Starting July 1st, a new California law called SB 478 will require businesses to include all mandatory fees in their initially advertised prices when selling to California consumers. This means hotels, vacation rentals, and restaurants will have to show the full price upfront, including things like resort fees, cleaning fees, and service charges.
The goal is to put an end to the practice of "drip pricing" where the advertised rate is deceptively low and then fees get tacked on later. Under the new rules, companies can no longer advertise just the base rate and surprise customers with high mandatory fees at checkout.
This law will particularly impact the hotel industry, which has increasingly relied on resort fees in recent decades to boost profits. Instead of a $149 nightly rate plus $50 resort fee, hotels will now have to advertise the full $199 price from the start when selling to Californians. The same goes for vacation rental cleaning fees and service fees that were previously tacked on.
While disruptive for business models that relied on hidden fees, the change aims to allow consumers to accurately compare total prices and make informed decisions. Companies that don't comply can face penalties of $1,000 per violation.
The travel industry had already been facing pressure over resort fee transparency, with lawsuits, a proposed federal junk fee rule, and some companies like Marriott proactively including fees after settlements. But California's law makes it a statewide requirement.
The Murky World of Hidden Travel Fees
The resort fee phenomenon is a prime example of the confusing and often unfair world of hidden travel fees. These mandatory daily charges, typically $20-$50, were originally positioned as covering amenities like pools and gyms. However, they've increasingly become a way for hotels to advertise deceptively low base rates while burying a significant portion of the true nightly cost.
In destinations like Las Vegas, resort fees over $40 per night are now the norm at many hotels. And consumers have little choice but to pay them if they want to book that "advertised" $79 rate. The U.S. hotel industry raked in an estimated $2.7 billion from resort fees in 2017 alone.
Other add-on travel fees like airline bag fees, seat reservation fees, rental car insurance fees and more have compounded the problem. What starts as an attractive $199 flight can easily balloon to $300+ once you've paid to check bags, reserve a decent seat, etc.
Consumer advocates have cried foul over these junk fee practices, arguing they undermine free market competition and price transparency. The FTC's proposed rule aims to crack down on companies burying mandatory fees until the very end.
Are Hotels and Airlines Finally Getting the Message?
While California's new law is a decisive step, the travel industry has already been forced to become more upfront about hidden fees amid mounting public pressure and legal action. Major hotel chains like Marriott and Hyatt recently started displaying resort fees as part of their initial room rate listings on their websites.
Airlines like United and American have introduced "basic economy" fares that at least make it clear upfront that amenities like checked bags and seat selection will cost extra. Though these basic fares are often terribly restrictive in themselves.
The hotel industry had lobbied against fee transparency rules, arguing they would make rates look higher and push consumers to book directly on sites like Airbnb instead. But that very shift in market share may have motivated hotels to get ahead of the issue. Vacation rental platforms were already more transparent about total costs.
Of course, businesses will likely look for new loopholes and grey areas as laws tighten. For example, California's law doesn't cover fees disclosed for optional add-ons and services. So hotels may try burying some fees there while advertising lower mandatory rates.
The travel industry has a history of finding creative ways to squeeze more from consumers through fees and surcharges. But laws like California's put them on notice that hiding the true cost is becoming unacceptable in the eyes of regulators and the public.
Source: LA Times