancy tax) are designed to generate more revenue without increasing rates as shown on any channels including the hotel's own website or on the telephone. Thus trying to be more competitive than the ultimate price being charged. And these amenity fees are charged on things that previously were included in expected hotel facilities and amenities, such as access to a fitness center. Sorry, but I still see it as deceptive.

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