FTC Sends 'Broader' Message In 'Drip Pricing' Warning To Hoteliers - Business Travel News

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FTC Sends 'Broader' Message In 'Drip Pricing' Warning To Hoteliers

November 29, 2012 - 11:45 AM ET

By Jay Boehmer

In sending warning letters this week to 22 undisclosed hotel operators for not fully disclosing on their websites resort fees and other mandatory surcharges, the Federal Trade Commission aims to convey "a broad message to the travel industry that any mandatory fees should be included in the total price quoted to consumers," regardless of booking channel, an FTC attorney told Business Travel News. While the federal government in recent years has taken strong actions to establish and enforce full-fare transparency requirements for airlines, FTC now is toughening its stance on what it calls "drip pricing" in the hotel sector.

"This is the first time FTC has publicly stated its position that it is deceptive for the hotels not to include mandatory fees as part of the total price they quote," according to an FTC spokeswoman.

Its warnings to hoteliers stem from a May conference that FTC held on drip pricing, which it defines as a practice through which "firms advertise only part of a product's price and reveal other charges as the customer goes through the buying process."

"One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or Internet access, sometimes referred to as 'resort fees,' " FTC noted in the warning letters sent to hotel operators. "These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions." Unlike many ancillary airline fees, such as seating assignments or checked bags, the resort fees or other hotel surcharges that FTC is targeting are not optional.

During an investigation this year sparked by the May conference, FTC reviewed "a number of online hotel reservation sites," determining that at least 22 operators may be in violation of the law "by misrepresenting the price consumers can expect to pay for their hotel rooms," according to the FTC letter. "Some hotels exclude resort fees from the quoted reservation price. Instead, the 'total price' or 'estimated price' quoted to consumers includes only the room rate and applicable taxes. At some of these sites, the applicable resort fee is listed nearby, but separate from, the quoted price. In others, the quoted price is accompanied by an asterisk that leads consumers to another location at the site—sometimes on the same page, sometimes not—where the applicable resort fee is disclosed, typically in fine print. A few sites fail to identify applicable resort fees anywhere, and instead inform consumers that other undefined fees may apply."

FTC warned that if those 22 hoteliers do not amend such practices, then it "may take action to enforce and seek redress for any violations of the FTC Act as the public interest may require," according to the letter.

The Business Travel Coalition this week praised FTC's decision to crack down on drip pricing in the hotel industry, and encouraged the U.S. Department of Transportation to require new airline pricing disclosures of optional services.

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