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How to Implement Fees Without Alienating Guests or Sacrificing Services



By Carl Schneider, founder of GuestRights
April 2010
 
Taking a page from the airline’s book, hotels have begun implementing separate fees for services previously included in the room rate.  In the airline business, this process has been called the unbundling of the airfare.  While there isn’t yet a clever descriptor for the similar process in hotels, it is certainly becoming more prevalent.  Vague “resort” and “service” fees have been appearing on check-out bills, and hotels have employed new motion-sensing technology to enforce minibar consumption.  Some of these fees are imposed to make up for systemic revenue shortfalls; whereas once phone service was a significant revenue generator for hotels, the proliferation of mobile phones strangled this stream, so some hotels have taken to imposing a telephone fee, unlinked to use. 
 
Whatever the impetus for the imposition of new fees, they are on the rise, and don’t show any sign of abating anytime soon.  For hotel owners and operators, these are important revenue lifelines in a market that still aspires only to 2008 conditions.  But what is fiscally beneficial for ownership has the potential to alienate consumers, and this is a distinction operators need to keep a good eye on. 
 
Where, in terms of fees, is the line between prudent business practice and chiseling the customer?  Where is the balance between needed revenue and nickel and diming? 
 
The truth is, hotels do need the new fees, just as the airlines needed to expose their core product to free up additional ancillary revenue streams.  The key for hotels is to avoid some of the mistakes the airlines made, and make those fees straightforward and included upfront in the booking path, clearly linked to tangible services, and not too egregious.  Springing an unexpected fee on a guest only at the end of their stay - as is the practice at some properties - is not conducive to repeat bookings and customer satisfaction, the two major drivers of hotel profitability.  But there are ways to implement fees without sacrificing these.
 
First, let’s look at some of the kinds of fees that are being implemented or considered.  The most straightforward sort of fee accompanies a clearly delineated auxiliary service.  What makes this kind of fee a fee and not an additional product or service for sale is its compulsory nature; a guest will not have a choice to decline this product or service.  Housekeeper gratuities are a good example of this sort of fee. 
 
The second kind of fee is derived from something that used to be included in the room rate as a matter of course.  Energy surcharges fall into this category, as do in-room safe fees. This sort of fee is also largely unavoidable, and allows hotels to defray the indirect cost of lodging a given guest. 
 
A third kind of fee spreads the cost of property upkeep to the individual guest; examples of these fees include groundskeeping fees, facilities or maintenance fees, resort fees and pool fees.  Whether or not a guest actually uses an amenity, they are assessed a blanket charge for them. 
 
The final sort of fee isn’t really a fee at all, but a charge for various services that a guest may or may not engage in. Local phone fees, minibar charges, airport transfer fees and internet connectivity are all examples of fees that were (or are, at a different property) offered complimentarily to guests, with their cost covered by the room rate.  But since guests are not compelled to partake in these services, they are not automatically on the hook for their associated fees.
 
Clearly, the first and last kinds of fees are the most palatable for guests.  Vague-sounding, badly-defined charges like resort fees upset consumers, and rightly so; it is a transparent attempt to artificially lower the base room rate by separating a portion of it out.  Fees that are closely associated with a given guest’s impact on the property, like energy surcharges, are a bit more palatable, though these fees are often instituted in response to changes in supply cost (does anyone remember an energy fee before crude oil prices went through the roof?), which is also transparent to consumers. 
 
If a hotel sticks with those fees that fall into the first and fourth categories, they can effectively keep the fee revenue stream open without running the risk of alienating their customers.  These fees are both reasonable, as they are tied specifically to auxiliary services or products.  In the case of the fourth category of fees, there is an opportunity for guests to avoid them if they care to.  These are the sorts of fees that hotels can reasonably impose, and continue to reap the benefits of repeat business and high guest satisfaction levels.
 
Whatever kinds of fees a hotel decides to implement, it is absolutely imperative that the hotel be up front about them.  Guests should be alerted well in advance that there is a fee associated with a particular service or product, or if a fee will be imposed regardless – as soon as the booking path.  This has a dual effect: first, if a fee is avoidable, this notification gives guests the opportunity to opt out.  Second, if a fee is compulsory, it prevents a guest from feeling bilked in the end. Of the two evils - being nickel and dimed and being outright snookered - the former is always preferable.
 
Hotel fees don’t have to be a Faustian bargain. By imposing reasonable, incremental fees, and by disclosing their existence clearly and early on in the booking process, consumers can be made to accept what is becoming an ever-more common practice.  By following these simple principles, hotels can have their fees, ad their repeat customers and high satisfaction rates, too. 
 
After all, isn’t your customer satisfaction just as important as additional revenue streams?

 

About GuestRights
GuestRights is a membership program for hotels and resorts whose purpose is to maximize the hotel guest experience and increase hotel bookings and revenues. To achieve this, GuestRights developed the Guest Bill of Rights®, a list of ten customer service principles that all GuestRights member hotels must agree to uphold.  GuestRights also offers its member hotels a CommentCard Service and a Dispute Resolution Service, which were designed to help hotels implement the new customer service mandates that the Guest Bill of Rights requires.  For more information on GuestRights and the Guest Bill of Rights®, please visit www.guestrights.org. A limited number of complimentary hotel memberships are available for properties willing to honor and uphold the Guest Bill of Rights.  To sign up for a charter membership, please email Carl Schneider at carl.sch@guestrights.org

 
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Contact:

Carl Schneider
carl.sch@guestrights.org

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