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.