In an article published in Business Insider, MCR, the fourth largest hotel management company in the United States, announced a suite of new fees they would be implementing at some of their hotels. Among the new “pay to play” fees, hotels would charge for services and amenities previously offered for free; such as a $25 fee to use the swimming pool or gym on property.
Taking a Page from the Airlines’ Playbook
User fees are nothing new in the travel industry. Especially for airlines, where some low-price carriers are taking the practice to extremes. On some routes, baggage fees (even for a carryon bag) can cost more than the roundtrip fare!
Hotels have dabbled with user fees in the past. Many resorts and leisure hotels successfully implemented mandatory, daily “Resort Fees” by bundling a loose collection of services and amenities that had previously been included in the published room rate or available for an optional charge. This practice became so popular that it was even adopted by some urban, suburban or airport properties.
Why User Fees?
Since March 2020, when the COVID-19 pandemic shutdowns started, occupancy rates for hotels around the globe have plummeted. While the hospitality sector showed strong signs of recovery in the leisure segment in recent months, business and conference travel have continued to struggle, and the surging Delta variant has caused a new wave of short-term cancellations.
The results have been a steady erosion in the Average Daily Rates (ADR) a hotel can charge, coupled with disastrous Occupancy Rates. Together, those factors have caused RevPAR (Revenue per Available Room) rates, a key performance indicator for hotels, to plummet. Thus, leaving hotels with few alternatives for ways to increase revenue while remaining competitively priced.
User fees, while they may be annoying, are generally preferred over non-specific, mandatory fees, especially when those fees include services and amenities that the consumer may not use. Similar to “sin taxes” levied against non-essential, but highly desirable, consumer goods, simply having the ability to avoid added costs by declining to participate makes these kinds of fees much more palatable for most consumers.
Here to Stay
It’s hard to foretell at this point whether User Fees will catch on with more hotels and brands; or if they’ll even outlast the current market conditions. But, for now, there are lots of people in the hospitality industry closely watching to see what happens for MCR Hotels.
What’s your opinion on User Fees? Answer in the Comments below.
