In so many instances, consumers are asked to bear the brunt of strategic decisions made by brands despite the obvious flaws in these decisions. It’s no secret that the hotel industry is no different. We have openly adopted an approach that involves imposing various fees on our customers in an attempt to recover revenue and profit that may have deteriorated for a variety of reasons. Some of these reasons include increased competition, downward trends in market performance, etc. And while no one can deny the math, (reflecting huge fee revenues being earned), what seems to have been completely forgotten in this equation is the customer’s expectation of value.
In the interest of fairness, it’s important to understand how resort fees and others came about. While fees of varying types have existed for many years, the period following the global economic meltdown of 2008 forced hotel operators and owners to scramble to find ways to replace significant revenue lost to the enormous slowdown in the world economy. Resort Fees, for example, became much more common, being packaged to customers as including “non-motorized water sports (aka wakeboards, flippers, masks, etc.)” as well as Fitness Center access, daily newspaper, etc. Less visible in our industry’s packaging of such “amenities” was the fact that we were not charging guests for these items in the first place. In this case, the packaging of these Resort Fees became an exercise in Marketing 101; packaging items to create an appearance of value, while neglecting to mention the fact that the packaged items were never charged for in the first place.
Fast-forward several years to a point where the hotel industry is operating at record levels of performance, and one finds a tremendous reluctance by owners, brands, and management companies to end their dependence on such fees. However, the very obvious missing piece to this puzzle is the importance of the customer’s reaction to such fees.
Numerous studies have been done that show the fact that miscellaneous fees are a leading cause of customer dissatisfaction. Such customer feedback is legendary in the airline industry, and is significant in our world as well. “Fee-creep” has continued as technology plays an increasing role in our operations and product offerings; charging for internet is the number one guest complaint that we face. As a result, major hotel companies are taking steps to reduce this pain, by offering basic internet for free with an option to upgrade to higher-speed service at a fee. Reality, in this case, shows us that very few guests opt for the higher-speed, pay-to-play option. Guests want value-for-price-paid, that is, don’t slap me with fees when I’m already paying significant dollars for my room. Not surprisingly, many travelers would sooner pay a higher room rate that included such fees rather than being “nicked & dimed” along the way.
While the fact that so many of us charge such fees makes it difficult for the customer to “vote with their feet,” it is important to note that this same customer is voting with their opinion; hotels don’t typically score well on “value for price paid” in cases where such fees exist. With overall demand still at record levels, there is not a great deal of interest on the part of hotel companies and managers to be so concerned about this perceived lack of value, and thus the fees continue.
It is up to us as the leadership of our industry to become more committed to what our customers want, and to what they don’t want. It’s simple, really; the customer wants value to meet their expectation, and not to be “nickel & dimed” in the form of multiple fees for services/amenities that do not offer such value to them.