U.S. Lodging Industry Fees and Surcharges to Resume Upward Trend in 2010

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Trend Analysis Report
May 4, 2010

By Dr. Bjorn Hanson, Clinical Associate Professor 
NYU Tisch Center for Hospitality, Tourism, and Sports Management

For the first time since 2002, total fees and surcharges collected by U.S. hotels decreased in 2009, from $1.75 billion in 2008 to $1.55. The decrease reflects a combination of a greater than five percent decline in occupied hotel rooms, reluctance to add new fees and surcharges, and selective elimination or reduction of others during a period of declining demand and increased consumer price sensitivity.

Fees and surcharges emerged as an industry practice in about 1997 with resort fees (one of the first resort fees was titled, “amenities tariff”) and have increased every year except for periods following 2001 and 2009, periods of declining lodging demand.  (Energy surcharges were introduced in 2000.)

Examples of fees and surcharges include: resort or amenity fees, early departure fees, reservation cancellation fees, internet fees, telephone call surcharges, the costs of local calls, business center fees (i.e. cost of sending/receiving faxes and sending/receiving overnight packages), room service delivery surcharges, mini-bar restocking fees, charges for in-room safes, and automatic gratuities and surcharges. For groups, there have been increased charges for bartenders, service, and other staff at events; charges for set up and breakdown of meeting rooms; charges for meeting rooms in which meals are served (the common practice has been that there is a charge for meeting rooms but not an additional room charge for rooms in which meals are served); fees for master folio billing and baggage holding fees for guests leaving luggage with bell staff after checking out of a hotel but before departure.

Industry net income for 2009 has not yet been reported, but is expected to be approximately $11.5 to 13.5 billion (at the hotel level, not including franchisor and management company corporate profits, for example), compared with $21 billion in 2008.  Fees and surcharges are especially profitable; most have incremental profitability of 80 to 90 percent or more, so they represent significant contributors to 2009 profits. 

The forecast 2010 increase in total fees and surcharges is based on an expectation of three to four percent more occupied rooms and more aggressive implementation, enforcement and pricing of fees and surcharges. 

The estimated amounts and trend of fees and surcharges collected is summarized below:

Year        Amount (in billions)
2000      $1.2
2001        1.0
2002        0.55
2003        1.0
2004        1.2
2005        1.4
2006        1.6
2007        1.75
2008        1.75
2009        1.55
2010        1.70 (forecast)

These amounts are estimated based on selected interviews with industry executives and corporate travel executives, analysis of industry financial data, press releases, and information available on hotel and brand websites.

EDITORS: To interview Dr. Hanson about this article or for more information, please contact Cheryl Feliciano at cheryl.feliciano@nyu.edu or 212-992-9103.

About the Author
Bjorn Hanson, Ph.D., a clinical associate professor of hospitality and tourism management at the NYU Preston Robert Tisch Center for Hospitality, Tourism, and Sports Management, is a hospitality and travel researcher widely respected for his industry forecasts and for having created econometric models that transformed business analysis in the field. Prior to joining NYU-SCPS, he held the position of global industry leader, hospitality and leisure, at PricewaterhouseCoopers LLP.