Are “Junk Fees” Doomed to Fail — or Here Forever?

If you’ve ever seen Les Misérables, you’ll remember the hilarious tune “Master of the House.” Sung by the conniving innkeepers, the Thénardiers, the lyrics go like this: 

Charge 'em for the lice, extra for the mice
Two percent for looking in the mirror twice! 
Here a little slice, there a little cut
Three percent for sleeping with the window shut!

Yes, it seems that hoteliers have been charging hidden fees and sneaky surcharges since at least early 18th-century France. That’s cold comfort when you check out a hotel in 2023 and find a mandatory nightly “resort fee” that you don’t remember seeing when you booked. The resentment deepens when you learn that the fee covers amenities you thought were complimentary: Wi-Fi, bottled water, concierge service, using the gym, swimming in the pool, and the like.

These so-called “junk fees” have been in the news a lot here in the U.S., and they’re not making our industry look very good. Recently, in response to a steady chorus of consumer complaints, the Biden Administration announced a crackdown on such fees, proposing a rule to “ban businesses from charging hidden and misleading fees and require them to show the full price up front.” The lodging and airline industries were called out specifically. At the same time, several bills addressing the issue are moving their way through Congress; a number of state attorneys general have filed lawsuits; and California just enacted a similar law (which could have a global impact if it is interpreted as applying to any hotel selling to state residents). There have been rumblings in Europe and the U.K. as well. 

It’s estimated that Americans spend $65 billion per year on junk fees, which are broadly defined as additional charges that the consumer doesn’t expect to pay — or at least doesn’t like — added to the base price for their room or flight or rental car. That includes airlines charging for seat assignments (especially cumbersome for families who want to sit together) and for using the overhead bin if you’re on a “basic fare”; resort fees, destination fees, facility fees, and the like at hotels; Airbnb’s notorious cleaning fees; rental car companies levying “airport facility charges” and outlandish fees to use a toll transponder; and mandatory “service charges” at all sorts of establishments.

The problem isn’t just the annoyance of feeling nickeled-and-dimed — it’s that in most cases, the fee isn’t disclosed to the consumer until they’re just about to book, if at all. Along with taxes and other government-imposed surcharges, that can make a $400/night hotel room cost closer to $500/night. It makes it much harder to comparison-shop. And it feels underhanded.

“I understand why ‘junk fees’ have that nickname,” Lindsey Epperly, Owner & CEO of Jet Set World Travel, told me, noting her clients’ frequent complaints. “It’s an added burden on top of what already feels like an investment, and it corrodes the trust the traveler has with the supplier. It goes against everything the hospitality industry is supposed to stand for.”

The hotels counter that separating these fees from the base rate enables them to advertise a more competitive price, and adds visibility to the cost of the services they provide. But that second argument is laughable when the resort fee supposedly covers silly things that most guests have no interest in ever using. I won’t name names, but there are plenty of egregious examples out there, everything from “keepsake magnets” to Zumba classes to pet beds (more here, here, and here). Even more laughable, some resort fees include discounts on local tours or attractions — so I’m paying the hotel for the privilege of paying less for something else (that I don’t want)? 

Resort fees also dilute the benefits of booking through Virtuoso, Signature, American Express, or similar programs. Those perks often include a $100 resort credit — which can easily be eaten up by fees. Most luxury travelers, I imagine, would rather spend that credit on a spa treatment or a nice bottle of wine than have it rendered ineffective by a resort fee.

As for the competition issue, hoteliers argue that if OTA’s and other third-party distribution channels are all showing the base rate, they should be allowed to do the same. Fair, but why not just fold the resort fee into that base rate? Just because nobody is being transparent doesn’t make it right. I would hope that any government regulation addresses that disparity and ensures that consumers are able to compare apples to apples when shopping online.

To be fair, not all hotels do this. Nikheel Advani, Co-Founder, COO & Principal of Grace Bay Resorts in the Turks and Caicos, says his properties don’t charge resort fees (though they do institute a government-mandated service fee of 10%, which goes to the resort staff). “Guests want to pay one price, not feel that they’re being nickeled and dimed for things like water or Internet access,” he says. “We are moving to a world of transparency: Google lets you research the price of anything. It’s the same reason restaurants no longer charge 7x for a bottle of wine — everyone knows how much it really costs.”

I’m picking on hotels here, but they are hardly the only culprits. Airlines also charge fees for services that used to be free, from seat assignments to checked bags. The difference is that these are optional (I could use a carry-on and roll the dice on seating) and, thanks to government regulations in the U.S. at least, they’re disclosed up front. In any case, as Epperly pointed out, the airline industry doesn’t have much of a reputation to put at risk. “Trust in airlines is already gone — the fees are just another pain point,” she says. 

These hidden fees are part of a broader cultural shift that makes consumers feel they are being hoodwinked into paying more than they expect. In the U.S., nearly every checkout terminal — whether at a coffee shop, a newsstand, or a fast-food restaurant —exhorts you to leave a tip, which makes everything seem like it’s 20% more expensive. And more businesses are experimenting with dynamic pricing, which adjusts yield based on supply and demand. That’s nothing new for airlines or hotels, but when English pubs and concert ticketing companies try it, howls of disapproval ensue.

So will these fees continue to exist? Marriott, Hilton, Hyatt, and others are now disclosing total pricing, inclusive of resort fees, at the beginning of the search process. But that won’t last unless third-party distributors agree (or are forced by regulators) to do the same. Frankly, I don’t see anyone leaving that revenue on the table: The hotel industry makes an estimated $3 billion per year from ancillary fees; the airlines a whopping $103 billion. 

But the way these services are sold matters, and travelers (especially luxury travelers) have demonstrated that they’re willing to spend for ancillary benefits, whether it’s a day pass for an airport lounge or an early check-in fee or consolidating their purchases on a points-earning credit card. “Customization is king, and people are willing to pay for things that they value,” points out Jordin Greene, Vice President of Hotel Programs and Partnerships for Signature Travel Network. “But they don’t want to be charged for things they’re not going to use.”

The reputational hit our industry is taking from this could take the wind out of the sails of our post-pandemic recovery — especially if a recession arrives. So I implore my supplier friends to make a change. If these fees are bundled back into the base rate, the consumer will still pay (or choose not to). But at least they’ll no longer feel bamboozled.

What about you? I’m very interested in hearing your thoughts, especially if you’re a supplier who charges these types of fees. Let’s keep the conversation going!