Hotels experimenting with add-on fees to boost revenue
HOUSTON - At a time when the hotel industry is still struggling to regain business lost during the pandemic, some are taking a cue from air travel and finding new ways to make a buck.
Just before the pandemic, airlines made almost $76 billion in add-on fees, for things like baggage, seat assignments, and carryons. Now, the hotel industry is experimenting with the same sort of a la carte charges that could really change the travel experience.
Some travelers may have already experienced one of these fees that hotels and motels are considering expanding. Early check-in, late check-out, and 'resort fees', to use amenities, occasionally come at a cost.
More may be on the way.
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The Wall Street Journal reports the company that owns the TWA Hotel, at New York's JFK airport, is experimenting with add-on fees for most things beyond the room stay, in exchange for lower room rates. Schedule changes, pool and gym use, wi-fi, room clean-up, can all have a price tag.
Arlene Ramirez, who teaches the hotel business, at the UH Hilton College of Hotel and Restaurant management, says the industry needs to tread carefully.
"You have to be very careful how you do that, because you do not want to alienate your customers," she says.
Ramirez thinks there's a challenge for hotels adopting such a la carte fees, especially if price-conscious customers aren't correctly told what's happening.
"If product is comparable, you're going to go with the one with the lower rate," says Ramirez. "The last thing you want to do is have the customer check-in, and find the rate was lower because you're not getting access to the pool, and that was one of the reasons that you booked."
If hotels are serious about tapping into extra fees, marketing experts suggest making the experience 'seem' a bargain for travelers.
"I would argue that, perhaps a better way, is rather than saying, 'Your rate is $99, plus $5 if you want to use the bathroom, or whatever you want,' would be to say, 'Your rate is $119, but if you're not going to use a service, here are the discounts that can apply," says Paul Galvani.
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There's another reason these add-on fees seem so attractive, to hotels. Since a lot of travelers make reservations through services like Expedia, the hotels have to pay a percentage for that. Extra charges, though, aren't included in those reservations and are pure profit.
Meantime, add-on fees are not yet widespread practice. Major chains like Hilton, Marriott, and Hyatt are not on-board, and maybe watching to see how the experiment goes.