There’s a simple reason that annoying fees are prevalent in travel. They work. Customers spend more money. And in some cases politics and the tax code encourage them.
John Arnold shares what happened at StubHub when they tested an elimination of hidden fees for some customers: those who were shown transparent all-in pricing spent less money.
Customers subject to the back-end fees spent 21% more money and were 14% more likely to make any purchase. Stubhub, which had started a transition to fully transparent pricing in 2014 in response to loads of customer complaints of hidden fees, reversed this policy and reinstated them after this A/B test.
Why are companies fighting rules to eliminate hidden fees? Consider this case study from StubHub. In 2015, the company randomized 50% of their millions of customers to see the full price while shopping; the other 50% saw lower prices up front but were hit by added (junk) fees at…
— John Arnold (@JohnArnoldFndtn) November 19, 2023
The U.S. federal government and several states have turned against hotel resort fees, and in addition to state lawsuits there are private ones as well. It seems like we’re beginning to see progress with all-in pricing. Even Airbnb is offering this as a toggle option.
We’ve seen little progress with online travel agencies like Expedia, however, which I believe is one of the worst companies in travel for even other reasons. And as long as online travel agency sites don’t show all-in pricing, hotel websites will appear to be charging more money for the same rooms. That’s a problem.
Airline fees are already pretty well-disclosed (even if more extensive, encouraged by the tax code). The Department of Transportation is considering fee disclosure rules that might actually help airlines at the expense of consumers.
No one seems to be paying attention to the scammiest fees of all: rental cars. It’s really tempting for cities to tax out of towners!
Here are some of the fees I’ve seen rental car companies charge:
- Tourism Commission Recovery Fee: Why does a tourist need to pay a tax, perhaps 3.5%, to… encourage tourism? They are already tourists, and taxing tourism literally does the opposite!
- Concession Recovery Fee: Your rental car company has to pay the airport to operate there, and you pay an extra charge for their right to sell to you (isn’t that what the price of the car is for?).
- Customer Transportation Fee: the free rental car shuttle bus isn’t actually free, and you pay for it whether you use the shuttle or not.
- Parking Recovery Fee: when you’re not renting the car and they’re not renting it to someone else, it has to be parked and parking is expensive. This is literally a fee that covers time when you aren’t renting from them.
- Premium Location Charge: This covers the rental car company’s rent. Usually that comes out of a company’s general revenue. But since the airport rental facility is convenient (although if it’s an off-airport rental center it isn’t that convenient) they call it a ‘premium location’ and add a charge for that. But it’s really a fee for rent.
- Energy Surcharge: this may cover utilities (on top of rent at the facility, there might be a power bill, though that’s probably included in their rent), fueling rental cars (but you either have to return it full or pay for gas!), or fuel for the shuttle bus (but you already pay a fee for that). Some hotels have tried to add energy surcharges but the chains have found those too scammy and crack down on the practice when it creeps up. There’s nothing too scammy for a rental car company, though.
- Vehicle License Recovery Fee: If you’re renting the car, doesn’t it need to be licensed? Why are you paying this as a separate service? “Yes, I’d like to rent the car but it doesn’t need to be licensed. Ok, thanks.” If it is mandated by law, then it goes in the price. It’s not an upcharge.
- Air Conditioning Recovery Fee: A car manufacturer pays an excise tax on air conditioners. In theory the car company charges the rental company more for the vehicle as a result. And the rental company charges you an add on fee because the price of the car is higher. Of course more expensive cars tend to mean higher rental rates, also. Double dip!
- Seasonal Tires Fee: this one seems unique to Quebec, where snow tires are required in winter and rental companies charge for it year round (because tires have to be both installed and removed as well as stored).
Junk fees often add 50% – 100% to the cost of a car rental. The good news is that many of them are specific to airport car rentals, and in particular to rentals you pick up at the airport. So if you go off airport to rent you save those fees.
Taxes work this way too. There’s the regular tax rate, then all kinds of phase-outs and special taxes so you end up paying more. Your property tax bill has many lines of special taxes.
Check the special taxes on your phone bill or utility bill. I called the cable company asking for a price quote and they literally could not tell me what the all-in cost for Internet would be.
It is fine to have all of the fees as long as a total is the one that is advertised so comparison shopping is possible. Sales taxes have been around a long time and are also done in a scammy way. My property taxes used to have only a few additions and now they have many. Getting the government to change how businesses charge fees, while they are guilty of the same actions, may be difficult.
I like my own solution.
I leave my car in my own garage. I then WALK 8 blocks to the airport (CYS – CHEYENNE WY) and take regional jet to DEN and get off PAST TSA. My dream solution?
Live in an airpark and DIY.
Scorch the property or biz on Google maps/Yelp/Trip Advisor – over bogus/junk fees and resort fees that offer zero value (2 bottles of water $0.20c at Costco, local newspapers in lobby (do they even print papers anymore) coffee/tea in your room, local phone calls and wifi, employee benefits etc.
Especially for F&B credits for Bonvoy Elite/Hilton Diamond-lack of free parking, (but definitely use a 2nd account unless you want to be deplatformed/canceled.
I have primary/ secondary accounts for just the purpose of scorching bad behavior
(I cross-post all my 4/5☆ star postive reviews so I don’t like a random angry customer (but I don’t merely c&p i still try to remain slightly anonymous).
My main account is 95-97% postive 4/5☆ reviews an I have 25M plus views over last 4-5 years – so the rsre occasions we have a negative experience it carries more weight and often yields better results.
Google maps has mainly two grouos of reviewers – people that likely bitch about everything and are generally unhappy people – and then those have many red flags about bad experiences/properties.
If I’m planning on dropping serious cash on a property/resorts/restaurants I read all the past year 1☆ and many if the 4/5 ☆ reviews – if
Most of the negative reviews are new/few reviews i discount them – same with the 5☆ this seems to be a good gauge.
The same with the response from the properties- if they are simply lip service “we will tallk with our team BS” or if its just we wills atrive to do better…” the sincere ones respond with an e-mail addy or request to DM/IM them.
Thanks for pointing out that deregulated markets don’t work, as they quickly devolve into fraud.
No wonder that the prior administration is so adamant in not wanting regulation — as the trials are showing, they made money through fraud!
Well Gary it seems you’re making a strong case for government regulation. As Warren Beatty said in Bullworth, you think these pigs are going to regulate themselves?
I think people do end up spending more money but it does deeper damage to the brand and loyalty in the long run. For example, my wife just spent two business nights at a random Holiday Inn Express in Kankakee Illinois. She gave me the bill for her tax records so I looked at it and found $2 per night for the room safe fee. Is it nice to have a safe? Maybe, although I don’t trust that any are actually safe to use. But what if you don’t want to use the safe or don’t need it? Do they take it off if you complain and who needs to deal with that? So the hotel thinks “Wow, look at all the money we made off safe fees this year so let’s add a “climate change” fee or a “Vending Machine Access Surcharge”, Clorrine handling and disposal tax”, “Remote Control Battery Replacement Convenience Surcharge” and a “LED Lighting Carbon Offset”. Fine but guess who thinks less of that hotel and is less likely to stay there in the future?
Full disclosure laws are usually passed under Democrat administrations. Republicans should get on the bandwagon for full disclosure/transparency, at least for airlines/hotels/rental cars.
I can just look at back at the good old Hertz days when a 14 day rental was $0.00 in NY off airport