À la carte fees add up for travelers

Jason · October 15, 2012

Airlines aren't the only ones in the travel industry that are charging fees for services and products that once were free. Hotels, rental car firms and cruise ships are joining in.

It seemed like a great deal at the time.

Morgiana Celestine-Lewis and her cousin Angie Taylor had scored a room at the Westin near Los Angeles International Airport for $124 the first night. As part of a birth-year promotion, they paid $73 the second night because Taylor's birth year is 1973.

When they got the bill at checkout, they found a $25-a-night fee for parking plus a $2.50 parking tax, charges they say the hotel did not disclose when they booked online. Parking their car for two nights came at a cost approaching that of parking themselves in a room for a second night.

"Had we known about all the extra fees and insane parking costs, we would have stayed elsewhere," says Celestine-Lewis, a book publisher in Oakland.

Travelers are starting to get used to fees charged by airlines. But they're increasingly being faced with more fees once they land. Hotels are doing more of it. Rental car companies are doing it. And now even cruise lines are dallying with it.

Buying an airline ticket, checking into a hotel, and even showing up first used to get you more than a seat and a bed. Now, travelers have to choose from an à la carte menu of services or conveniences to board first, use the gym or even zip through toll lanes more quickly.

And they often have no choice but to pay up — unless they're flying business or first class, are frequent fliers with an airline or have the right credit card with airline perks.

Aaron Gellman, professor of transportation at Northwestern University's Kellogg School of Management, says the industry is "trying to push the limits until they find out what they are."

"How far can they do it before there's a rebellion?" he asks.

The answer has been pretty far.

This year, Allegiant Air joined Spirit Airlines in charging for carry-on bags in addition to checked bags. Fees range from $10 to $35 each way. Next month, Spirit, which introduced the carry-on fee, will increase it to a maximum of $100 one way if you don't pay in advance. If you do, you'll have to come up with only $25.

Some airlines are charging for services you can do yourself. Spirit charges $5 if you skip the airport kiosk and ask the customer service agent to print your boarding pass. Virgin America this summer started charging $20 if you call to upgrade or select a seat and $20 if you need your itinerary re-sent.

Experts say airlines have just about exhausted the fees they can introduce for services they used to offer for free, such as choosing seats and getting a snack on board. Airlines have taken on a new role: They're becoming retailers by devising new services and products to sell. American Airlines, for instance, introduced a baggage-delivery service within four hours of arrival from $29.95 to $49.95 depending on the number of bags. And U.S. Airways now has a premium meal in economy on international flights for $19.99.

"Your ticket is just getting you from A to B. Anything else in terms of bags, meals, where you sit on a plane, at what point you board, is up for sale," says Blaise Waguespack, an aviation marketing professor at Embry-Riddle Aeronautical University. "They are going from a fee mentality to a retail mentality."

Airlines throughout the world reported making $22.6 billion in fees for add-ons such as extra services and frequent-flier programs in 2011, a $20 billion jump since 2007, according to a review by IdeaWorks Company, a consulting firm that specializes in so-called ancillary revenue, and Amadeus, which processes transactions for the travel industry. For some airlines, such as Spirit, that makes up more than 30% of their total revenue.

U.S. airlines in the first half of this year collected $1.7 billion in baggage fees alone, according to the Transportation Department. Delta led the pack with $430 million. United followed with $351 million.

"It's made the difference between red and black" ink, says George Hobica, founder of Airfarewatchdog.com, which tracks the airline industry. "Fees are here to stay."

So it's no wonder that airlines have inspired hotels, rental car agencies and cruises to experiment more with fees.

And that's made traveling much more stressful for Celestine-Lewis. The last time she and her husband went to Las Vegas, they paid $60 round-trip each for extra legroom because her husband is 6-8, and about $200 in baggage fees. "The airlines, hotels and rental car companies know we are at their mercy," she says.

Hotels introduced a "resort fee," usually for the use of swimming pools and other amenities, in 1997. According to the American Hotel and Lodging Association, 19% of luxury hotels now charge resort fees.

But over the years, hotels have started charging for much more, according to Bjorn Hanson, dean at New York University's hospitality school.

At many properties across the country, fees are being charged for parking, early departures, faxes, in-room safes, mini-bar restocking, housekeeping and bellman services, Wi-Fi and even luggage storage. The fees vary widely by service and property.

"These are very profitable, because in most cases the service or function already existed," Hanson says.

Last year, hotels collected $1.85 billion in fees. Hanson projects that this year, the industry will collect $1.95 billion. He attributes the bump to a 3.5% increase in the number of occupied rooms this year plus higher fees and surcharges.

"Occupancy is recovering, so it's time to find ways to increase revenue for something other than room rates," he says.

Joe McInerney, CEO of the American Hotel and Lodging Association, says hotels aren't profiting from fees. "They're passing on costs," he says.

Whatever the case, many travelers say the fees bother them.

Kenneth Means, a director of field engineering in Grand Prairie, Texas, was surprised when he was told at a Hilton that checking out early would incur a charge. "I have seen at some hotels where this seems to be the policy, and I will not stay at any of them due to that fact," he says.

