Hotels charge resort fees, parking, fees, wi-fi fees, amenity fees, and just about any other fee they can think up because they have to make up for previous financial losses. After coming out of a nearly two year slump due to Covid, and facing the rising pressures of wage increases, food increases, and the looming threat of an economic recession, these fees provide a valuable source of income.
Long gone are the days that you could book a hotel and expect to only pay a charge for the room. Hotels started adding fees that were due upon the time of booking at their properties in many large cities, and today the fees have spread to just about every hotel chain, large or small. These fees provide a valuable source of income to many hotels; it has been estimated that fees alone are responsible for about 11% of the total cost of a room in a typical hotel chain.
The reason for this is simple: it increases revenue. Because nearly every hotel charges some type of fee, it’s difficult for consumers to avoid the fees. And hotels need the revenue; not only do they have to make up for years of decline in room rentals, but they now have to contend with rising costs for everything from food to labor.
COVID’s Impact on Hotels
In 2019, the majority of hotel chains were able to return a profit. Already, however, the majority were charging resort and amenity fees at their properties located near major tourist areas. At the time, hotel executives claimed that this was done to keep hotels competitive in the face of online price comparison websites.
Since consumers were able to rank hundreds of hotel rooms by their price, it was necessary for hotels to keep their nightly price as low as possible. Fees allowed them to increase prices without affecting the price that consumers initially saw. By the end of 2019, many chains were posting records profits, due in large part to these fees.
When lockdowns began in the spring of 2020, however, many of these hotels saw their room bookings instantly dry up. Even as properties were able to reopen, many of them were unable to fully rent out their rooms due to efforts to keep guests socially-distanced.
Encouraging guests to stay was decisively more difficult, with many businesses choosing to use online meetings rather than authorize travel, and many vacationers hesitant to travel due to either concern over the virus or frequent business shutdowns.
There were many properties that were only able to book 25% or less of their rooms for over a year. In normal circumstances, those kind of booking numbers would put a hotel out of business. While government grants did make up a portion of the lost revenue, the majority of hotel chains were forced to refinance their debt.
Now as many people are eager to travel, these hotels have to increase their revenue in order to pay off that debt. Consumers still have access to those same databases of hotel room costs, however, so hotels are once again adding hidden fees to their rooms.
Rising Costs and Hotel Profit Projections
It’s very unlikely that the fees will stop any time in the near future, either. At the same as they have to increase revenue in order to pay off the debts they accrued from the pandemic, hotels must also contend with rising prices. Labor shortages began to become apparent within months of the initial lockdown ending in many cities.
Many hotels let go of many of their staff members during the initial lockdown and subsequent slow reopenings. As they continue to open more rooms, many have discovered that there is no longer a large supply of workers willing to take the jobs. Many of their previous workers moved on to different types of employment or left the workforce altogether.
The result is that labor, the receptionists, maids, and security officers required to make a hotel run, is now costing hotels a lot more than used to. Unlike other businesses that have tried to adapt by reconfiguring work schedule or relying on robots, hotels simply must have a certain minimal staff in order to keep the place running. Labor costs have increased nearly 40% in some areas.
In addition, prices on many of the goods that hotels buy on a regular basis have increased. Textile price increases have thrown the cost of replacement linens up 15% or more. Paper goods have increased nearly 30%. Even the chlorine that is needed to keep hotel pools clean has nearly doubled in price.
The result is that hotel chains are seeing higher prices for nearly everything that they spend money on, at the same time as the consumers they rely on are becoming more price sensitive. That means they cannot increase room prices, as many consumers will make the decision about where to stay based on the per night charge.
Those same consumers are also eschewing the “extras” that many hotels used to rely on for additional profit. Many people now have apps on their food for food delivery (leading to a sharp decrease in the use of room service) and entertainment (rather than use paid premium channels and movies), for example.
All of these factors taken together mean that hotels have little choice but to start charging fees for the use of hotel amenities.