Hotels Pile On The Fees: New, Increased Meetings Surcharges To Reach Historic Heights

Hotel fees and surcharges on corporate meetings will hit record levels this year, analysts said, and buyers can expect charges for every service, from moving boxes to master folio transmission. Buyers are protecting themselves through more diligent contract negotiations and working with preferred vendors to ensure all charges are enumerated beforehand.

"Groups being nickel-and-dimed? I see it in everything that hotels are doing right now, period," said Greg Herrera, travel senior supply chain specialist for Waltham, Mass.-based conglomerate and defense contractor Raytheon Co. "Whether it's groups and meetings or transient, they're riding high on their horse right now."

Bjorn Hanson, head of PricewaterhouseCoopers' hospitality and leisure practice, said 2005 would be a record year for hotel surcharges and fees levied on groups.

"I don't believe there's a cyclicality to this. These charges were beginning to be implemented and business got very strong in the 1990s," Hanson said, adding that fees and surcharges fell out of favor in 2001 with the economic downturn and hotels became very focused on giving a positive image to customers. However, fees and surcharges began to reemerge in 2002.

According to Hanson, hotels apply a variety of surcharges and fees on groups, including higher Internet, telephone and fax charges; increased room service fees; automatic gratuities; resort amenities fees; earlier room block guarantee date requirements; room set/reset charges; energy surcharges; higher cancellation fees; early departure and arrival charges and master folio billing fees.

Master folio billing fees, according to Hanson, could be interpreted as a "bill for a bill."

"Some hotels are charging various accounting fees for putting together that master folio with all the rooms and tax and other charges," PricewaterhouseCoopers' Hanson said. When a company uses a credit or purchasing card to pay for a meeting, the hotel pays a commission to the issuer of the card, Hanson said, but when a company is billed directly, hotels can pocket the commission.

Raytheon does not have a centralized meetings sourcing process, but Herrera said the amount of fees and surcharges he has seen on some company meetings bills is "staggering."

Herrera said Raytheon has begun an initiative to consolidate and leverage its meetings spend, estimated at more than $100 million. One of the reasons the company has begun to develop a meetings policy is high hotel fees on groups, he said. Raytheon is looking into a preferred chain deal for meetings, he added.

"Let's not forget the cycle, when you are hanging your head out the door trying to find somebody to come into your hotel," Herrera said. "Regardless of how the economy is, our business is consistent year over year."

Donna Healy, vice president and deputy head of corporate events for the Americas for New York-based financial services firm Credit Suisse First Boston, said it is important to negotiate fees and surcharges in the contract negotiation phase.

"This is where the surprises come," she said. "Even moving boxes, even if it's not on the contract, I'll tell the planners to ask the hotels about this. You're going to get charged for it."

CSFB tries to control these costs by detailing each part of the meeting contract and negotiating every fee—even to the extent of how many communication circuits the company will pay for, she said.

"The question is: What charges am I going to be hit for that I don't necessarily know upfront?" Healy said.

Hotel chains tend to be reasonable about communicating fee and surcharge levels ahead of time, but Healy said planners still need to ask hotels about potential charges.

"Obviously, negotiating is getting harder," she said. "No question about it. They know that they're back in the buyer's seat, and it's getting harder, but it's not impossible."

Healy said more rental fees have appeared on hotel contracts that have not appeared in the past.

Buyers should ask hotels before each meeting what surcharges or fees they might incur, she said, even if the hotel property has been used before for an event.

John Meissner, executive director of corporate meetings at Fairmont Hotels & Resorts, said fees and surcharges have created some problems for corporate groups.

"We've been doing some research on it, trying to find a better way to deliver resort fees and things of that sort. We're pretty flexible when it comes to meeting space," Meissner said. "We basically do sliding scales as it relates to their guest room pickup. We try to stay away from nickel-and–diming, but there are things we do charge for."

Meissner said the chain tries to steer companies to its preferred guest program, which waives or reduces certain fees for members.

"We try to be as flexible as we can, but in turn if the service is something that we have to pay for, then we obviously like to charge it back to the customer," he said.

The best way for meeting buyers to avoid surprise charges is to ask about any potential surcharges, he said. "It needs to be in the contract," Meissner said. "The planner has to make sure they read all the fine print because, in some cases, it's there but the interpretation's either wrong or they don't understand what is really included. It's a sticky issue."

Tom Chevins, senior vice president of sales and marketing for Omni Hotels, said nickel-and-diming customers is a bad idea for hotels.

"At the end of the day, the customer has to add it up, regardless of what your room rates are, what your meeting room rates are, what it costs for your meal functions and what you charge for a fax. It all adds up to a total sum," Chevins said. "We believe that customers are pretty smart and they'll add it all up and say: 'Well, this is what the cost is here and this is what the cost is at location B.' They'll make the educated decision of what provides them the greatest value versus the cost."

Chevins said Omni has not implemented any excessive fees on corporate groups.

"Our view has always been to keep it simple and to not implement a charging scheme that would be perceived as a nickel-and-dime scheme," he said.