Business travelers, especially, dislike fees for in-room Wi-Fi. Some hotels have gone so far as to charge for Wi-Fi for your laptop, iPad and smartphone separately.

Mike Wolfe, president of a social-media marketing company in Westchester County, N.Y., stayed at the Boston Marriott Copley Place for a conference this summer. The price for Internet access in his room was $12.95 for the day. If he wanted faster access, he could pay $16.95 .

He refused to pay for either one. When he needed to get online, he went to the lobby, where Wi-Fi was free, or to a nearby coffee shop.

"It would have been throwing away money," he says.

McInerney says hotels have to charge for Wi-Fi because people are showing up with more than one device and draining the hotels' broadband. "The broadband the hotels need to have now is getting bigger and bigger, and someone needs to pay for that," he says.

Budget hotels tend not to charge for Wi-Fi. But 84% of luxury hotels do, according to the Lodging Association.

McInerney says he thinks Internet charges are here to stay. "I don't foresee it changing," he says. "I think that if, in the marketplace, if the hotel thinks the customer will pay for it, they will continue to do it."

Adding onto car rentals

Go online and select an economy car from Thrifty to be picked up at Atlanta's airport, and you'll find a menu of options . The base price is $32.72. But for $12.99 a day, you can get a GPS navigation system. For $7.99, you'll get a pass to avoid the long lines at electronic toll booths. For $12 a day, you'll get an infant car seat.

"You could end up paying double," says Peter Thornton, CEO of VroomVroomVroom.com, which compares rental car prices.

The Global Business Travel Association this summer listed the most problematic fees for business travelers.

Rental car fees for toll passage, late returns, drop-offs of one-way rentals and fuel charges were on it. The group picked them because they are the least predictable, can't be paid in advance and are difficult to track individually.

Rental car agencies also typically charge for extra drivers. Some also charge for returning a car early.

Charges you can't avoid are state taxes used to pay for public projects such as convention centers. Airport concession charges are also difficult to avoid unless you decide to rent the car elsewhere.

The most avoidable fee, Thornton says, is the one for the GPS.

"It's kind of ridiculous," he says. "If you have one for two weeks you might as well buy it and put it back on eBay."

Cruising to fees

Even the cruise industry is experimenting with fees.

This summer, Carnival Cruise Lines rolled out a pilot program called "Faster to the Fun" for $49.95. It includes early embarkation, early stateroom availability, express luggage-delivery service, priority dinner seating and early or late debarkation.

Cruises are still billed as all-inclusive, but increasingly they're excluding in the base fare certain dining experiences and activities.

Norwegian's new Breakaway ship, for instance, will have three main dining rooms serving food included in the fare. But there will be more than 20 restaurants on the ship. Some, such as celebrity chef Geoff Zakarian's Ocean Blue restaurant, will be open only to those who pay an extra charge.

"(We're) just giving the person who wants to spend a little bit more to have a different experience every single night (what they want)," Kevin Sheehan, CEO of Norwegian Cruise Line, said during a USA TODAY Roundtable with four top cruise line CEOs. "You need to keep it exciting and different so that they want to keep coming back."

Sheehan said he expected most activities and entertainment to remain free. Travelers can watch a show featuring Barbie for free, but if they want Barbie to spend a few days escorting their child around the ship, that will cost them.

Mike Driscoll, editor of Cruise Week, says "changing their on-board products in ways that people spend more" has been effective.

Carnival, for instance, recently reported that "on-board and other revenue" jumped from $936 million in the third quarter of 2011 to $965 million in the third quarter of this year. Meanwhile, ticket revenue declined from $3.9 billion to $3.6 billion over the same period.

The Transportation Department has forced airlines to disclose government taxes in all advertised fares and made them disclose fees on their websites. But not much regulation is in place on fees charged by rental cars, hotels or cruises.

Airlines and some experts argue that fees actually help consumers.

Spirit spokeswoman Misty Pinson says the carry-on fee has sped boarding and deplaning, freed space in overhead bins and helped conserve fuel.

Jay Sorensen, president of IdeaWorks, says fees have actually helped some people fly more frugally.

"At one time, those who could do with a small carry-on and didn't need a meal and drink from the airline subsidized those who wanted more amenities," he says. "Now the tables have been turned."

By Nancy Trejos, USA Today

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DebbieandJerry · October 15, 2012

It is sad, but true, that we are being nickled and dimed. Thankfully we have the internet where we can search for what we hope is the best deal possible. There are people out there that willingly pay extra. I see it as the law of supply and demand. As long as someone is willing to pay these extra fees, they will continue to show up (and it really odd places).

Look at the restaurant industry. Folks are not going out to eat like they use to. Almost every ad is some type of special or combined meal. Sometimes I have to ask Jerry: Do you really eat an appetizer, entree (limited choice, mind you) and dessert?? Are you really getting a bargain?

Jan115 · October 17, 2012

It's an ugly trend, indeed, and as long as people are willing to pay for the extras, the fees aren't going away. Airlines are particularly ridiculous. So in order to avoid a bag fee, we are to fly with just the clothes on our backs? How do they even get away with this? Travelers today need to be smart and do a lot of research to avoid rip offs.